Govt suspends export sops on cotton yarn

The government has suspended the 7.5-per cent duty concession on cotton yarn exports to discourage outward shipments and moderate the domestic prices.

The decision was taken to suspend the duty at a high-level meeting chaired by Finance Minister Pranab Mukherjee on Tuesday, a source told PTI here today, adding Agriculture Minister Sharad Pawar, Commerce Minister Anand Sharma and Textile Minister Dayanidhi Maran were also present.

The textile ministry had been pitching for such measures to tame the price of cotton yarn resulting in nearly 50 per cent increase in fabrics prices in the past five months in domestic market.

The exporters were getting duty concession of 7.5 per cent under the duty entitlement pass book (DEPB) scheme. Under the scheme, companies get customs duty refund on imported inputs of export items.

Besides, the government has also decided to slap export duty on dispatches of raw cotton and cotton yarn, the official said. "The prohibitive duty (export duty), which would discourage exports, is likely to be issued next week," he added.

India, the world's second biggest cotton producer, exported 2.36 million bales (of 170 kg each) cotton last season.  As per a report, cotton exports are likely to more than double to 6.2 million bales in the 2009-10 season ending September, on the back of higher global demand and tight supplies in the US.

The apex body of garment exporters Apparel Export Promotion Council said the suspension of export incentive would have a sobering impact on fabric prices.

The price of cotton voile fabric -– the most commonly used in garments-– has moved up to Rs 33 per metre currently from Rs 22 a metre last November.