Cotton yarn exports under scrutiny

The removal of cotton yarn exports from the negative list and putting it under OGL (Open General License)

from April 1, has added fuel to the already mounting problem of the garment industry currently dealing with the mandatory Central Excise Rate increase of 10 per cent for the branded readymade garments and textile made-ups. This removal from the negative list will lead to unchecked exports of yarn resulting in unchecked price increases and scarcity of supply in domestic market.

As Rakesh Vaid, President, Garments Exporters Association (GEA) has pointed out that garment exporters have been undergoing serious crisis due to non-availability of adequate supply of cotton yarn at reasonable prices. In fact, in a letter to Anand Sharma, Union minister of commerce and industry he has requested him to take action and place cotton yarn exports back on the negative list because of the unprecedented rise in the price of cotton yarn.

Cotton yarn exports have strong potential to slowdown the exports of value-added products like garments and made-ups, even though it constitutes less than 10 per cent of overall textiles exports. Also, cotton yarn exports from India do not face much global competition unlike garment exports as most yarn producing nations keep their domestic yarn supply for its own industry. While keeping the export of cotton yarn in negative list, Vaid has also requested the government to maintain the export ceiling at 720 million kg for this year also.

He is hopeful the government will take prompt and necessary steps to safeguard the interests of garment exporters. He has requested the government to allow export of cotton only in a calibrated manner to ensure adequate and uninterrupted supply of cotton yarn at reasonable prices for the domestic industry.

According to the AEPC, price of 40s combed cotton yarn for hosiery, a widely-used category, has risen from Rs 185 per kg in August, to a record Rs 240 per kg. As a result, fabric prices have also shot up by 38 to 90 per cent, leading to higher prices for apparel products. The garment sector is one of the most labor-intensive industries of India and employs 35 million people. So it is expecting prioritized support from the government based on value addition and employability.