Players hit by sluggish exports & rising imports from Bangladesh and Lanka,
one-third of production capacity lying idle.
Exports of cotton yarn in the first quarter ended June have fallen 33% to 226
million kg from 338 million kg a year earlier.
Indian textile and clothing
industry players say one-third of
their production capacity is lying
idle due to sluggish exports, poor
domestic demand, and growing
imports from Bangladesh and Sri
Lanka, and have sought
immediate relief from the
government.
Spinning mills across the country
recently cut down their
production by 15% to 50% as a
damage control exercise due to
excess stock lying unutilised in
their godowns, according to trade
association body Confederation of
Indian Textile Industry (CITI).
“Textile and clothing segments
are presently going through a
deep crisis due to uncompetitive
fibre prices, declining exports,
incompetitiveness of our products
in international markets, embedded taxes not getting refunded, and lack of
working capital, among others,” said Sanjay Jain, chairman of the
confederation.
Exports of cotton yarn in the first quarter ended June have fallen 33% to 226
million kg from 338 million kg a year earlier, he said. Domestic demand has fallen 10-15% due to poor consumer sentiment
impacting garment sales and festive season expectations.
To overcome the situation, the industry — which claims to provide direct and
indirect employment to more than 100 million people —has urged the
government to extend its tax incentive scheme to the entire industry and
transfer subsidies directly to cotton farmers’ accounts through direct benefit
transfer (DBT) instead of offering a minimum support price (MSP) for their
produce.
CITI wants state governments to avoid incentivising new spinning mills for
three years “to prevent existing units from turning into non-performing
assets (NPAs) due to excess capacity”, Jain told ET. It is also seeking special
moratorium for spinning loans to ensure they don’t slip into NPAs due to the
un-favourable environment.
The industry wants the government to extend the Rebate of State and Central
Taxes and Levies (RoSCTL) scheme, which is at present available on export
of garments and made-ups (bed linen), to be extended to export of cotton
yarn, too, to make the entire industry internationally competitive.
RoSCTL allows reimbursement of duties on export inputs and rebate on
embedded taxes such as agricultural cess, mandi tax, and power and fuel
surcharge incurred in the production process through freely transferrable
scrips.
“The RoSCTL scheme is compliant with the World Trade Organization
(WTO) norms and can be immediately implemented,” said KV Srinivasan,
chairman of Cotton Textiles Export Promotion Council (Texprocil). “It will
give us an advantage while exporting cotton yarn over Pakistan and Vietnam
who get duty free access to China and European markets.”
RoSCTL refund can vary from 3% to 5% depending on the products,
Srinivasan said. Currently, Indian exporters pay a 4% duty to export cotton
yarn to China and Europe.
Bilateral trade agreement with China for yarn and fabric and with the EU,
Australia and Canada for apparels and made-up will further push sales,
industry players said India, which was the world''s second largest exporter of textile and clothing
products after China during 2014-17, fell to fifth position in 2018 falling
behind Germany, Bangladesh and Vietnam, they said.
Source: The Economic Times, India Friday, 16 August 2019