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Texprocil Engages With China To Resolve Discriminatory Tariff: Siddhartha Rajagopal

• By  Henry Dsouza
• May 19, 2017

The Cotton Textiles Export Promotion Council (TEXPROCIL), India’s premier textile export promotion body disclosed that even though there was a sharp decline in China’s total import of cotton over the previous five-year term, India has managed to secure a positive growth rate for cotton exports to China during the current cotton season. Texprocil says, exports of the fiber from India to China grew of 57.85 per cent during October 2016 to February 2017 period. 

In the last five years, cotton imports by China fell from 5,526 million kgs in the cotton year 2011-12 (October-September) to 1,068 million Kgs in the year 2015-16.  According to Siddhartha Rajagopal, Executive Director, Texprocil, China’s interest in imported cotton has grown of late. Statistically, import grew from 567 million kgs in October 2015-March 2016 to 682 million kgs in  October 2016-March 2017 which is a growth of 20%.  “This clearly shows that there are Chinese customers who continue to source cotton from overseas owing to better quality compared to their own stock cotton,” observed Rajagopal.

Interestingly, according to data furnished by TEXPROCIL, India’s cotton exports have witnessed a sharp decline in the current cotton season. Export of the fiber declined by 30.73% from 927 million kgs for the period from October 2015 to February 2016 to 642 million kgs for the corresponding period from October 2016 to February 2017. Despite this overall decline in cotton export, India managed to record a positive growth rate in Chinese markets. India’s cotton export during the period grew from 92 million Kgs to 145 million Kgs. Whereas, in the full cotton year 2015-16 the exports to China stood at 124 million Kgs. Rajagopal summarized the data stating, “Trade data clearly shows that export of cotton to China during the current cotton year has already surpassed the export volume in the previous cotton year.”

He added, “It may be noted that, increasing cotton consumption in the domestic market is offsetting decline in export over the past two years.”

Talking about the disadvantage faced by India vis-à-vis Vietnam, Rajagopal said, “We have been submitting representations to the Chinese authorities at various levels to address the tariff disadvantage issue and hope that it will be resolved soon.” It may be recalled that China imposes a tariff of 3.5% on cotton yarn under Asia Pacific Trade Agreement (APTA) for import from India. However, Vietnam enjoys duty free access to China under China-ASEAN Free Trade Agreement, which has led to increasing level of Chinese investment in spinning in Vietnam. The Chinese then take back the yarn to China for further value addition.”

Rajagopal pointed out that because of this tariff disadvantage, and outward processing or buy back strategy adopted by the Chinese spinners Vietnam has turned the top supplier of cotton yarn to China in the past two years.

Texprocil also disclosed that they were working earnestly towards the government’s target of boosting textile exports to the US to the USD 30 billion mark. “To achieve the target, emphasis will be more on cotton based home textiles and technical textiles in addition to value added fabrics.  The Special package for the home textile sector that was recently announced by the Ministry of Textiles will give a boost to capacity building and substantial increase in home textiles in coming years,” elaborated Rajagopal.

He added, “The Technology Upgrade Fund Scheme (TUFS) of the government will also encourage more investment in processing, technical textiles, home textiles and such value added products. It is envisaged that government support coupled with extensive marketing effort by Texprocil and exporters will lead to achieving higher growth rate in export of cotton textiles.”

Citing figures, he said, “In the year 2016-17, our Council organized 12 export promotion events in major markets and proposes to organize similar number of events in the current financial year. Continuous export promotion activities being undertaken by the Council is one of the important reasons for positive growth in export of value added textiles such as made ups.”

When queried about the impact of fluctuating cotton prices on cotton yarn exports, he responded, “Approximately 60% of cost of cotton yarn manufacturing is raw material meaning raw cotton. India being a cotton surplus country, theoretically, cotton prices should be lower than the international prices. However, over the past two seasons, most of the time, cotton prices in India were at par or slightly higher than international prices. This puts a lot of pressure on profitability of spinners. Exploring new markets would help us achieve sustained growth in yarn export.”

When asked about the impact of GST on textile exports, Rajagopal said, “Once GST is on track, a uniform percentage across the entire value chain will ensure seamless movement of goods and help reduce transaction cost to some extent, thereby resulting in better pricing strategy for export. At present there is large scale zig zag movement of textile goods across India.”

“For example, cotton is sent from Gujarat to Tamil Nadu for spinning; yarn is sent to Maharashtra for weaving; grey fabric is sent to Andhra Pradesh or Gujarat for processing; processed fabrics are sent to Karnataka for stitching into garments or home textiles; and the final product is exported. As the output of one segment is the input for the next segment in the textile value chain, GST will lead to seamless integration of the long and complex value chain in the entire textile and apparel industry.” 

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