Recently, the Chief Minister of Tamil Nadu has expressed concerns over import duties on cotton, a vital resource for the state’s thriving textile industry. As the second largest employment provider in the region, the textile sector in Tamil Nadu constitutes one-third of India’s overall textile business. The chief minister has accordingly urged the Union Textile Minister to address these issues to protect the industry and the livelihoods it supports.
Demands from the Textile Industry
The major demands presented by the textile industry include the elimination of the 11% import duty on cotton imports imposed by the Union government. Adding to this, the industry has proposed that yarn manufacturers should be given procurement priority over traders during cotton purchasing transactions.
Furthermore, they have asked for a 5% interest subvention to spinning mills during peak seasons which spans from December to March every year. Another demand is to reduce the minimum lot size for e-auctioning cotton to a manageable count of 500 bales, a move that aims to support the sustainability of Micro, Small and Medium-sized Enterprises (MSMEs).
The Rationale Behind These Demands
These demands arise due to the significant implications of cotton and yarn price volatility on the pricing of fabrics and garments. The current predicament has resulted in widespread cancellation of export orders, leading to difficulties in fulfilling long term export commitments. A formidable reason for the fluctuating cotton prices is the imposition of 5% Basic Customs Duty (BCD), 5% Agriculture Infrastructure Development Cess (AIDC), and 10% Social Welfare Cess from the 2021-22 budget, cumulatively amounting to an 11% import duty on cotton.
Concerns about the Import Duty on Cotton
This hefty import duty on raw cotton chips away at the competitiveness of the resultant value-added segments, which boasts a business size of around Rs 50,000 crores in exports and Rs 25,000 crores domestically. These sectors provide employment to nearly 12 lakh people, signaling the large-scale impact an import duty can have on jobs and the economy.
Overview of Cotton Importance
Cotton is a Kharif crop that requires 6 to 8 months to mature and has a high resistance to drought, making it ideal for arid climates. It occupies 2.1% of the world’s arable land and meets 27% of global textile needs. The crop thrives best in temperatures between 21-30°C and rainfall of approximately 50-100cm. Well-drained black cotton soil or ‘Regur Soil’, like that found in the Deccan Plateau, is ideal for its cultivation.
Cotton Producers and Products
India leads the world in cotton production, followed by China and the USA. Within India, the top cotton-producing states include Gujarat, Maharashtra, Telangana, Andhra Pradesh, and Rajasthan. There are four cultivated species of cotton: Gossypium arboreum, G.herbaceum, G.hirsutum, and G.barbadense, with Gossypium arboreum and G.herbaceum known as old-world or Asiatic cotton; G.hirsutum and G.barbadense are known as American cotton or upland cotton and Egyptian cotton, respectively.
Hybrid, Bt Cotton, and Indian Cotton Production
Hybrid cotton, produced by crossing two parent strains with different genetic characters, and Bt cotton, a genetically modified pest-resistant cotton variety, are widely used in cotton cultivation. Since its introduction in 2002, Bt cotton hybrids have dominated the Indian market, covering over 95% of the area under cotton cultivation.
India produces about 6 million tons of cotton every year, accounting for roughly 23% of global cotton production. It tops the world as the largest consumer and third largest exporter of cotton. Fascinatingly, India contributes about 51% of the total global organic cotton production, underpinning its pivotal role in the international cotton industry.