India Budget 2025: CITI advocates for low import duties on textiles

CITI has presented its case with facts and figures, noting that PSF was priced at ₹76.82 ($0.915) in the global market in October 2024. Meanwhile, the domestic price of the product was noted at ₹97.3 per kg, which was 26.64 per cent higher than the global price. The price difference was noted to be between 26.64 per cent and 36.31 per cent over the last seven months. VSF was priced at ₹141.10 (~$1.680) per kg in the global market and ₹158 per kg in the domestic market, making local prices 11.98 per cent higher than the global market rate. The price difference varied between 11.98 per cent and 18.42 per cent in the last seven months.

CITI has stated that Indian domestic raw material prices are significantly higher than international prices, while competitors like Bangladesh and Vietnam have free access to such raw materials. India has imposed quality control orders (QCO) on man-made fibre (MMF) and yarn, which act as a non-tariff barrier on the imports of such raw materials, thus affecting their free flow. This has resulted in a shortage of some specialised fibres and yarns and also impacted domestic prices.

The industry organisation stated that the expensive raw materials are severely affecting the cost competitiveness of downstream textile products. Since the downstream segment has the highest employment elasticity in the entire value chain, it is endangering the livelihoods of the millions of people employed in the sector.

The government must consider liberalising import policies and reducing the basic customs duty (BCD) on all MMF fibres, filaments, and essential chemicals like PTA and MEG, which are critical in the production of these raw materials.

CITI has renewed its demand to remove the import duty on cotton to ensure the availability of cotton at internationally competitive prices. The government could remove the BCD from all cotton varieties.

The government has already excluded cotton of staple length exceeding 32.0 mm from the scope of import duty. However, this accounts for only about 37 per cent of the total cotton imports by India, and the import duty still affects about 63 per cent of the imported cotton. It argued that the duty, which was imposed to safeguard the interests of farmers, is not serving its intended purpose, rather hurting the domestic cotton textile value chain.

It noted that the Indian cotton industry is importing specialised varieties of cotton such as contamination-free, organic cotton, and sustainable cotton, which are not available domestically. These are being imported under nominated businesses to meet the quality requirements of foreign clients.

In India, cotton is predominantly grown by small and marginal farmers who sell their cotton during the peak season. Due to working capital constraints, the industry can only keep limited inventory and must rely on traders for the supply of cotton during the off-season. These traders, during the off-season, often supply cotton based on import price parity, thus making domestic cotton more expensive than international cotton.

During the year, Indian cotton fibre prices were typically 15-20 per cent more expensive than international cotton prices, affecting the cost competitiveness of downstream value-added cotton-based textile products.

Fibre2Fashion News Desk (KUL)