International Watch: Will India'S Cotton Import Tariff Be Abolished

Recently, the Indian textile industry strongly called for the reduction of import cotton tariff of up to 10%. Affected by high cotton prices in India, cotton yarn prices soared. Some experts say that cotton as a raw material accounts for nearly 68% of yarn production costs, and the rise in domestic cotton prices has greatly affected the cotton inventory, cash flow and yarn production costs of yarn mills. Although the domestic yarn prices and cotton prices in India basically keep up with each other, due to the long transmission cycle, the adjustment of yarn prices lags behind about one week, and the profit margin of the mills is small.

Industry insiders said that due to the current high international cotton prices, the current tariff reduction and exemption of imported cotton will not cause fluctuations in the domestic market. Therefore, the abolition of cotton import tariff is not only conducive to the protection of cotton textile enterprises, but also can calm the market sentiment and adjust the exchange rate of Rupee against the US dollar. It is reported that garment export traders in Tamil Nadu will strike on January 17 and 18 to protest against the current rise in raw materials.

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The McX exchange said on Tuesday that it was "irrational demand" for some domestic industry associations to suspend cotton futures trading. Exchanges pointed out that India is one of the major cotton exporters, basically keeping pace with international cotton prices. By hindering market-oriented operation, the ultimate goal of these trade associations is to control cotton prices and benefit from the opaque market without regulation. If the trade is suspended, only cotton farmers will suffer from real losses.

Experts of the exchange pointed out that the real purpose of futures contracts is to prevent price fluctuations. Industry associations, which should have used hedging to hedge risks, are lobbying the government to suspend trading.