Decline in Cotton Yarn Exports by 10% This Year: CITI

 

Shri Sanjay Kumar Jain, Chairman CITI stated that Indian cotton yarn exports is struggling due to various policy lapses. During April-September 2017, there has been decline of 10% in exports of cotton yarn to 464 mn. kg. from 517 mn. kg during the same period last year.

 

Table 1: India’s Cotton Yarn Exports for April-September 2017

Values in Mn. Kg

April- Sept. 2016

April- Sept. 2017

% Change

Cotton Yarn

517

464

10%

Data Source: Ministry of Commerce

 

Mr. Jain pointed out that Indian spinning mills performed well in exports during 2013-14 taking advantage of the 2% incremental export incentive, 2% interest subvention and 3% focus market incentive and achieved a record export of around US$ 4,555 million of yarn during 2013-14. However, in 2014, the benefits of export incentives provided to cotton yarn were withdrawn due to some inexplicable reasons. During the year 2016-17, the cotton yarn export was only around US$ 3,352 million, registering a decline of 26%. This is despite adding over 3 million spindles and 62,000 rotors spinning capacity during this period.

 

 

Table 2: India’s Cotton Yarn Exports

Values in US$ Mn.

2013-14

2014-15

2015-16

2016-17

% Change

Cotton Yarn

4,555

3,938

3,611

3,352

-26%

Data Source: Ministry of Commerce

 

He further stated that India is today exporting more than 60 lac bales of cotton every year i.e. about 20% of the total cotton production. Exporting of raw cotton bales instead of value addition by converting to yarn is leading to loss of valuable foreign exchange, employment and better remuneration to farmers. This season cotton prices are feared to touch MSP levels due to a big crop and strained capacity of the domestic spinning industry to buy more cotton and stock due to financial and market constraints. In RBI Financial Stability Report, textile industry has one of the highest levels of NPAs and is marked as a stressed industry.

 

Shri Sanjay Jain also pointed out that when the export benefits such as MEIS and IES were introduced in lieu of aforesaid export benefits, every other segment in the textile value chain including MMF spun yarn were provided with the benefits while cotton yarn was not considered. This policy decision has adversely affected cotton yarn exports to China, the largest importer of cotton yarn. China has shifted from India to Vietnam/Indonesia as they have duty free access while Indian yarn carries 3.5% import duty. From 2013-14 to 2016-17, there has been a decline in India’s cotton yarn exports to China by 42% while exports from Vietnam and Indonesia has increased at a remarkable rate of 83% and 14% respectively in the same period as indicated in the table below:

 

China's Import of Cotton Yarn from Major Suppliers (Values in US$ Mn.)

Rank

Supplier

2013-14

2014-15

2015-16

2016-17

% change

Apr-Sep 2016

Apr-Sep 2017

% change

1

Vietnam

977

1,336

1,428

1,791

83.4%

885

1,058

19.6%

2

India

2,066

1,638

1,651

1,195

-42.1%

450

285

-36.6%

3

Indonesia

245

307

307

279

14.0%

136

174

28.5%

4

Uzbekistan

163

204

252

201

23.0%

94

110

17.6%

Data Source: TEXPROCIL

 

He also stated that profit margin in the yarn industry are thin and profits are made with volumes.  Withdrawal of the export incentives for cotton yarn has reduced our competitive edge by increasing our prices to the tune of 5 to 6 percent. Many old textile mills have been shut down while new capacities are coming up at the cost of tax payer’s money. Over the last five years, spinning EBITDA margins have decreased at an alarming rate of 21% per annum. 

 

 

He further stated that 3% IES benefit are also essential to maintain six to nine months cotton inventory, cotton being a seasonable commodity available for four months and also to ensure consistency in quality of yarn supplied, at a lower interest cost. Indian interest rate ranges between 10% and 12.5% while interest rates of our competing nations ranges much lower between 4% and 6%.

 

 

 

He stressed that there is an urgent need to restore the MEIS and IES benefits for cotton yarn immediately. There are no reasons why other segments in the textile value chain should get this benefit including MMF yarn while cotton yarn should not get the same.

 

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