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Cotton exports incentive to strengthen competitor competitivness
Feb '09
The Government of India has announced 5% duty credit scrip for raw cotton with effect from April 1, 2008 and the benefit would be available for all cotton exports made and till 1.7.2009. The benefit is granted under Special Agriculture and Village Industries Schemes viz., Vishesh Krishi and Gram Udyog Yojana (VKGUY).

The cotton exporters are entitled for duty credit scrip equivalent to 5% FOB value of exports. The Indian textile industry which is seriously ailing due to over 45% increase in Minimum Support Price for cotton , hardening bank interest rates, acute power shortage, global financial melt down, etc., could get very negligible benefit under the two stimulus packages already announced by the Government of India.

The industry also did not get any benefit in the interim Budget of UPA Government. Under this scenario, the 5% export incentive offered for raw cotton has become a serious negative step threatening the survival of the textile industry in the country.

In a press release issued here today, Dr.K.V.Srinivasan, Chairman, The Southern India Mills' Association (SIMA), has criticized the move made by the Government that too giving retrospective effect with effect from 1st April 2008.

Dr.Srinivasan has mentioned that the export incentive would benefit only the middlemen, particularly the cotton exporters and not the farmers. The implication of the budget would be around Rs.400 crores commitment for the Government which would affect the profitability of the domestic industry by 2 to 3%.

SIMA Chairman has said that the farmers sell their cotton during the period October to January and it is clearly evident that the entire export incentive would benefit only the traders. He has pointed out that the Government has encouraged the export of raw cotton and not the value added products.

He has further pointed out that cotton yarn is provided only 4% drawback incentive for export which suffers almost equal or more incidence of duties while the raw cotton which has been given 5% incentive does not suffer any duty.

The domestic spinning sector also spends Rs.3 to Rs.5 per kg. of cotton towards transport cost and in addition, State levies ranging from 4 to 6% are not refunded for exports. Under such scenario, the domestic sector is not in a position to compete with the countries like China, Pakistan, Bangladesh etc.

The cotton export incentive would strengthen the competitiveness of the competitors like China, Pakistan, Bangladesh, Indonesia, etc., in the global market.

SIMA Chief has appealed to the Centre to immediately withdraw the 5% incentive announced for export of raw cotton and protect the survival of the ailing textile industry in the country and safeguard the jobs of several millions of people, particularly the people below the poverty line.

Southern India Mills' Association

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