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Government Scrap Down Import Duty On Cotton
For boosting the domestic stocks, the UPA government here slashed down the custom duty on the import of the raw cotton and withdraw the export incentives of 1% on the raw cotton export. The rationale behind the government move is to increase the cotton stocks in India and ensuring the cotton availability at the less prices in the local marketplace. The import of cotton attracted 10% basic custom duty and 4% special additional duty. Succumb by the textile industry demand, the govt has scrapped the custom duty and other export incentive under the duty entitlement passbook scheme. Along this it has also abolished drawback benefits (refund of local taxes) on raw cotton exports. The move will also have its indirect influence in the inflation rate. With the decision for scrapping the import duty, the govt. is expected to incur loss of Rs 100 crore in this fiscal year. The Confederation of Indian Textile Industry estimates that the cotton export of the India has risen by 72% to 10 million bales in the crop year to September and the production is also seen a steep rise by 17% and reach to a height of 31.5 million bales in 2007-08. “Raw cotton exports are expected to increase despite the withdrawal of export incentives, as global cotton output will continue to decline in the cotton season 2008-09. This is due to a sharp drop in US cotton output on account of shifting acreage towards corn and climbing global demand from large consumers including China where demand will outpace supply. India's output is expected to exceed consumption resulting in an exportable surplus. Consequently, we expect exports to China to continue to increase - thus keeping cotton prices firm and putting pressure on the margins of spinning companies,” explained Mr. Sridhar Chandrasekhar, Head, CRISIL Research ( India's leading Ratings, Research, Risk and Policy Advisory Company). The International Cotton Advisory Committee also reach to the same result. According to the committee, the output of cotton on global front will diminish in the 2008-09 due to the America's shift of the acreage towards the corn and increase in the demand of cotton on the global front including the big consumers of China, where demand is more than the supply. On the other hand, cotton production of the India will rise by 5%, as it will witness the exportable surplus. The key players of the industry believes that the measures announce by the government is not seen so effective in curtailing the prices as the India's major consumption includes of the short to medium staple variety in which the nation is self dependent and is a major player in global marketplace. India's import constituents only the extra long staple variety of cotton which is only 5 per cent of the consumption. The CRISIL Research says that the cotton export to the China will continue to see a rising trend which in turns keep the prices of cotton steady. The abolition of the import duty will lead towards reducing prices of the extra long staple cotton variety. India is importing such variety from African nations and the US. Quick View
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