No import duty on cotton may hurt local farmers: Traders

Time of India

a day ago

Nagpur: India's decision to scrap import duty on cotton until September 30 may benefit the US, but cause losses to farmers in regions like Vidarbha, say stakeholders in the sector.
A day after the duty was lifted, Cotton Corporation of India (CCI) reduced the rates at which it sells bales by Rs600 per candy (per 356 kgs) on Tuesday. This indicates that domestic prices are easing.
Duty-free imports would mean the textile industry getting cheaper imported cotton, but rates available to farmers in India may slump, say traders. "CCI cutting the rates is already an indication. As imported cotton is expected to flood India, demand for home-grown produce may fall, bringing down the rates," said Vijay Jawandhia, a veteran farm activist from Wardha.
He added that farmers will have to depend on purchase of raw cotton by CCI at minimum support price (MSP).
This year, MSP has been fixed at Rs8110 a quintal. CCI later sells the bales in the open market.
The Cotton Association of India (CAI), a traders' guild, has written to the govt demanding that at least those consignments having a bill of lading until September 30 be exempt from duty. There is confusion if the consignments booked earlier but arriving in India at a later date would be exempt from duty or not.
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"The duty has been lifted only until September 30; the window is too short for the textile industries to benefit. By the time the consignments reach India, it would already be past September," says Prashant Mohota of Gimatex Industries, a yarn-making unit in Wardha.
Cotton harvests would begin by mid-October. However, a section of traders accepted that the open market rates would be bearish.
The import orders are already at a record high of 39 lakh bales of ginned cotton this season.
The booking would further increase after the duty cut, leading to a glut in India. "So, duty-free imports may still leave an impact on domestic cotton rates during the harvest season next month," pointed out an expert.
The US sees it as a chance to penetrate the Indian markets, competing with Brazil which has been able to sell at competitive rates. "The Indian trade sector may prefer US cotton over Brazilian due to its better quality," the source said.
The Honorary Treasurer of the Cotton Association of India, Rintu Pandya, also pointed out the possibility of a global price collapse due to China. "China has stopped buying US cotton, and its own production has reached 400 lakh bales. In that case, if China decides not to import any more and consume its own carryforward stock, the global market may crash. This may have a further impact on Indian raw cotton prices." said Pandya.
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