The Indian textile industry has not only welcomed the move to remove import duty on extra-long staple (ELS) cotton but also expects that the government will soon realise the need to scrap the duty on other varieties of cotton. Following the decision, cotton prices eased by ₹600 per candy of 356 kg in the Gujarat market due to immediate pressure on market sentiments. However, prices recovered to some extent on Wednesday.
The central government has removed the import duty on ELS cotton. The country is heavily dependent on imports of ELS cotton. Currently, around 11 per cent import duty is applicable to the raw material used for fine counts of cotton yarn.
Sanjay Jain, managing director of TT Industry and former chairman of the Confederation of Indian Textile Industries (CITI), said, “It is a welcome step. We hope that the import duty on other varieties of cotton will be reviewed sooner or later. The government has to maintain a balance between the competitiveness of the industry and farmer’s protection through MSP.” He said that India is a net importer of ELS cotton as the country does not grow enough of it to meet the requirements. The import duty had made Indian value-added products made from yarn of 60/1 and above costlier. There was no benefit for the farmers. The government has corrected an aberration.
Bharat Shah, a power loom owner from Ichalkaranji, Maharashtra, said, “The removal of import duty can provide some relief in the textile value chain of high-end fabric. The production cost may ease slightly for fine quality fabric and garments.” He said that the psychological impact can be seen on the market sentiments of cotton only for a few days. Overall market dynamics will not change due to the government’s decision.
A leading cotton yarn trader from Delhi said that there is very little consumption of ELS cotton out of the total cotton requirement. Therefore, the decision will have a very limited impact. It cannot substitute Shankar-6 cotton of Gujarat because ELS cotton is very expensive.
Trade sources said that cotton prices had eased up to ₹600 per candy on Tuesday in the Gujarat market after the news came out. The sentiment weakened due to the wait-and-watch mode of cotton buyers. However, the prices recovered by ₹200 per candy on Wednesday.
