In the first six months of this financial year, cotton yarn exports from India declined ten per cent.  Withdrawal of export incentives for cotton yarn has reduced India’s competitive edge by increasing prices to the tune of five or six per cent.

The country exports almost 20 per cent of its cotton produced.  In 2013-14, spinning mills took advantage of the two per cent incremental export incentive, two per cent interest subvention, and three per cent focus market incentive. In 2014, these incentives were withdrawn and cotton yarn exports in 2016-17 registered a 26 per cent decline in value terms.

During the current cotton season, prices might touch minimum support price levels as production is expected to be high.

The textile industry has one of the highest levels of non-performing assets. When exports benefits such as Merchandise Exports from India Scheme and Interest Equalisation Scheme were introduced, all segments of the textile value chain were covered except cotton yarn. Thus cotton yarn exports to China dropped.

The three per cent IES benefit is essential to maintain six to nine months’ cotton inventory and to ensure consistency in quality of yarn supplied. The industry has asked for restoration of MEIS and IES benefits for cotton yarn.