You are here: Home » Markets » Commodities » Other Commodities
Business Standard

Rise in cotton prices, dearth of incentives make exports uncompetitive

Cotton yarn, fabric exports see dismal growth of 0.38% year-on-year in dollar terms in December 2017

Vinay Umarji  |  Ahmedabad 

Rise in cotton prices, dearth of incentives make exports uncompetitive

A sharp 11 per cent rise in prices during the past two months in India has pushed up raw material costs for mills, making export unviable and uncompetitive. International prices are also up by 17 per cent, but 2.7 per cent appreciation in the Indian rupee has nullified all the gains to be had from global prices.

While and exports have seen a dismal growth of 0.38 per cent year-on-year in dollar terms in December 2017, that for man-made yarn and fabrics grew by 6.77 per cent.

As per the central government's quick estimates of exports for some of the major commodities for December 2017, cotton yarn, cotton fabrics, and products, among others grew by 0.38 per cent to stand at $938.57 million, up from $935.05 million in December 2016.

On the other hand, man-made yarn, man-made fabrics and made-ups, among others saw a decent growth of 6.77 per cent in December 2017 at $416.91 million, from $390.47 million in the corresponding month last year.

According to cotton ginning, spinning and textile mills, the trend is predominantly led by a rise in the commodity prices, which now stand at about Rs 42,000 per candy of 356 kg, (Rs 11,670 per quintal) along with dearth of export incentives. In terms of quintals too, cotton prices have grown by 11 per cent from Rs 10,517 in November 2017 to Rs 11,670 per quintal now.

"Post Goods and Services Tax (GST) implementation, several important export incentives are not available. This has led to sluggish demand in the textile value chain for cotton products, leading to marginal growth in both exports and domestic market," said Paritosh Aggarwal, managing director of Ltd.

The rise in cotton prices in recent times have made exports of cotton products more challenging by making Indian exporters uncompetitive against other competing exporting nations such as Bangladesh.

Rise in cotton prices, dearth of incentives make exports uncompetitive

"With Bangladesh being able to export on free trade basis, India's have become even more uncompetitive. Hence, price rise as well as dearth of incentives from government post GST has made exports growth difficult," said Aggarwal.

According to Arvind Raichura of Balkrishna Ginning and Pressing Factory, domestic sales and exports in December were also low due to lesser capacity utilisation. "This is owing to festive mood in the latter part of December when capacity utilisation fell. Moreover, with export demand lagging, fabric manufacturing companies reduced demand from spinning and ginning mills," said Raichura.

Lack of export incentives have hit the cotton ready-made garments (RMG) the most, with the vertical posting a decline of 8.08 per cent in December 2017 over December 2016. Cotton-based RMG exports stood at $1,336.63 million in December 2017 as against $1,454.17 million in December 2016.

The Apparel Export Promotion Council (AEPC) has also been taking up the matter with the government, having made representation for restoration of duty drawback and other incentives that the industry was dependent on for exports.

First Published: Wed, January 17 2018. 01:49 IST
RECOMMENDED FOR YOU