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Covering cotton yarn under MEIS will help boost India's exports: CITI

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Dion Global

11 Feb 2019

Textile Industry body CITI Monday appealed to the Centre to include cotton yarn under Merchandise Exports from India Scheme (MEIS), to help boost India's exports and penetrate new markets.

The Confederation of Indian Textile Industry (CITI) noted that cotton yarn and fabric shipments are struggling because of the duty disadvantage faced by the Indian exporters in major markets and asked the Government to enhance MEIS rate for fabric from 2 per cent to 4 per cent.

According to CITI, there has been continuous decline in exports of cotton yarn and fabric in recent years.

"India's exports of cotton yarn declined by 25 per cent from USD 4,570 million in 2013-14 to USD 3,443 million in 2017-18. In the same period fabric exports declined by 7 per cent from USD 4,941 million to USD 4,598 million," CITI said in a statement.

CITI Chairman Sanjay Jain requested the Government to cover cotton yarn under MEIS to help boost India's exports and penetrate new markets especially in Africa, while enabling the farmers get a better price for raw cotton.

He said that cotton yarn is the only segment which is not covered under MEIS.

"Hence, despite abundant raw materials availability and second largest cotton spinning infrastructure in the world, the cotton yarn exports are struggling in the absence of Government support," Jain observed.

He also requested the Government to enhance MEIS rate for fabric from 2 per cent to 4 per cent at par with Made-ups. According to him, if the MEIS rate for fabrics is hiked from 2 per cent to 4 per cent, it is estimated that exports of fabrics will increase by USD 1 billion per annum.

The CITI Chairman highlighted that China which is the largest importer of cotton yarn has shifted from India to Vietnam and Indonesia as these countries have duty free access while Indian yarn carries 3.5 per cent import duty.

From 2013 to 2017, there has been a decline in India's cotton yarn exports to China by 48 per cent while exports from Vietnam and Indonesia have increased at a remarkable rate of 129 per cent and 55 per cent respectively during the same period, Jain said.

He further stated that India's raw cotton is going to various markets at zero duty. India exported USD 1,894 million worth raw cotton in 2017-18. Exporting of raw cotton bales instead of value addition by converting to yarn and fabric is leading to loss of valuable foreign exchange, employment and better remuneration to farmers.

Jain pointed out that fabric exports from India are at serious disadvantage as compared to exports from competing countries due to duty differentials in major exports markets.

Markets like EU, China, Turkey and Vietnam impose an import duty in the range of 8-12 per cent on Indian fabric while duty free access is given to countries such as Pakistan, Cambodia, Bangladesh and Cambodia, he said.

The exports of garments have declined from USD 17.4 billion in 2016-17 to USD 16.7 billion in 2017-18, CITI said.