Fighting against the proposed export incentive for cotton, the Confederation of Indian Textile Industry (CITI) fears the Centre's move will "imperil the domestic textile industry". The textile industry body has also made representation to the PM in this regard, stating that further incentives will only be detrimental to the domestic textile mills and related industries
"Cotton traders have raised the spectre of cotton glut and the fear that cotton prices may fall below the MSP level unless exports are encouraged through an extra incentive to be paid on export of cotton in the season of 2011-12. In our view prices may remain minimum 25-30 per cent higher than MSP depending upon the Rupee exchange rate and the quality of cotton. Any incentive on export will imperil domestic textile industry," said SV Arumugam, Chairman, Confederation of Indian Textile Industry (CITI) in a representation letter.
Stating that ruling prices of seed cotton are higher than MSP by 40-50 per cent in different regions of the country, CITI has claimed that cotton traders are citing misinformation in a bid to seek further export incentives.
According to Arumugam, the cotton exporters from India are very active in selling Indian cotton in China, Bangladesh and other countries.
"It is learnt that a commitment of the order of 400,000 tonnes which is equivalent to 2.5 million Indian bales has already been made. This has been done at international price of 108-112 cents per pound CIF China port. This will translate the present ruling price of Cotton to Rs 39000-40000 per candy (1 candy= 355.624 kilos) and present seed cotton price is consistent with the level of sales price. There does not seem to be any valid reason for any person with reasonable prudence to believe that there will be a drop in price to a level equal to MSP," he added.
Further, the industry body has stated that any extra incentive on cotton export, if given, will cause Indian textile industry a severe damage. "It will create inequality between cost of cotton to our competitors and cost of cotton to Indian mills who export yarn, fabric, made ups and garments (value added products). This will also hurt the industry which has already suffered huge losses in the first six months of the financial year 2011-12," Arumugam stated.
Meanwhile, CITI has cited that the exportable surplus of cotton on Sunday is of the order of seven million bales, whereby any extra incentive will tend to increase export beyond available surplus and reduce availability of quality cotton for domestic industry.
"This will entail production cuts, losses and unemployment. Any measures of additional increase in incentive on cotton will be discriminatory against the domestic industry; besides there will be a financial outgo of almost Rs 1000 crore from the Government which is not justified by any standard," the letter further stated.