Textile manufacturers, exporters seek more govt intervention as removal of import duty has not dented prices

With a section of the cotton-based textile and garments industry producers calling for a ban on its export and others threatening to go on strike against the continually rising raw cotton and yarn prices, Minister for Commerce & Industry and Textiles, Piyush Goyal, has called a meeting of all stakeholders, including cotton and cotton yarn traders, spinners, garment manufacturers and exporters, on Wednesday, to look for possible solutions.

“Whatever the Ministry decides will be in the larger interest of the entire value chain. We normally allow market forces to operate but if we see that there is a requirement for government intervention, it should be done. At the same time, it should be done in a manner that it does not adversely affect any one segment of the value chain,” Textiles Secretary Upendra Prasad Singh told BusinessLine

Up, up and above

Cotton prices have almost doubled since the beginning of the current season seven months back — from ₹55,000 to about ₹1 lakh per candy today — pointed out Sanjay Jain, Managing Director, TT Ltd. “This unprecedented rise has led to a demand destruction of cotton-based textiles and has endangered the very existence of thousands of garment MSMEs,” Jain said.

The Centre’s decision to remove the 11 per cent import duty on cotton in mid-April did not dent cotton prices. Instead, cotton yarn manufacturers increased prices by ₹40 per kg across categories earlier this month, following which garment units in Tiruppur threatened to go on a six-day strike from May 16.

The Textiles Secretary said attributed these prices to the high global prices and to the addition of freight and handling charges to imports. Additionally, there were other problems such as port congestions and container availability. “Even if someone wants to import cotton, it takes two to three months for the consignment to arrive in India. So, the industry is not getting any immediate benefits,” he said.

Change in exports

Garment export organisations have been seeking help from the government, including a short-term ban on export of cotton yarn, to help retain their hold on the global market. In a recent representation, the Apparel Export Promotion Council (AEPC) noted that instead of exporting raw material such as cotton and cotton yarn, the government should encourage exports of value-added products like apparel.

“The apparel industry has been working very hard to achieve the set export target of $20 billion for FY23 … this continuous increase in the cost of raw material has impacted the entire apparel value chain and has led to an increase in garment prices. [Accordingly] apparel exporters have been facing a lot of resistance from the buyers towards placing new orders,” Narendra Goenka, AEPC Chairman, said in a statement.

Varying reasons

The Tiruppur Exporters’ Association reportedly called for a ban on the export of cotton yarn till prices stabilised. “The demand of the industry varies. Some feel that there should be no export of raw cotton. Some demand no export of cotton yarn. Some call for quantitative restrictions on exports. Some say there should be some export duty on cotton or cotton yarn. Such things depend on whether you are a spinner or garment manufacturer, and where you are in the value chain,” Singh said.

The Textiles Secretary assured that all relevant issues, including the case for further extension of import duty withdrawal beyond September 30 or applying the deadline to the loading of consignment into the ship instead of when it arrives at port, will be examined at the stakeholders’ meeting.

Published on May 09, 2022