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Subsidy on Xinjiang cotton receives mix response
02
Jul '08
In order to overcome the problem of rising cost of Xinjiang cotton due to skyrocketing oil prices, the Ministry of Finance has decided to provide appropriate subsidies after the State Development and Reform Commission increased the price of petrol and diesel to 1,000 yuan per ton.

A survey was conducted regarding higher transport price caused by hike in oil prices, in which enterprises from Shandong, Henan, Hebei, Anhui, Zhejiang, Jiangsu, Hunan, Hubei Provinces participated. Nearly 52 percent enterprises believe that, impact of rise in price is going to affect the textile industry largely.

However, 32 percent entrepreneurs think the impact is not so big, whereas remaining 16 percent think that although its not going to affect immensely, they still use pre-inventories at present, so they can accept the price increase. They plan to share increased cost together with cotton enterprises at a later stage, while some entrepreneurs think they will directly pass on cost pressure to cotton enterprises.

There are mixed opinions on Xinjiang cotton subsidies as the enterprises think the policy brings little benefit to them. As cotton stock is held for a long time, these subsidies are only enough to pay bank interest.

For the new cotton, price of Xinjiang cotton is likely to be pushed higher due to subsidies. The biggest beneficiaries are farmers, while cotton enterprises and spinning units will not be benefited from the policy.

However, recently some companies have started preparations for procurement of Xinjiang cotton due to the lucrative gain after price subsidies.

Fibre2fashion News Desk - China


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