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CITI urges ministers to take steps to avoid collapse of industry

01 Jul '08
6 min read

- A stipulation may be introduced for registration of contracts for exports and imports of cotton with the Textile Commissioner of Government of India, within a period of 15 days from the finalization of such contracts.

This will help government to monitor the trends in cotton trade and take necessary steps to regulate the trade, whenever felt necessary.

- The margin money of 25% applicable for working capital loans for cotton purchases may be reduced to 10%, as a temporary measure for one year.

- As an emergency measure, export of cotton may be suspended immediately for the period up to 31 December 2008, by which time the new crop would arrive and the situation can be reviewed.

- Additional Funds allocation of Rs. 2000 crore for TUFS for the current year may be made to meet the current backlog of nearly one year in disbursement of TUFS assistance.

The huge backlog in disbursement of Technology Upgradation Fund (TUFs) assistance is a contributory factor for the present textile crisis.

The Budget allocation of Rs.1090 crore made for the scheme of 2008-09 has been utilized already and that was enough only to clear partially the backlog of last year.

The requirements of last year from October onwards and of the full year 2008-09 can be met only through an additional Rs.2000 crore budget allocation.

The textile delegation has pointed out that the profitability of the sector has come down significantly and that would lead to default on repayment of loans and increased mill closures in the coming months.

CITI has pointed out that as an immediate measure, export of cotton should be suspended for the period up to December 31, 2008. Shri Patodia explained that farmers have no cotton with them any more and foreign traders are the only beneficiaries of the current increase in cotton prices.

Suspension of exports would flush out the cotton that the traders are currently hoarding. That would also trigger greater economic and industrial activities in the country in the various stages of value addition of textiles, thereby creating large employment opportunities.

He also pointed out that it is not prudent to export cotton to competing countries like China and Pakistan, which account for most of India's cotton exports this year.

CITI leaders pointed out that China and Pakistan, which are the other major cotton producing and textile exporting countries had a stable policy of allowing cotton exports only to the extent of exportable surpluses available after meeting the needs of their domestic industries.

The industry has pointed out that a mechanism may be evolved for assessing the cotton needs of Indian textile industry periodically and to permit cotton exports only after meeting domestic demand.

The assessment can be made by the government's cotton Advisory Board on a quarterly basis and quantities can be released for exports for each quarter on the basis of this assessment.

Also, it felt that a stipulation should be introduced for registration of cotton contracts for exports and imports of cotton with the Textile Commissioner of government of India, within a period of 15 days from the finalization of contracts.

This would help the Government to monitor trends in cotton trade and take necessary steps to regulate trade, whenever it is necessary.

Confederation of Indian Textile Industry

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