As US Tariffs bite, Farms, Mills diverge on Import Duty cut-Hindustan Times
As US Tariffs bite, Farms, Mills diverge on Import Duty cut-Hindustan Times
Pradip Maitra and Divya Chandrababu
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PANDHARKAWDA/Chennai : In India’s cotton belt of Vidarbha, the monsoon months of July and August are busy. Farmers across the districts of western Vidarbha in Maharashtra plant the cotton crop, readying them for harvest in the winter months of November-December. Despite persistent indebtedness and news of farmers ending their lives, this area has remained India’s unofficial cotton capital, supplying roughly 25% of India’s production of 30 million -32.5 million bales. Across the state, roughly 4.08 million hectares are under cotton production.
This monsoon, however, has added an additional layer of anxiety after the government decided to scrap the 11% duty on raw cotton imports until September 30, which many say was prompted by the US announcing a punitive 50% tariffs on India that came into effect on Wednesday.
Prices have slumped from ₹7,500 per quintal to ₹7,000 since the announcement on August 19, according to Suresh Khandankar, secretary of the Agricultural Produce Marketing Committee of Pandharkawda in Yavatmal district and farmers fear they might plunge further. Farmer groups and activists fear that the move – which removes protection for Indian cotton – will flood the market with cheap imported cotton, depress domestic prices, and push cultivators further into distress.
“Growers were recently forced to sell cotton at just ₹6,600–₹7,000 per quintal, compared to ₹8,500 three years ago,” said farm activist Kishore Tiwari, former chairman of the state-run Maharashtra Agriculture Mission. According to Tiwari, the duty cut may temporarily benefit large textile manufacturers by lowering input costs and boosting export competitiveness, but comes at a bad time for growers.
Price crash fears loom
The anxiety is palpable in the villages. Pentamama Parlewar, 67, a cotton farmer from Kopa Mandvi village in Yavatmal, said his condition was already precarious after being denied a loan by his local bank. “I own five acres of land, all under cotton cultivation. During the season, we need funds midway to pay for labour. Since the bank has refused me a loan, I am now forced to turn to moneylenders, who charge as much as 20% interest,” he explained. He fears that the removal of import duty will further depress prices, making it even harder to repay his loans.
For farmers like Sunil Raut, 41, of Kelapur, who has cultivated cotton on all of his 20 acres, the uncertainty is unbearable. “I have already taken a ₹2 lakh crop loan. If prices crash, I will not be able to repay and will be marked a defaulter,” he said.
In this belt, which has long been in the news for suicides and controversy around transgenic crops, many farmers know their crisis is the outcome of a complex mix of environmental, economic, and systemic factors. But they fear that a price crash for even one season could push many into destitution.
The import duty on cotton was imposed in 2016-17 to protect domestic farmers when India had a surplus of cotton production.
The government has announced a minimum support price of between ₹7,710 and ₹8,110 per quintal of cotton, and touts it to be among the highest raises in the floor price of a Kharif (monsoon sown) crop. Union textiles minister Piyush Goyal has said the government is committed to supporting farmers and the textile industry, and the duty cut is a temporary measure to ensure raw material availability for the textile sector.
Veteran farm leader Vijay Jawandhia, the former Maharashtra president of Shetkari Sanghatana, described the import duty waiver as “the last nail in the coffin.” He noted that while international cotton prices have halved in recent years — from nearly ₹1 lakh per candy to about ₹50,000–55,000 — Indian farmers are unable to fetch even MSP. This is largely due to issues in procurement, where government agencies are slow to purchase cotton at MSP, forcing farmers to sell to private traders at lower rates. “When raw cotton prices fell, garment prices did not. The profits went elsewhere. Farmers were never compensated,” he said.
Santosh Netam of the Vidarbha Janandolan Samiti, an organisation that documents farmer suicides since 2000, alleged that farmer Mahadev Kurwadle, a cotton grower with five acres of land from Chicholi village in Wardha district, consumed pesticide on August 22 after realising his crop would not fetch remunerative prices this season. While police confirmed a farmer’s death on August 22 in Wardha, they are investigating the cause. “Mahadev swallowed poison and ended his life. We are verifying why he committed suicide,” said Deepak Joshi, inspector of Ashti police station.
According to Netam, on average, four farmers — mostly cotton growers — end their lives every day in Vidarbha, particularly in the western districts of Wardha, Yavatmal, Amravati, Akola, Buldhana, and Washim.
Small spinning and ginning mill owners, too, feel anxious. “We already have enough domestic cotton stocked to last two months. Competing against duty-free imports will make survival impossible for small mills like ours,” said Wardha-based entrepreneur Pawan Singhania, who owns Sanskar Agro Ginning and spinning mills.
The mood in Tiruppur
In the Tamil Nadu industrial town of Tiruppur, the mood is marginally less glum.
The country has imported around 600,000 bales of cotton since August 19, when the duty suspension came into effect. Here, the import duty cut has alleviated, at least temporarily, some of the pain due to the punitive 50% tariffs imposed by the US. But, the 11% waiver needs to be extended, accounting for 53% of India’s ₹66,000 crore knitwear exports, says N Thirukumaran, general secretary of TEA and chairman, Esstee Exports India Pvt Ltd.
“With this exemption, we can manage this season. Ideally import duty on cotton should be fully removed because it was levied when India had surplus cotton production. So it doesn’t make sense now. If that can’t be done, we want the government to remove it at least for off-season,” said K Selvaraju, secretary general of the Southern India Mills’ Association. Off season refers to months between April 1 and September 30, which are out of the cotton production cycle. “Cotton price is a deciding factor for the performance of the textile industry because it accounts for almost 60% to 70% of the cost of the production every year,” he said.
Already burdened by a growing shortage in skilled labour shortage, lack of infrastructure, and geopolitical tensions which caused supply chain disruptions, the industry here is wary about further shocks.
KM Subramanian, chairman of K M Knitwear Pvt Ltd that gets cotton from Australia, West Africa, Maharashtra, Punjab and Gujarat and exports babywear to the US and the EU, is cautiously optimistic. “Now our price to buy domestic and imported cotton will almost be the same without having to pay 11% on duty,” he said. “The price of 356kg (one candy of cotton) is ₹56,000 in India while so far for imported cotton per candy was ₹62,000. Now, that will reduce.”
Demand to retain import duty waiver
Subramanian, who is also the President of the Tiruppur Exporters’ Association (TEA), said that the time period for the waiver needed to be expanded. “This is a very short term relief for 40 days which is not enough to purchase one cycle of cotton. If we place an order for imported cotton today, it will take a minimum of 45 days for it to be delivered. We are asking the government for an extension of a month or to permanently give us this benefit,” said Subramanian.
Though Tirupur is the hub of small enterprises involved in different levels of the manufacturing process such as knitting, dyeing, sewing and exports, the spinning mills are concentrated in adjacent Coimbatore. The industry, of more than 2,500 exporters, employs more than 600,000 people directly and 200,000 indirectly, most of whom are women and migrants working the Tiruppur cluster.
All buyers in the US asked exporters to stop production after tariffs were raised to 50%, said exporters, adding that trade has been smooth with countries in the European Union. “Business to the US has stopped. We shipped whatever we could before the August 27 deadline,” said Subramanian.
“This relief is important because it will increase our competitiveness in the world such as with Vietnam, Cambodia and Bangladesh. Around 70% of yarn is made from cotton and remaining 30% is the making charge. Without paying import duty, the price of yarn per kg will reduce by ₹10. When the price of cotton reduces, the price for the garment we produce will also reduce, which is very helpful for us in the current scenario. 80% of garments in Tiruppur are made of cotton and only 20% are man made fabric (such as polyester, nylon).”
For two years, garment exporters in Tiruppur had been urging the government to suspend import duties on cotton.
“This type of relief is welcome but it will be short-lived. We cannot import within 40 days from the date of announcement. For instance, if we want to import cotton from the US, it takes 80 days,” says Thirukumaran. “Our domestic cotton prices are 20% higher than international ones. Even our yarn prices are higher than our competitors’. This waiver should be for at least six months.”
Subramanian’s company mixes 75% Indian cotton with 25% imported cotton. “With the waiver, we can import from anywhere in the world,” he said.
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