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Enable textile sector to have healthy competition - SIMA Chief
May '09
Dr. K. V. Srinivasan
Dr. K. V. Srinivasan
The Government policies 2008-09 on cotton have not benefited either the cotton growers or the textile industry. The policies have benefited only the cotton traders and cotton exporter and also indirectly our competing countries in the textile trade.

The textile industry which has been seriously ailing during the last two years due to global economic melt-down, acute power shortage in general and over 50% in Tamil Nadu, hardening bank interest rates, poor export incentives, etc., is irked by the recent government policies on the cotton economy.

In a press release issued here, Dr K V Srinivasan, Chairman, SIMA has stated that the country could improve the cotton productivity over 220% and cotton production over 230% during the last decade due to the concerted efforts of the Government through Technology Mission on Cotton and also through extension activities of CITI CDRA, SIMA CDRA and individual companies.

He has said that the mother industry could perform well during 2004-2007 mainly due to the stable cotton price and availability of good quality cotton. He has further said that the removal of cotton textiles from the Essential Commodities Act, during February 2007, enabled the multi-national cotton traders to use their money power to grab over 100 lakh bales during the cotton season 2007-08, hoard and speculate the cotton price over 45% in India and seriously affected the performance of the textile industry in the country.

The entire industry had to stop the production at all India level on 9th July 2008 to get the 10% import duty and 4% special additional duty and 1% duty draw back on cotton removed and create a level playing field in the international cotton trade and also to bring mandatory registration for cotton exports. But these measures were overshadowed by certain drastic negative policies announced by the government during the cotton season 2008-09.

SIMA Chief has stated that the Minimum Support Prices (MSP) is meant for any distress among farmers and since there had been substantial growth in the productivity and cotton prices during the recent years, the cotton farmers were very happy. But the Government increased the MSP for the current cotton season by over 40% as against a normal increase of 5 to 8% effected in the past which made the Indian cotton prices dearer in the global market and export of Indian cotton declined drastically.

In addition, the domestic consumption has also gone down due to poor financial performances and also acute power shortage in States like Tamil Nadu which accounts for almost half of the country's cotton consumption.

Due to abnormal MSP, CCI and NAFED had to enter the market and purchase almost 50% of the cotton during the current cotton season and started selling at a lower price incurring huge losses.

The industry could not procure adequate cotton due to high prices and also financial crunch which has been pleading for aspecial financial assistance for procurement of cotton. Apprehending that it would be difficult for the Government agencies to dispose of procured cotton Government announced 5% export incentive with effect from 1st April 2008 and also bulk discount upto Rs.650 per candy for 2 lakh bales to motivate the multinational cotton traders and big cotton traders which has ultimately become reality and largely benefited the cotton traders.

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