The Hindu : Business : Cotton import duty goes

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Thursday, Jul 10, 2008
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Cotton import duty goes

Special Correspondent

Incentives on export of basic raw material withdrawn

NEW DELHI: Yielding to the textile industry’s demand as also to rein in inflation, the Central Government has scrapped the customs duty on imports of raw cotton and withdrew incentives on export of the basic raw material with effect from July 8 to boost its domestic availability.

“The 10 per cent customs duty on cotton imports has been abolished along with four per cent special additional duty with effect from July 8. Besides, [the] one per cent drawback benefits (refund of local taxes) on exports of raw cotton have also been withdrawn,” a senior Finance Ministry official said here on Wednesday.

According to a Finance Ministry statement, a notification in this regard had already been issued by the Central Board of Excise and Customs (CBEC).

The abolition of import duty on cotton is expected to lead to a revenue loss of about Rs. 100 crore during the remaining months of the current fiscal even as withdrawal of the export incentives would partly set off these losses.

Alongside, cheaper imports of raw cotton are expected to tame the price spiral in the textile sector and also impact garment prices in retail markets.

The Government’s decision to exempt cotton imports from customs duty has not come a day too soon as nearly 3,000 yarn units had given a call for a strike on Wednesday to press their demand for abolition of duty on cotton imports and imposition of some regulation to check exports.

In line with the industry’s demand, the Textile Ministry had also been lobbying for scrapping of the import duty on cotton. The Ministry argued that textile exports remained stagnant at about $20 billion against the target of $25 billion in 2007-08, mainly owing to a sharp hike in cotton prices along with a rise in other input costs.

The industry has been claiming that since January this year, cotton prices have gone up by over 42 per cent which, in turn, affected spinning mills as imports of the raw material was also negligible on account of high duties.

According to its estimates, the government decision is unlikely to have any major impact on cotton producers as production has gone up to 35 million bales (170 kg/bale) this year as compared to 30 million bales in the previous year due to wide plantation of Bt cotton.

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