Mills body urges govt to restore export incentives for cotton, yarn

The Southern India Mills’ Association today urged the government to restore the Focus Market Scheme and incremental export incentives to cotton and yarn.

T Rajkumar, chairman, Sima, said the cotton-based spinning sector in the country had invested over Rs 1 lakh crore in upgrading the technology and also in expansion. It had added over 20 million spindles during the last decade.  Apart from catering to the domestic sector, the country has over 30 per cent excess spinning capacity, which is utilised for exports.

“In spite of buoyant yarn exports during the current year, there is adequate stock in the country ranging between 115 and 125 million kg as against 90 to 100 million kg during the same period last year.  Though the cotton price continued to rule high, the yarn price had decreased Rs 10-20 per kg during the last one week due to sluggish demand.  Under this scenario, the sudden removal of export benefits under the Focus Market Scheme and Incremental Export Incentivisation Scheme has come as a rude shock,” he said.

According to the amendments that is with immediate effect, categories such as export of cotton and cotton yarn will not be eligible for Focus Market Scheme. These were enjoying three per cent export incentives in certain markets and four per cent in a few others. The products have also become ineligible under the incremental export incentivisation scheme.

Rajkumar urged the commerce minister and textile minister to restore the benefit immediately to achieve the vision of increasing textiles and clothing exports from US $32.5 billion to US $ 42.5 billion in one year and doubling the same in a couple of years. Indian exporters would lose their competitiveness and credibility in the international market with such policies, he said, and added they were already under pressure owing to volatility in the exchange rates.

Exporters have commitments for two to three months, particularly with South American countries like Colombia, Peru, Venezuela, Chile, Argentina and also countries like Morocco, Tunisia.

Owing to high freight cost, mills could capture these markets with great difficulty with the 4 per cent FMS benefit announced this year, he added.

According to him, India cannot depend only on China and Bangladesh, which account for more than 65 per cent of the yarn exported from the country, and considering the huge volume of surplus cotton produced in the country and surplus spinning capacity, the government should restore the export benefits to achieve a sustained growth rate.