Export duty on raw cotton export likely to reduce local prices.

MUMBAI: The recently imposed export duty on raw cotton export may reduce the price of cotton in the domestic market, a senior government official said.

"The export duty imposed on raw cotton and cotton waste is an effort to control the prices in the domestic market," Central Textile Commissioner, Anil B Joshi, told reporters here today on the sidelines of the inauguration of 'Fibres & Yarns 2010' Expo.

"The cotton prices were increased by 20-25 per cent and yarn prices by 40-45 per cent in the domestic market. Though there is 5-9 per cent increase in yarn production, it is very low compared to the rising demand," he said.

The newly imposed duty may bring down the prices in local market, he said.

The Government had imposed a duty of Rs 2,500 per tonne on raw cotton exports and 3 per cent duty on export of cotton waste, with effect from April 9, in order to moderate prices of the commodity in the domestic market and help the local textiles industry.

The Central Board of Excise and Customs had notified the export duty on the natural fibre. The export duty has been levied for six-months.

In order to tame the rising domestic prices of cotton and yarn, the Government had suspended the 7.5-per cent duty concession on cotton yarn exports recently, which was followed by additional export duty.

The exporters were getting duty concession of 7.5 per cent under the duty entitlement pass book (DEPB) scheme. Under the scheme, companies get customs duty refund on imported inputs of export items.

India, the world's second-biggest cotton producer, exported 2.36-million bales (of 170 kg each) cotton last season. As per a report, cotton exports are likely to more than double to 6.2-million bales in the 2009-10 season ending September, on the back of higher global demand and tight supplies in the US.

In 2008-09 India's domestic production of cotton was 29-million bales (one bale is 170 kilograms). For the 2009-10, the forecast is slightly up at 29.2-million bales according to the Textile Ministry.

Source : The Economic Times