India Set to Impose Duty on Cotton Imports
February 2, 2021 On February 1, Honorable Mrs. Nirmala Sitharaman, Union Finance Minister of India, introduced the Indian budget for the financial year 2021-22, which included a 10% duty on cotton imports as a move to support farmers.
The budget is built on six pillars – Health and Wellbeing, Physical & Financial Capital and Infrastructure, Inclusive Development for Aspirational India, Reinvigorating Human Capital, Innovation and R&D, and Minimum Government and Maximum Governance. While the budget has received positive feedback from the textile sector, the spinning sector is feeling the pinch due to the duty on imported cotton.
The budget supports boosting the textile sector and enhancing its global competitiveness with investments for Mega Investment Textile Parks. Seven textile parks will be established within three years. To enhance the manmade fiber sector, import duties on raw materials like nylon fiber and yarns, nylon chips and caprolactam have been reduced from 7.5% to 5% – a duty structure similar to polyester and other manmade fibers. Duty on raw silk and silk yarns will be increased from 10% to 15%.
India’s textile sector for fine count spinning has been importing cotton from countries like Egypt and imposing the duty may affect the competitiveness of the spinning sector. Countries like Vietnam and Bangladesh have been doing well in garments exports to the United States and Europe, and this duty may negatively impact the Indian spinning sector and the value chain.
“Overall, the budget has positive aspects but for the duty on cotton imports,” stated Gandhiraj Krishnasamy, General Manager of Lakshmi Card Clothing in Coimbatore. “The Indian industry needs scale to compete against other countries.”
Jayalakshmi Textiles, which has about 70,000 ring spindles and spinning fine count yarns, recently started importing Egyptian Giza cotton which was price competitive against Indian DCH-32. In fine count yarns, customers are demanding the use of imported cotton and hence, this industry has recently purchased about 500 tons of Giza cotton.
“The duty on cotton may add pressure to the Indian spinning sector,” stated Velmurugan Shanmugam, General Manager of Jayalakshmi Textiles, whose average yarn count is about 70s Ne.
The budget is on the right track to enhance the domestic sector in terms of value addition, agriculture and innovation. The customs structure on cotton puts emphasis on the Indian cotton sector to focus on research, quality enhancement, contamination reduction and building the overall infrastructure.
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