Approved By: Oliver Flake
Prepared By: Santosh Singh
Report Highlights:
India‟s MY 2009/10 (August/July) cotton production is forecast to increase to a record 25.0 India‟s MY 2009/10 (August/July) cotton production is forecast to increase to a record 25.0 million U.S. bales on expected higher planted area and yields. Bt cotton coverage is expected to account for 87 percent of the forecast cotton area of 9.6 million hectares. Consumption is forecast to increase to 18.5 million bales on expected improvement in export and domestic demand for cotton textiles. Exports are forecast higher at a record 7.8 million bales; and imports at 390,000 bales, mostly extra long staple cotton.
Commodities: Cotton
Production:
Assuming normal weather conditions, India‟s marketing year (MY) 2009/10 (August/July) cotton production is forecast to increase to a record 25.0 million bales (5.4 million tons) onAssuming normal weather conditions, India‟s marketing year (MY) 2009/10 (August/July) cotton production is forecast to increase to a record 25.0 million bales (5.4 million tons) on
expected higher planted area and yields (see Table 1). Cotton area in MY 2009/10 is forecast to increase to a record 9.6 million hectares as cotton farmers this past year realized higher net returns vis-à-vis other competing crop because of the significant hike in the minimum support price (MSP) for seed cotton in MY 2008/09. Bt cotton is expected to account for about 87 percent of the total planted area. Assuming timely and well distributed monsoon rains and normal weather conditions, cotton yields are expected to increase to 567 kg per hectare, a six percent increase over last year‟s weather impacted crop.distributed monsoon rains and normal weather conditions, cotton yields are expected to increase to 567 kg per hectare, a six percent increase over last year‟s weather impacted crop.
Cotton, a predominantly monsoon-season crop, is planted from the end of April through September, and harvested in the fall and winter (Table 4B). Planting intentions are largely influenced by the relative price and profitability of cotton vis-à-vis competing crops (rice, guar, and fodder crops in the north; coarse grains, pulses, and sugarcane in the central region; and rice, tobacco, and chilies in the south). With farmers assured of the „highly‟ highly‟ remunerative MSP prices in the upcoming season, cotton area in most cotton growing states is forecast the same or slightly higher than last year. Strong end-season prices of competing crops (paddy, maize, soybean, and peanuts) will limit any major shift in area from competing crops to cotton (Table 3A). Assuming normal weather at planting time, cotton planting is forecast to expand by 2 percent over last year‟s area to 9.58 million hectares.cotton planting is forecast to expand by 2 percent over last year‟s area to 9.58 million hectares.
Cotton production has been a major success story in Indian agriculture as production more than doubled from 10.6 million bales in MY 2002/03 to a record 24.6 million bales in 2007/08. Cotton production in MY 2008/09 faltered on late planting due to a prolonged dry monsoon spell in July/August 2008. The latest cotton arrival estimates [1] indicate that MY 2008/09 production will reach 23.0 million bales [2] from 9.5 million hectares with the yield of 535 kg/hec. About 70 percent of total cotton production is accounted by the states of Gujarat, Maharashtra and Andhra Pradesh (Table 3A).
The production growth in recent years has been largely fueled by rapid gains in productivity as scope for area expansion is limited [3] . Cotton yields have nearly doubled from around 300 kg per hectare levels in the pre-2002/03 period to the recent 520-565 kg per hectare in the last three years. The rapid growth in yields can be attributed to introduction and expansion of Bt cotton and improved hybrid cotton varieties [4] , improved crop management practices [5] and overall favorable weather conditions in most of the growing states.
With the area under Bt cotton and improved varieties nearly peaking, the prospect for future growth in productivity is limited as most cotton is grown under rainfed conditions and on small size of land holdings [6] . Although potential exists for a further increase in yields, cotton farmers will have to invest more in production technologies for improved management of irrigation, fertilizers and micro nutrients and pests and diseases, i.e., move toward precision farming.
Riding on the expectation of the continued current growth trend, the government has set up an ambitious production target of 28.1 million bales (6.1 million tons) by 2010 [7] . Some industry sources estimate cotton production to peak around 27.0 million bales in the next 2-3 years.
Government Procurement Mounts on High MSP
In September 2008, the government raised the MSP price of different varieties of seed cotton by 26 to 48 percent over previous year when international cotton prices were high [8] . Since then, international cotton prices have crashed exerting downward pressure on
domestic cotton prices, but the „artificially inflated‟ MSPs unrelated to the declining cotton prices constrained the private trade from making normal seed cotton purchases from the artificially inflated‟ MSPs unrelated to the declining cotton prices constrained the private trade from making normal seed cotton purchases from the farmers. Consequently, government agencies like Cotton Corporation of India (CCI) and state marketing federations have been forced to buy large quantities of cotton compared to the previous years at the MSP [9] . While government procurement may have helped stabilized domestic cotton prices, Indian cotton became uncompetitive in the international market.
Industry sources report that government agencies have procured about 9.6 million bales by April 5, 2009, nearly half of the total cotton arrivals. While government agencies had been selling cotton at market prices, unrelated to the cost of procurement and processing, sales had been very poor initially. In order to liquidate the ballooning stocks, the CCI announced a bulk discount scheme, offering a discount of $23 to $29 per ton on the ruling market price and other benefits for buyers purchasing cotton in bulk quantities of 10,000 bales and above (see Cotton Quarterly Update March IN9028). Industry sources report that CCI and marketing federations have been able to sell about 5.1 million bales, but still have about 4.5 million bales of unsold cotton. With the domestic cotton prices improving, CCI has been slow in offering cotton for sale in the recent weeks. Industry sources report that government agencies may procure about 10.5 million bales by the end of the season.
While the private trade (ginners/traders) and textile mills have been strongly advocating the lowering of MSP prices, the government is highly unlikely to lower the MSP due to political compulsions. With forecast bumper MY 2009/10 production, government agencies will have to undertake significant MSP procurement from the beginning of the upcoming season. Industry sources report that government agencies will be under tremendous pressure by June/July to sell cotton and reduce their stocks to manageable levels to enable them to undertake the MSP operation in the upcoming season. Given the reports that the quality of government stocks may not be good, government agencies will have to offer price incentives for liquidating their cotton stocks if the current price parity between local and international cotton remains steady. Consequently, government agencies will have to write off huge costs incurred in procurement, processing and carrying of cotton under the MSP. The new government to be elected in May after the parliamentary elections will have to take a decision on management of government cotton stocks and MSP procurement for the upcoming season.
Bt Cotton — The Success Story
After the „Green Revolution‟ in cereal crops in late the 1960‟s, Bt cotton has been the Green Revolution‟ in cereal crops in late the 1960‟s, Bt cotton has been the Green Revolution‟ in cereal crops in late the 1960‟s, Bt cotton has been the genesis for the „Cotton Revolution‟ in Indian agriculture. Since the introduction of BtCotton Revolution‟ in Indian agriculture. Since the introduction of Bt
cotton in 2002, area under Bt cotton has grown remarkably in the short span of seven years. Various empirical studies report significant benefits to farmers from Bt cotton by way of an increase in yields (30-60%) and reduction in the number of pesticide sprays (50 percent) resulting in a 50 to 100 percent increase in profits [10] . Improved availability and better quality of the raw material provides the Indian textile industry with a competitive edge in the global market. Remarkable benefits from Bt cotton has spurred political support for biotechnology among Indian farmers, industry, and policy makers.
Bt cotton area in MY 2008/09 is estimated at 8.1 million hectares, and is forecast to increase to 8.3 million hectares, accounting for almost 87 percent of forecast total cotton area. Industry sources expect that the Bt cotton share will stabilize at around 90 percent of total cotton area. Due to the significant reduction in seed prices of approved Bt cotton varieties, a wider choice of approved Bt hybrids and growing awareness about the reliability and benefits of approved Bt seeds, cotton farmers are rapidly shifting from unapproved Bt seeds to approved Bt cotton seeds. Farmers are evaluating various Bt cotton hybrid varieties for factors such as better germplasm (higher yield potential), improved Bt technology (stacked gene events) and adequate availability of seeds.
Since 2002, the Government of India (GOI) approved five events and over 280 hybrids for commercial cultivation in different agro-climatic regions. In May 2008, the Genetic Engineering Approval Committee (GEAC) granted approval to a new Bt event developed by
the Central Institute of Cotton Research (CICR), and incorporated in a popular cotton variety Bikaneri Narma. With this, Bt technology has been for the first time introduced in a varietal background whereby farmers can save the seeds. The Bt seeds of the CICR event will be available to farmers for planting in the upcoming 2009/10 season.
Most of the approved Bt cotton hybrids are from two Monsanto events, including the Bollgard II (stacked gene event) that provides protection against a wider range of bollworm pest. Indian cotton farmers have a wider choice of Bt cotton hybrids as they increasingly adopt higher yielding Bt hybrids (better germplasm or improved Bt technology like BG-II) among range of available approved Bt hybrids.
According to industry sources [11] , in addition to the approved varieties, there are several (about fifty) Bt cotton hybrids, illegally developed, multiplied and marketed by farmers and seed companies, which are available at cheaper rates vis-à-vis approved hybrids.
However, area under unapproved Bt cotton seed has been rapidly declining since 2006 after seed companies were forced to slash the Bt cotton seed prices by state governments. The price differential between approved and unapproved Bt hybrids has declined significantly and farmers prefer to plant approved Bt hybrid seeds due to the higher risk associated with production from unapproved Bt cotton seeds.
The success of Bt cotton is resulting in a significant change in the varietal profile and share of different types of cotton produced in India. As most of the Bt hybrids are of medium and long staple cotton (26 to 32 mm), there is an increasing shortage of domestic cotton
of short staple (below 22 mm) and extra long staple (35 mm and above). If the current trend continues, the domestic textile industry may have to augment their short staple cotton requirements through imports which they are already doing in the case of extra long staple cotton.
[1] Market arrivals, through April 11, 2009, are estimated at 20.4 million bales vis-à-vis 22.3 million bales for the comparable period last year.
[2] India's second largest crop to date.
[3] Industry sources estimate cotton area to peak at 9.8 million hectares.
[4] Bt cotton in India is nearly all hybrid cotton varieties, which have better yield potential due to better germplasm vis-à-vis traditional varieties. With the successful adoption of Bt cotton, the share of hybrid cotton has expanded from 30-35 percent in pre-Bt cotton era to about 85 percent. The expansion in area under hybrid cotton varieties coupled with lower crop losses due to the Bt technology has supported the phenomenal yield gains of the recent years.
[5] The cost of Bt and hybrid cotton seeds (Rs. 750per acre) significantly higher than traditional varieties (Rs.200- 400 per acre). Higher investment at the time of planting encourages farmers to follow better crop management practices.
[6] There are about 5.5 million cotton farmers with the average size of holding of less than a hectare which limits their ability to adopt capital intensive production technologies and infrastructure.
[7] Report from the working group on textile and jute industry for the 11th five year plan (2007-2012) http://www.txcindia.com.
[8] For more information, refer Cotton Quarterly Update-December (IN8140)
[9] MSP operations in MY 2007/08 were minimal as market prices were higher than the MSP in most purchase centers. The highest government procurement (CCI‟s MSP and Maharashtra Monopoly procurement) was recorded in MY 2004/05 at an estimated 5.1 million bales.centers. The highest government procurement (CCI‟s MSP and Maharashtra Monopoly procurement) was recorded in MY 2004/05 at an estimated 5.1 million bales.
[10] Source: James Clive, “Global Status of Commercialized Biotech/GM Crops: 2007”, ISAA Brief 37 [11] No official estimates are available for the number of illegal Bt hybrids and area under illegal Bt cotton.
Consumption:
Cotton consumption in MY 2009/10 is forecast to recover to 18.5 million bales (4.0 million tons) on expected improvement in domestic and export demand for textiles and sufficient domestic supplies (see Table 1). With the value of the Indian rupee vis-à-vis U.S. dollar expected to remain steady at the current low [1] , industry sources expect recovery in export demand for Indian textiles. Expected continued growth in the Indian population and economy [2] should support domestic demand for textile.
Post‟s MY 2008/09 consumption estimate is revised marginally upward to 17.3 million bales Post‟s MY 2008/09 consumption estimate is revised marginally upward to 17.3 million bales (3.9 million tons) based on the latest monthly consumption figures (Table 4) and information from market sources.
After robust growth for three consecutive years, India‟s cotton consumption faltered in MY After robust growth for three consecutive years, India‟s cotton consumption faltered in MY 2008/09 due to a slowdown in export demand and high cotton prices. However, the recent strong depreciation in the value of Indian rupee vis-à-vis the U.S. dollar since the beginning of 2009 has resulted in a revival in export demand. There has been a recovery in exports of cotton yarn and textiles since February, resulting in a lowering of their inventories to manageable levels and improvement in production activities. Industry sources report a recovery in prices of cotton yarn and textiles since March 2008, which should improve the prospects for domestic consumption. Industry sources expect cotton consumption to recover further in MY 2009/10 on continued growth in the economy, an expanding middle
class and a strong rural economy. Consequently, MY 2009/10 consumption is forecast to increase by about 6 percent to 18.5 million bales.
Cotton‟s share in the textile industry‟s total fiber use (Table 13) in Indian fiscal year (IFY) Cotton‟s share in the textile industry‟s total fiber use (Table 13) in Indian fiscal year (IFY) Cotton‟s share in the textile industry‟s total fiber use (Table 13) in Indian fiscal year (IFY) 2008/09 (April/March) is estimated to increase to 59.5 percent due to relatively higher cotton prices vis-à-vis man-made fiber (MMF) during most of 2008. However, prices of man-made fibers have sharply declined since November/December 2008, while cotton prices have gained in recent months. Assuming the current relative price ratio remains stable in the future, cotton‟s share in total fiber use is estimated to decrease by one percent stable in the future, cotton‟s share in total fiber use is estimated to decrease by one percent to 58.5 percent in IFY 2009/10.
Due to tropical weather conditions and tradition, cotton is the preferred fiber in India. However, poly-cotton blends are becoming increasingly popular in India due to their durability and ease of maintenance under tropical conditions. Mills are increasingly shifting their cotton/polyester blends in favor of polyester. Future growth in cotton usage is likely to be determined by the relative prices of cotton vis-à-vis MMFs.
Prices
The government‟s MSP operations steadied the domestic cotton prices during MY 2008/09 The government‟s MSP operations steadied the domestic cotton prices during MY 2008/09 despite weak international cotton prices and bumper production (Table 6). Nevertheless, current prices of most cotton varieties are 18 to 25 percent lower than last year‟s record despite weak international cotton prices and bumper production (Table 6). Nevertheless, current prices of most cotton varieties are 18 to 25 percent lower than last year‟s record ending prices.
Prices of the most commonly traded varieties are currently ranging between 58 to 60 cents per lb. While the domestic cotton prices during the upcoming MY 2009/10 should closely follow the international cotton price movement, prices are expected to be steady on sufficient domestic supplies.
[1] Value of the Indian rupee vis-à-vis US Dollars has depreciated by over 30 percent from Rs. 39.4 in January 2008 to Rs. 52.0 by March, 2009.
[2] Due to the global recession, the growth of the Indian economy has slowed down from 9.0 percent in 2007/08 to an estimated 7.0 percent in 2008/09 and may grow at 5-6 percent in 2009/10. As per the latest census, Indian population has been growing at 1.8 percent per annum.
Trade:
After emerging as the second largest exporter of cotton behind the U.S. for two consecutive years, India‟s cotton exports during MY 2008/09 faltered as the high MSP made Indian years, India‟s cotton exports during MY 2008/09 faltered as the high MSP made Indian cotton uncompetitive in the international market. India may re-emerge as a major player in the international market in MY 2009/10 as cotton production is forecast to decline in most exporting countries.
Post forecast‟s cotton exports in MY 2009/10 to increase to a record 7.8 million bales (1.7 Post forecast‟s cotton exports in MY 2009/10 to increase to a record 7.8 million bales (1.7 million tons) on forecast sufficient domestic supplies and the weak Indian rupee vis-à-vis other currencies (see Table 1). Imports in MY 2009/10 are forecast at 390,000 bales (85,000 tons), mostly extra long staple (ELS) and some short staple cotton to augment declining local supplies of ELS and short staple cotton. However, the relative price of local cotton vis-à-vis world cotton and the quality of domestic cotton during the upcoming season may temper these forecast trade volumes.
Post‟s MY 2008/09 export estimate has been lowered to 2.0 million bales (0.4 million tons) Post‟s MY 2008/09 export estimate has been lowered to 2.0 million bales (0.4 million tons) based on available official estimates for the first four months of the marketing year and information from trade sources [1] . Official export registration with the Textile
Commissioner‟s Office indicate that about 1.54 million bales have been registered for export Commissioner‟s Office indicate that about 1.54 million bales have been registered for export from August 2008 to March 2009, of which only about 790,000 bales have been shipped. Major export destinations have been Bangladesh, Pakistan, China and other Far-east countries. The export registrations during the months of February/March have been reported at 0.8 million bales for delivery through May, 2009. Market sources report that export prospects for Indian cotton have improved since February, 2009 due to the decline
in the value of Indian rupee vis-à-vis the U.S. dollar. Assuming current price parity between Indian cotton vis-à-vis other origin remains stable, MY 2008/09 exports are expected to reach 2.0 million bales due to strong exports during the coming months.
Post‟s MY 2008/09 import estimate has been revised higher to 625,000 bales based on Post‟s MY 2008/09 import estimate has been revised higher to 625,000 bales based on available official statistics for the first four months of the marketing year. Most of the imports have been ELS and some short staple cotton from the U.S., Egypt, and West Africa. Based on the revised official statistics, MY 2007/08 imports have been revised higher to 600,000 bales.
[1] Official export figures are available for four months of the MY 2007/08, i.e., August –November 2008 (see table 6).
Stocks:
Due to near record production and low off take (both export and domestic), MY 2008/09 ending stocks will balloon to an estimated record 11.8 million bales. These stocks are more than sufficient for eight months consumption against the normal stocks of 3-4 months of the consumption requirement (see table 1). Industry sources estimate that more than half of the stocks will be with government agencies, some of which may have quality issues.
Forecast strong recovery in exports and consumption will drawdown the MY 2009/10 ending stocks marginally lower to 10.9 million bales, still more than sufficient for the seven month consumption requirement.
Policy:
Production Policy
Various central and state government agencies and research institutions are engaged in cotton varietal development, seed distribution, crop surveillance, and integrated pest management, extension and marketing activities. In 1999, the central government launched the Technology Mission on Cotton (TMC) to improve the availability of quality cotton at reasonable prices. The goal of the TMC is to focus on bringing about improvement in the production, productivity and quality of cotton through research, transfer of technology and improvement in the marketing and raw cotton processing sectors.
The GOI establishes minimum support prices (MSP) for cotton at the beginning of every marketing season. The Cotton Corporation of India (CCI), a government organization, is responsible for price support operations in all states. Typically, market prices remain well above the MSP, but for the MY 2008/09 when the government hiked the MSP significantly. Government agencies purchase seed cotton at the MSP, and sell the processed cotton at market prices, and the losses incurred in the operation are borne by the government exchequer.
Since the launch of futures trading in cotton by the East India Cotton Association in 1998, three commodity exchanges have futures operation in cotton. However, it is believed that cotton futures have not gained enough volume to affect the market.
In 1999, the Ministry of Textiles launched the Technology Upgradation Fund Scheme (TUFS) that provides an interest subsidy on loans intended to modernize the textile industry. At the end of December 2008, more than Rs. 579 billion ($11.6 billion) loans had been disbursed under the TUFS to nearly 23,500 textile units. In 2007, the government launched the Scheme for Integrated Textile Parks to provide the textile industry with world-class infrastructure facilities. The government has so far approved 40 parks with an estimated investment of Rs. 214.8 billion ($4.3 billion). The central government also has several ongoing schemes for development of specifics sectors like handlooms, power looms etc [1] . Additionally, several state governments supplement the central government efforts by supporting development schemes including tax incentives, subsidies, etc for the textile industry in their respective states.
Trade Policy
On July 8, 2008, the Government of India removed the import duty (14.7 percent) on cotton [2] . The tariff levels on cotton textile products (Table 21) remained unchanged in the 2009 Indian budget that is effective for IFY 2009/10 (April/March).
On July 22, 2008, the Ministry of Commerce issued a notification [3] that imposes the condition that states “The contracts for exports of cotton shall be registered with the Textile
Commissioner prior to shipment. Clearance of cotton consignments by customs should be done after verifying that the contracts have been registered.”
This was done to enable the government to monitor India‟s exports of cotton as well as the This was done to enable the government to monitor India‟s exports of cotton as well as the domestic cotton supply situation. Earlier, export statistics were made available to the government with a lag of 4-6 months after physical exports since the Directorate General of Commercial Intelligence takes some time in collecting, compiling and tabulating the custom statistics from each port
On February 17, 2009, the government announced the Vishesh Krishi Gram Upaj Yojana [4] (VKGUY) benefit to exports of raw cotton to encourage cotton exports and liquidate burdensome cotton stocks from the domestic market. The benefits have been extended on a retrospective basis for cotton exports from April 1, 2008 to June 30, 2009, wherein exporters are entitled to a five percent duty credit scrip on the FOB value, which can be traded and used for availing a duty relief for imports. The Indian textile industry has strongly opposed the move as the policy to subsidize cotton exports will give undue benefit to their competitors from China, Pakistan, Bangladesh and Indonesia in the global cotton textile market. However, market sources believe that the government may extend the June 30, 2009 deadline further through the MY 2009/10 season if the current price parity between the domestic and international market does not change substantially in favor of exports.
With the expiration of the MFA in January 2005, Indian exports of all textile products have been liberalized. In an effort to promote the export of value-added cotton textiles, the GOI provides various incentives. Export oriented units (EOUs) and firms importing against an advance license receive a duty drawback (zero duty for EOUs, and duty discounts for others) on imports of raw materials for the export of value-added goods. Under the “Export Promotion Capital Goods” plan, imports of capital goods and machinery are allowed at reduced duty rates against export obligations (zero duty for a 100 percent EOU).
In the recent annual supplement to the foreign trade policy, the government announced that textile and leather product exporters will get direct government assistance of 2% of their FOB value of exports to the U.S. and E.U as duty free scrip‟s. The scheme will be that textile and leather product exporters will get direct government assistance of 2% of their FOB value of exports to the U.S. and E.U as duty free scrip‟s. The scheme will be effective for the period April August 2009 and a sum of Rs. 32.5 million ($0.65 million) has been allotted for the scheme.
[1] For more information on TUFS and other central government schemes for the textile industry, refer the website of Office of the Textile Commissioner http://www.txcindia.com/ and review various schemes in the heading „Progress of Central Schemes‟.Progress of Central Schemes‟.
[2] http://www.cbec.gov.in/customs/cs-act/notifications/notfns-2k8/cs84-2k8.htm
[3] No 26(RE-2008)/2004-09 http://164.100.9.245/exim/2000/not/not08/not2608.htm)
[4] Special Agriculture & Village Produce Scheme
Marketing:
India should be in the cotton export market for the next few (3-4) years, until domestic consumption catches up with production. Most exports are expected to be of medium-tolong staple cotton (25 to 32 mm length) to neighboring countries, China, and Far East countries. Post expects India to continue to import ELS and quality long staple cotton (28- 34 mm), with occasional imports of short staple cotton (below 22 mm) when international prices are favorable. The United States has been the leading supplier of cotton to India over the past few years, but volumes have declined in recent years on sufficient domestic supplies.
Indian mills importing U.S. Pima and upland cotton are appreciative of its quality and consistency. However, U.S. cotton faces severe competition from neighboring suppliers like
Egypt, West Africa, the Commonwealth of Independent States (CIS), and Australia due to their freight advantage and shorter delivery periods.
Production, Supply and Demand Data Statistics:
Table 2: Commodity, ELS Cotton - 35mm staple length and above
Source: Directorate General of Commercial Intelligence & Statistics (DGCIS), GOI.
Note: Figures include non-spinnable cotton waste not included in the PS&D. Source: Directorate General of Commercial Intelligence & Statistics (DGCIS), GOI.
Notes:
/1 : OGL(Open General License)- No restrictions on imports.
/2 : Most goods of the under Chapter 52 get a tariff concession up to 50 percent of the effective basic duty on imports from less developed countries (LDC) members of SAPTA - Bangladesh, Nepal, Bhutan and Maldives.
/3 : CVD (Countervailing Duty) = local excise taxes + Central Cess applied on CIF value of good plus Basic Duty.
Local excise tax rate = 4.12 % for items not containing synthetic fiber or 8.24 % for items containing synthetic fiber
Central Cess under Textile Com Act, 1963 = 0.05%
/4: Special CVD = 4 percent applied on CIF Value of Good plus Basic Duty plus CVD plus Education Cess. However, cotton fabrics are exempted from Special CVD.
/5 : Education Cess = 2+1 percent of the Basic duty + CVD.
However, education cess exempted in case of items under the HS codes 5208.41, 5208.42, 5208.49, 5208.51, 5208.52,
5208.53, 5208.59, 5209.41, 5209.42, 5209.49, 5209.51, 5209.52, 5209.59, 5210.41, 5210.42, 5210.49, 5210.51,
5210.52, 5210.59, 5211.41, 5211.42, 5211.59, 5212.15, 5212.24, 5212.25.
/6: Total Applicable Duty computation
A: CIF Value of Good
B: Basic Duty = Basic Duty Rate x CIF Value
C : CV Duty = CVD Rate x (A+ B)
where CVD Rate = Excise Tax Rate + Central Cess
D : Spl CVD = Spl CVD Rate x (A+B+C) E: Education Cess = 3% of (B+C+D) Total Applicable Duty = B+C+D+E
/7: Basic Duty on 5208.39 is 10% or rs. 150/kg whichever is higher
on 5208.41 is 10% or rs. 9/sq meter on 5208.42 is 10% or rs. 37/sq meter on 5208.49 is 10% or rs. 200/kg
on 5208.51 is 10% or rs. 27/sqmeter on 5208.52 is 10% or rs. 23/sqmeter on 5208.59 is 10% or rs. 50/sqmeter
/8 : Basic Duty on 5209.31-39 is 10% or rs. 150/kg on 5209.41 is 10% or rs. 32/sqmeter on 5209.43 is 10% or rs. 30/sqmeter
on 5209.49 is 10% or rs. 150/kg
on 5209.51-52 is 10% or rs. 30/sqmeter on 5209.59 is 10% or rs. 38/sqmeter
/9 : Basic Duty on 5210.39 is 10% or rs. 150/kg
on 5210.41 is 10% or rs. 15 /sqmeter on 5210.49 is 10% or rs. 185/kg
on 5210.51-59 is 10% or rs. 15/sqmeter
/10: Basic Duty on 5211.31-39 is 10% or rs. 150/kg on 5211.41 is 10% or rs. 44/sqmeter on 5211.42 is 10% or rs. 18 per sqmeter on 5211.43 is 10% or rs. 40/sqmeter on 5211.49 is 10% or rs. 150/kg
on 5211.51-59 is 10% or rs. 18/sqmeter
/11: Basic Duty on 5212.15 and 5212.25 is 10% or rs. 165/kg on 5212.24 is 10% or rs. 20/sqmeter
Author Defined:
Extra Long Staple Cotton
The Indian cotton textile industry largely depends on imports to meet their consumption needs for extra long staple (ELS) cotton as domestic ELS cotton production is on a steady decline. ELS cotton is used for the production of quality yarn, fabric, and dress material, mostly for exports, and for a small but growing high-end domestic market segment.
Extra long staple (ELS) cotton production in MY 2009/10 is forecast lower at 135,000 bales (see Table 2) as the increase in the MSP for ELS cotton (DCH-32) has been lower than competing long staple varieties (Bunny, Brahma, other 30-34 mm varieties) [1] . Consequently, ELS cotton farmers are expected to shift to long staple varieties such as Bunny and Brahma (30-34 mm) as these varieties give higher and stable yields.
There are very few Indian cotton varieties (DCH-32, TCH-213, and Suvin grown mostly in southern India) that meet international ELS specifications. The fiber quality and yields of these varieties have deteriorated in recent years causing marketing problems and lower returns to growers. Therefore, farmers are increasingly shifting to long staple varieties, which have higher yields and fewer quality problems. Local mills use the long staple varieties for blending with imported ELS cotton for production of quality yarn and fabric. Efforts to improve the productivity of ELS parent lines have been met with limited success.
India‟s MY 2009/10 ELS cotton consumption is forecast to recover to 375,000 bales on expected improvement in demand for finer count yarns and fabrics, both for export and for India‟s MY 2009/10 ELS cotton consumption is forecast to recover to 375,000 bales on expected improvement in demand for finer count yarns and fabrics, both for export and for the domestic market. Since most of the consumption requirements are met through imports, MY 2009/10 imports are forecast higher at 230,000 bales. MY 2008/09 consumption is revised lower to 345,000 bales due to poor export demand for finer count yarns and fabrics. Imports have been revised lower to 175,000 bales as mills curtailed consumption.
Textile Industry
India is the second largest producer of textiles and garments after China and has a share of 3.9 percent in the global textile trade. The textile industry is largely cotton based contributing about 12 percent to the country's total export earnings, 11 percent of industrial production, 4 percent to GDP and provides direct employment to over 33.17 million people,
the second largest employment generator after agriculture [2] . Post MFA (2005/06), the textile industry had been progressing well for three consecutive years on sufficient raw material supplies, and strong export and domestic demand. However, the textile industry has been facing severe challenges since late 2007 due to an increase in the price of raw material, depressed global demand for textiles, and other infrastructure problems. Consequently, growth in the production of textiles is estimated to come down in IFY 2008/09 compared to last year (Tables 8-12)
The sharp weakening of value of the Indian rupee since February 2009 has improved export price realization in rupee terms. Consequently, industry sources report an improvement in export demand for textile products. Export demand for Indian textiles is expected to recover in IFY 2009/10 provided the Indian rupee remains stable. Domestic demand for textiles is expected to grow on continued strong growth in the economy and an expanding population. Consequently, industry sources expect a turnaround in the textile industry, with the production in IFY 2009/10 forecast to increase by 4-5 percent over the previous year.
The Indian textile industry includes both an "organized" sector (large-scale spinning units and composite mills) and an "unorganized" sector (small-scale spinning units, power looms, handlooms, hosiery units). More than 95 percent of yarn is produced in the organized sector. The weaving industry is mainly supplied by the unorganized sector, with power looms accounting for 60 percent, handlooms for 18 percent, and hosiery units for 17 percent of total cloth production. The organized sector weaving mills account for the remaining 5 percent of cloth production.
After three consecutive years of steady double digit growth, cotton textile exports in the first five months of IFY 2008/09 slowed down to 4 percent (Table 16). While official statistics are not available, market sources report a significant decline in exports from August 2008 onwards, and total exports during IFY 2008/09 may decline by 5-6 percent over last year. However, there has been a resurgence in export demand since March 2009 and textile export prospects are expected to improve in IFY 2009/10.
Cotton madeups account for the major share of cotton textile exports followed by cotton yarn, and cotton fabric (Tables 18-20). Indian textile exports are typically targeted at the lower quality end of the international market. A few modern integrated textile units are now focusing on exports of finer count yarns, fabric, and branded garments for the upper segment of the world market. Leading textile groups are making significant investments in modern equipment and in further integration in the post MFA-era (after January 2005).
[1] See India Cotton Quarterly Update - December, 2008 (IN8140)
[2]Source: Confederation of Indian Industries http://www.citiindia.com/
