CITI urges ministers to take steps to avoid collapse of industry

01 Jul '08

6 min read

Textile and clothing industry has urged the Government to take immediate steps including abolition of import duty on cotton, to prevent the collapse of the sector because of the crisis that is looming large on account of the runaway increase in cotton prices.

In meetings with the Union Ministers of Textiles, Finance and Commerce, they pointed out that cotton prices in the country increased by over 35 percent during the last one year and this vital raw material has disappeared from the market because of speculative operations of international traders.

“The textile and clothing industry is going through a serious crisis because of the spiraling increase in cotton prices and the unabated increase in prices of cotton will be deleterious to the economy in general and the textile sector in particular, which has already eroded its exports competitiveness on account of the appreciating rupee.

The series of onslaughts being faced by the industry will cripple its growth and employment generation potential,” said Mr. P D Patodia, Chairman, Confederation of Indian Textile Industry (CITI) while addressing the press in New Delhi.

He stated that a textile and clothing delegation has met the Union Ministers of Finance, Commerce and Textiles and apprised them of the grave situation that is enveloping the textile industry and suggested remedial measures.

CITI has also taken up the issue with the Prime Minister recently, highlighting the need for urgent measures for moderating input costs, especially cotton prices.

The textile delegation has pointed out in their interface with ministers that the price increase in cotton in the domestic market is basically because of the uncontrolled export of cotton.

The official figures put cotton exports for the current year at 85 lakh bales as against 58 lakhs bales last year. However, the industry estimates indicate that actual exports during the current cotton year would surpass one crore bales, aggravating the present situation.

The report that there is heavy hoarding of cotton by international traders is a matter of great concern. With cheap availability of credit at LIBOR, such traders can manipulate the supply positions, further hiking up the cotton prices.

“The anomaly is that even at higher prices, textile mills are not be able to get cotton at the required quantity, which will force them to cut back the production,” said Mr. Patodia, adding that any production loss in the textile sector will have serious impact on employment generation in the country.

Explaining the specific recommendations that the CITI delegation has placed before the Union Ministers and the Prime Minister, Shri Patodia and other industry leaders who addressed the press stated that their suggestions take into account the interests of the farmers and Indian cotton traders, in addition to those of the textile sector and the economy as a whole.

The following are the major suggestions made:
- Custom duty of 10% and Additional Custom Duty of 4% applicable to import of cotton should be withdrawn immediately, so that cotton can be sourced by the Industry from wherever it is available at affordable prices.

- A mechanism may be evolved for assessing the cotton needs of Indian textile industry periodically and permit export of cotton only to the extent of exportable surplus available. The assessment can be done by Government's Cotton Advisory Board on a quarterly basis and quantities may be released for exports for each quarter on the basis of this assessment.

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