According to foreign news on April 26, textile mills in southern India have begun signing agreements to import cotton after the government decided to allow cotton to enter India duty-free before September 30.
“Textile mills in Tamil Nadu have started placing orders for imported cotton. As a strategy, mills have placed production orders for 30-40 days to rebalance the domestic cotton market,” Indian Textile Entrepreneurs Federation (ITF) ) said Prabhu Dhamodharan, convenor.
Trader Anand Poppat said: “Since the tax exemption was introduced on April 13, textile mills in southern India have signed import agreements for at least 100 bales (170 kg each) every day. These imports will start within two months.”
But the number of agreements signed so far has not yet been fully calculated.
As domestic cotton prices rose sharply, the government allowed duty-free imports of cotton for a period of time. In addition, since spinning mills cannot obtain high-quality cotton, they slow down production to expand their inventories.
At its meeting last month, the Cotton Production and Consumption Council (CCPC) lowered its forecast for India’s cotton production in the season ending in September to 34.062 million bales, down from 35.248 million bales in the previous season and the lowest level in three years.
Poppat said cotton may be imported from Brazil, the United States and Africa. “We may even import cotton from Australia,” he said.
Further reading:
Indian Textile Minister: Temporary export ban on cotton may be implemented
According to foreign news on April 26, Indian Textile Minister Upendra Prasad Singh said that if cotton prices continue to soar, the federal government may impose a temporary export ban on cotton.
The statement comes as the Indian textile industry is being hit by soaring cotton and yarn prices, affecting production and exports.
Cotton prices have doubled in less than a year to Rs 90,000 per unit (355.62 kg). The price of some varieties of cotton even reaches Rs 1 lakh per unit. A ban could increase the supply of cotton in the domestic market, helping to moderate prices.
High cotton prices have a particularly severe impact on India’s textile industry because India relies heavily on cotton, unlike other markets where man-made fibers account for a larger share.
Singh said cotton prices were unlikely to fall before the new crop hits the market in October. Singh said cotton prices have been a “disincentive” and the problem is likely to continue for some time due to a global cotton shortage.
The statement comes a week after the government exempted cotton imports from tariffs until September. Earlier, the effective tax rate on Indian cotton imports was 11%. “Cotton prices have not softened or increased as we expected, but have stagnated at a point. We are evaluating further actions, and a temporary export ban or quantity restrictions to control prices are options.”
“However, policy decisions should not be uncertain or knee-jerk reactions, these are extreme measures – but we will do so if necessary,” he added.
Textile manufacturers say many have had to cut production due to rising input costs. While consumers have already borne “some degree” of the price increases, clothing manufacturers worry about headwinds ahead.
Manufacturers say import duty exemption would be more beneficial if the imported cotton is supplied immediately after booking. However, it takes nearly three months to get the cotton from the date of placing the order, and the current tax holiday only lasts until September.
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