Spurt in cotton prices: TN CM seeks PM’s intervention to help improve the situation

Our Bureau | Updated on: May 16, 2022

Stalin has listed out various remedial measures, including mandatory stock declaration, cash credit limit extension, margin money reduction, among others. 

With the rising cotton and yarn prices affecting Tamil Nadu’s textile industry, the Chief Minister MK Stalin had urged Prime Minister Narendra Modi’s urgent intervention to improve the situation.

Based on the State government's request, the Centre notified the withdrawal of import duty levied on cotton. Despite this, the situation has not improved and the prices of these commodities continue to rise. This precarious situation has widespread ramifications for the textile industry in the State, the Chief Minister said in his communication

A large number of spinning, weaving and garment units face the danger of closure due to unsustainable working capital requirements, and mismatch between the agreed price of supply vis-a-vis the production costs. The garments manufacturers are suffering huge losses and many MSME units have already closed their operations resulting in massive job losses

The situation had adversely impacted handloom weavers in the cooperative sector as they are not able to procure yarn and supply to their members.

The growing discontent in the industry and among the weavers are alarming. The Chief Minister has the Prime Minister to take serious note of the situation and initiate steps to rein in the price rise and consequent disruptions in the textile value chain:

As an immediate measure, the stock declaration for cotton and yarn may be made mandatory for all spinning mills so that ginners and cotton traders can obtain actual data on their availability.

Import duty waiver

The Centre had waived import duty on cotton till September 30, 2022. However, as it takes over three months for the consignment to reach Indian ports after the contract is entered into, effectively the duty waiver will be available only up to June 30, 2022. Therefore, the Union Government may issue suitable clarifications that waiver of import duty will be available for all contracts entered up to September 30.

Currently, banks provide a cash credit limit to the spinning mills for cotton’s purchase only for three months while the availability with the farmers extends up to four months and thereafter, it is available in the market for another four months. Therefore, the cash credit limit for spinning mills procurement may be extended up to eight months in a year.

Similarly, margin money sought by the banks at 25 per cent of purchase value may be reduced to 10 per cent since banks are calculating the purchase stock value at lesser rates than the actual purchase/market rates in the market.

“Considering the critical situation, I request you to urgently intervene on the serious disruptions faced by the textile industry in the State,” Chief Minister has urged.

Published on May 16, 2022
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