Friday, 28 February 2020

After Food, This Time It Is Your Apparel! The unprecedented price rise due to ban in export duty of cotton may hit the textile industry

Updated: October 9, 2010 10:34 am

The upcoming festival and wedding season may witness a soaring price of garments if the government allows duty-free exports from October 1. The law of demand-supply can work against the interest of the farmers, traders, manufacturers and the end users of the cotton and textile industry of India. Allowing duty-free exports implies less supply of cotton in the domestic market which will push the price of raw cotton. As a result, the high price of fabric, yarn etc will make the garments and dress materials make a crunch at your pocket, an expert from the sector informed. Instead of raw cotton, the industry is interested to export dress materials, garments etc which are value-added products and have a huge international market.

                In the last decade, India woke up to a mass of farmers’ suicide. Vidarbha, a small area in the eastern region of Maharashtra was in the media for more than 20,000 farmers’ suicide cases in recent years apparently because of the falling minimum-support price for cotton. It is surprising to see that the destitution occurred for that cash crop whose production in India is the second highest in the world after China.

High demand globally

This year, the textile industry has witnessed a revival after the global slowdown that hit global demand hard. But, as soon as the demand is getting back from both Indian mills and abroad, the farmers are planting more cotton, encouraged by the fibre’s high price. As a result, the cotton output for the cotton season 2009-10 had reached an all time high at 295 lakh bales as compared to 290 lakh bales in the previous year. Gujarat, Maharashtra, Andhra Pradesh, Punjab and Haryana are the major cotton producing regions.

                “Worldwide demand this time will be more due to flood in China and Pakistan—the two major cotton growing countries. So naturally, there will be a shortage of supply globally,” said Bulaki Das Mimani, hony secretary, Chamber of Textile Trade and Industry. So, the farmers in the upcoming cotton season starting from the month of November-December can feel the pinch of rising demand, he said.

Boosting output

Another reason for boosting output is due to increase in acreage. According to the Cotton Corporation of India (CCI), the area under cotton production has increased at a record level as farmers receive good prices for cotton compared to other competing cash crops in the previous year. As a result, the acreage under cotton in 2009-10 had reached a record level of 103.29 lakh hectares as compared to 94.06 lakh hectares in the previous year. This is why India, the world’s second-largest producer of cotton after China, is likely to achieve an all-time high of 32.5 million bales in the next crop year. According to AB Joshi, Textile Commissioner of India, the cotton area in the next crop year is likely to expand.

                Over the last eight years, farmers have got better output through Bt cotton seeds compared to conventional seeds According to Joshi, Bt cotton has surpassed 90 per cent of cotton acreage this kharif season. The evolution of Bt has not only made farmers continue to gain from the high-yielding seeds, but also has created additional value worth 40,000 crore till 2008.

Ban on export duty of cotton

Slamming the government’s ‘premature’ announcement of the opening of cotton exports for the coming cotton season, Apparel Export Promotion Council, the Cotton Textiles Export Promotion Council, the Indian Spinners Association, the Federation of Indian Exporters’ Association and the Handloom Export Promotion Council etc have urged the centre not to go ahead with the registration of contracts for the export of the raw material till next January.

                Rising demand and higher output have made the government rethink on the export policy and the centre may remove restrictions on export of surplus cotton yarn produced in the country that is over and above the quantity required by the domestic textile industry.

                But the industry is inheriting some problems that the government cannot ignore. “Excessive exports of cotton and the resultant increase in cotton prices have become a burning problem for the entire textile value chain,” Mimami said in grievance. In spite of record production over domestic needs, the industry is unable to access quality cotton in the absence of a concrete cotton trade policy and raw material security system. “Currently, the second largest employment provider of the nation is saddled with inadequate availability of quality cotton as the government has permitted export of almost 85 lakh of bales as against the estimate of 55 lakh bales by the Cotton Advisory Board at its first meeting during the beginning of the cotton seasons,” he added. “It has been announced that the export duty of 2500 per tonne currently applicable on cotton has been withdrawn and as a result, cotton price has already increased by almost 4000 per candy within a month,” informed a trader. This is a threat to the survival of the highly labour intensive sector of the country.

                The same tune was reflected in the views of one representative from Federation of Hosiery Manufacturers’ Association of India (FOHMA). He came out with the suggestion that cotton exports during cotton year 2010-11 should be restricted to exportable surplus only after meeting the domestic demand and any decision regarding the exportable surplus should be decided immediately on the basis of current data. Indian apparel exporters have warned that rising cotton and yarn prices will “cripple” the industry that can miss the export target of USD 12 billion for this financial year. Apparel exports were cumulatively down by 8 per cent.

                Now, forget about the industry and the exporters and think about our domestic customers. India may see a rise in domestic demand as the economy grows at a faster pace and can achieve its target rate of growth at 9 per cent. The economic growth will definitely be due to high income and the purchasing power of even the middle-income group can push the demand up for apparels which are today not only a necessity but a symbol of social status. Policymakers at the centre should keep in mind that production has increased but not productivity. The report of CCI clearly shows that with unfavourable agro-climatic conditions, inadequate availability of canal water etc, cotton productivity in the last two years has been declining. In the cotton season 2009-10, cotton productivity had been 486 kg per hectare as against 524 kg in the previous year. Though the US Department of Agriculture (USDA) has forecasted upwards the cotton production estimates for India an 11 per cent rise on account of the higher area to come under cultivation and expectation of better yield, the export policy should balance both the interest of the industry, exporters and the domestic consumers.

 By Samarpita Roy from Kolkata

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