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CITI highlights perils of incentivizing cotton exports
Nov '11
Confederation of Indian Textile Industry (CITI) has pointed out that there are efforts being made by vested interests for obtaining export incentives for raw cotton.

Shri S.V. Arumugam, Chairman, CITI in a letter addressed to the Prime Minister, Commerce, Industry and Textiles Minister and Agriculture & Cooperation Minister has stated that while export of cotton is necessary and correctly being allowed without any restrictions, granting any incentives on export of cotton would make Indian cotton available to the other competing countries in the textile space at lower prices.

Shri S.V. Arumugam pointed out that in the year 2008-09, when the government had provided export incentives for raw cotton, this led to an expenditure of around Rs.1,000/- crore by way of incentives to cotton exporters. Such incentivized exports of raw cotton to competing countries ruined the domestic textile industry and government had to spend another Rs.2,000/- crore for introducing a relief package for the affected textile industry.

He has cautioned that re-introduction of export incentives for raw cotton would again lead to a similar expenditure for the government for the benefit of a few cotton exporters, though the arguments will always be adduced in the name of farmers.

Shri S.V. Arumugam pointed out that it is essential to allow export of surplus cotton. But it is of utmost importance to ensure that we do not put our cotton cheaper in the hands of our competing countries like China, Bangladesh and Pakistan, by providing incentives on cotton exports .If we do so, we would be destroying the viability of the Rs.1 lac crore textile investments made in our country, its huge employment potential and would in reality be subsidizing creation of jobs in our competing countries, while destroying employment opportunities in India.

Shri S.V. Arumugam also pointed out that current cotton prices are substantially above the minimum support prices announced by the government and there is no possibility of any drastic decline in cotton prices on the basis of the current market situation.

He requested government not to provide any form of subsidies to cotton exports as it is uncalled for, it destroys employment creation in the Rs.1 lac crore textile industry, it causes huge out flow from the exchequer and is ABSOLUTELY not necessary to protect farmers who are already adequately protected by high support prices which make cotton the most preferred crop.

Cotton is not perishable and lends itself beautifully to successful support price operations, he added. Shri Arumugam pointed out that we have evidence of the level of injury that providing subsidy for cotton exports can cause to our country, from the previous experience in 2008-09.

Confederation of Indian Textile Industry (CITI)

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