Indian industry calls for financial relief, duty removal on ELS cotton

S K Sundararaman, chairman of SIMA, issued a press release detailing the delegation's meeting with the finance minister. The memorandum submitted seeks the extension of Emergency Credit Line Guarantee Scheme (ECLGS) short-term loans from a three-year repayment period to a six-year term loan. This is to alleviate the financial strain on the textile units. Sundararaman cited multiple challenges facing the cotton-based Indian textile and clothing industry, including a steep drop in global and domestic demand. He pointed out that the prolonged Ukraine-Russia war and economic downturns in Europe and the United States were key contributors to the crisis. 

SIMA stated that the 11 per cent import duty on cotton, coupled with the detrimental effects of quality control orders on man-made fibres (MMF), has led indigenous cotton traders and MMF producers to adopt import parity pricing, thereby making the industry uncompetitive globally. The average monthly exports of textiles and clothing from April 2022 to August 2023 decreased by 19 per cent compared to fiscal 2021-22. Cotton textile exports declined by 24 per cent, and cotton yarn exports fell by 46 per cent. 

Particularly affected is the capital-intensive spinning sector, which has had to reduce its production by 30-40 per cent for several months, causing unprecedented financial difficulties for the majority of spinning mills, especially SMEs. In the current crisis, the repayment obligations under the ECLGS 1.0 have already strained their finances, and upcoming repayments under ECLGS 2.0, starting from October 2023, are expected to push many of these mills into becoming non-performing assets (NPAs), the press release added. 

SIMA Chief stated that 11 per cent import duty levied on cotton has made Indian cotton expensive by 10-15 per cent as domestic market considers import price parity. He said that the country produces only five lakh bales of ELS cotton as against the requirement of 20 lakh bales. Therefore, the government should allow duty free import of ELS cotton. After introducing a separate HSN code, ELS cotton can be specifically identified for imports. 

Fibre2Fashion News Desk (KUL)