According to reports, the South India Cotton Mills Association (SIMA) recently once again called on the Indian Finance Minister to exempt 11% cotton import tariffs during the cotton off-season (April-October 2023) to ensure the safety of raw material supply and avoid large-scale shutdowns of cotton textile companies and Textile exports continue to decline.
The association believes that raw materials such as cotton must be provided to the manufacturing industry at internationally competitive prices, and periodic exemptions from import tariffs are crucial to boosting exports of cotton textiles and clothing. It is understood that although the Indian Textile Industry, Cotton Mills Association and others have repeatedly urged the government to exempt cotton import tariffs since 2023, they have not received high attention from relevant departments, and their wishes have repeatedly failed.
Several international cotton merchants and Indian brand yarn mills said that so far, India’s phased elimination of 11% cotton import tariff may be “a matter of course” and they hope that the policy will be introduced as soon as possible.
First, India’s cotton production in 2022/23 may still have room for reduction, and India’s domestic cotton supply and demand pressure continues to rise. According to AGM statistics, as of April 23, the cumulative volume of Indian cotton on the market this year was 3.2103 million tons, which is still more than 30% lower than the average volume of the three years in the same period. Therefore, regarding CAI’s latest output forecast of 30.3 million bales, some institutions and cotton-related enterprises Not approved.
Second, the current domestic cotton price in India is still “difficult to come down”, resulting in serious losses in orders from spinning mills and insufficient operating rates. As of now, the premium of Indian S-6, J-34 and other spot goods to ICE futures generally exceeds 18% (a premium of 5%-7% under normal conditions), resulting in a lack of competitiveness in international markets such as cotton yarn, cotton textiles and clothing.
The third is the need to complete orders for mid- to high-end cotton textiles and clothing. It is understood that since 2023, a certain amount of high-end and high-value-added orders from Europe and the United States have been transferred to India from China, Turkey and other countries. It may be difficult to meet the contract requirements using only Indian cotton and cotton. Processing companies need to purchase Australian cotton and American cotton in a timely manner. , Brazilian cotton, etc. are arranged and generated.
Fourth, as the Federal Reserve’s interest rate hike comes to an end, the Indian rupee’s exchange rate against the US dollar is expected to turn from depreciation to appreciation, and the cost of imported cotton will fall, which will help textile and clothing companies receive export orders and improve their competitiveness.