Plea to withdraw proposed cess on cotton yarn

The Confederation of Indian Textile Industry has appealed to the Union government to withdraw the cess proposed on cotton yarn exports.

Chairman of the confederation Shishir Jaipuria has said in a release that the government's decision to withdraw 7.67 per cent Duty Entitlement Pass Book Scheme benefits for cotton yarn exports and levying a cess on the exports were “wrong medicines for a genuine ailment.”

Cotton yarn prices had gone up during the recent months. However, this was because of increase in cotton, power and labour costs and not because of cotton yarn exports. Only 20 per cent of the cotton yarn produced in the country was exported. And, India was able to export cotton yarn at the current prices because the global prices were higher.

The price escalation on the primary inputs was passed on to the fabric sector by the textile mills. Home textile and garment exporters were at the end of the value chain and they were finding it difficult to pass on the increased prices to their customers in the global market.

A large portion of these sub-sectors were fragmented and this added to their cost as they lacked economies of scale. The two per cent additional duty scrip for garment exports to the U.S. and the EU announced recently by the Union Ministry of Commerce and Industry was a step in the right direction. More such assistance should be provided to garment exports to absorb the additional costs rather than disturbing the other sub-sectors, he said.

Taxing exports could lead to temporary decline in yarn exports. But this would not have any significant impact on domestic yarn prices.

“The only effective remedy to the current problem was to improve the cost competitiveness of our home textiles and garments in the global markets through improving production efficiencies and extending adequate Government incentives,” he said.