Cotton prices rose from Rs 44,500 per candy in February 2021, when an 11 percent import duty was levied on cotton, to Rs 90,000 per candy in March 2022. The rates of this much-sought-after commodity in India have more than doubled in the past year.
Amid high cotton and yarn prices plaguing the sector, the government is formulating a second production-linked incentive (PLI) round - or PLI 2.0 - for the textile industry, revealed Textile Secretary Upendra Prasad Singh on June 6.
Also Read: Textile industry at a crossroads on soaring cotton prices
PLI 2.0 for textiles on the cards
''The next round of PLI scheme should be for apparel and garments and whether it is knitted or woven, it won't make a difference. We are in the process of formulating it, and will take it to the Cabinet as soon as possible,'' Singh said in an exclusive interview with CNBC-TV18.
Any government scheme which has an outlay of more than Rs 1,000 crore needs a Cabinet approval, he added. In the first PLI round, the textile industry attracted Rs 6,500 crore in terms of incentives, compared to Rs 10,000 crore incentive that the government offered.
"In PLI 1, we gave approval to 64 companies and got investments as we had expected, but since the number of products allowed under PLI was limited, the turnover was lesser than expected,'' he explained.
Himatsingka Seide, Trident, Gokaldas Exports, Monte Carlo Fashions, Arvind, KG Denim, Aditya Birla Fashion, and SVP Global Textiles are a few applicants that were approved in the first PLI round for the textile industry.
Also Read: Small spinning mills in south recoil from cotton buying as raw material too hot to touch
Cotton exports not feasible in present scenario
High cotton prices and southern spinners shutting down mills due to the nonavailability of cotton at affordable prices are some of the pressing issues that plague the textile industry right now.
Besides, the initial trade numbers for May indicate that textile products, fabric, and spinning products showed a fall from year-ago levels. The textile secretary attributes the reduction to less export of cotton yarn and raw cotton.
Even amid a fall in cotton exports that affected the overall trade of textile products, Singh does not foresee any harsh steps that could be taken by the government.
"We avoid taking extreme measures that could disrupt the market, which is why we have not gone for a ban on cotton exports, but we have always tried to engage all stakeholders - from spinners to manufacturers because India's textile sector has a fragmented value chain."
However, the overall 'exports' of textile products increased by 8-10 percent in the first two months of the current fiscal, Singh told CNBC-TV18, adding that, if one goes segment-wise, then apparels and garments showed a growth of 20 percent in exports, in spite of high cotton and yarn prices.
With respect to the export of textiles, the government held two rounds of discussions. It was decided on May 17 that an informal textile advisory group be formed - which again met on May 29.
It was then that Textile Minister Piyush Goyal and other industry experts decided that the demands of the Indian industry -local cotton, yarn demand- must be fulfilled first, before exports.
''Right now, raw cotton export is not feasible as prices in India are at par with international prices and when one adds the logistics cost, the export is not feasible,'' Singh noted.
Also Read: Garment industry braces for tough times as cotton price rockets, demand for export ban is nixed
Softening of cotton prices of late
Since cotton is an internationally traded commodity, prices in India move in tandem with global markets, said the textile secretary, adding that cotton prices, from the start of the new cotton season in 2021, have been high not just in India, but all over the world.
However, he asserts that of late, prices have started softening, although there hasn't been a drastic reduction. Illustrating this with an example, he explains that the price of a common variety of cotton- 'Shanker-6', which is a variety of 28-millimetre staple cotton and is grown in Gujarat, was Rs 1,01,500 as on May 20, and now that has come down to Rs 93,500 per candy.
Import orders that were placed during April and May will start arriving in July. ''We will also get 6-7 lakh bales of summer cotton, and some early cotton is also expected from northern states such as Punjab,'' said Singh.
Due to all these factors, cotton should see a softening trend over the next few months till the new crops arrive by the end of September or the beginning of October, according to him.
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