SIMA appeals for a fair cotton trade policy

The predominantly cotton based Indian textile industry has incurred a loss of over Rs.15,000 crores during the current financial year and even the best performing textile companies are incurring huge cash losses due to high volatility in the cotton and yarn prices.

The synthetic fibre manufacturers also maintain parity with the cotton prices resulting in the synthetic textile industry to incur cash losses. A levy of 10% duty on branded readymade garments and made-ups and duty free access agreement entered with Bangladesh have added the woes of the Indian textile industry threatening its very survival.

The textile industry has already appealed for a financial restructuring package to the Reserve Bank of India, Finance Ministry, Commerce & Industry Ministry and Textile Ministry to avoid gross NPAs / BIFR of textile units. The Hon’ble Union Minister of Commerce, Industry and Textiles has convened a meeting of all stakeholders, including officials from Finance Ministry, RBI, DGFT, etc., on 11th October, 2011 at New Delhi to understand the gravity of the problem.

The Hon’ble Minister was very positive in helping to revive the ailing textile industry on a fast track mode from the recession. During the meeting, CITI and SIMA appealed to the Hon’ble Minister to ensure raw material price stability and a level playing field in pricing and cost of funding to minimize the losses incurred by the industry and also face the stiff challenges posed by the competing countries in the open market.

In a Press Release issued here, Mr.S.Dinakaran, Chairman, The Southern India Mills’ Association (SIMA) has informed that the Association has proposed for Rs.2500/- per tonne as freight equalization tax on cotton export, as the mills in India spend higher transportation cost than the textile mills in China, Bangladesh and other competing countries.

He has stated that the transportation cost for cotton has substantially gone up due to abnormal increase in the diesel price and the textiles mills have to procure more than 75% of the cotton from up country States like Gujarat and Maharashtra whereas, the mills in China, Bangladesh and other competing countries are able to carry the raw cotton in foreign vessel through sea route and able to transport at less than 40% of the transportation cost spent by the mills in South India.

SIMA Chief has stated that textile mills in Tamilnadu accounts for 47% of the cotton consumed in the country produces less than 3% of its requirement within the State and procures more than 75% of the cotton from up country States like Gujarat and Maharashtra.

He has opined that it is very essential for the Government to frame the cotton export policy in such a way that our competing countries do not derive competitive advantage from Indian cotton. He has pointed out that the Parliament has already passed a Bill to levy up to Rs.10,000/- per tonne so as to create a level playing field in the open market.