CCEA may consider tomorrow 10% export duty on surplus cotton

NEW DELHI: The CCEA is likely to consider tomorrow a proposal to impose export duty of 10 per cent on shipment of exportable surplus cotton to ensure availability of the natural fibre in the domestic market.


The proposal moved by the Textile Ministry is listed on the agenda of the meeting of the Cabinet Committee on Economic Affairs (CCEA) tomorrow, sources said.

As per the Cabinet note, the Ministry has proposed a new 'Cotton Distribution Policy' for putting in place a stable, transparent, production and tariff driven cotton market to balance interest of stakeholders in the entire value chain.

Under the new policy, "the Ministry has recommended imposition of an export duty of 10 per cent ad valorem at Freight on Board (FOB) or maximum of Rs 10,000 per tonne, whichever is less, for all cotton export over and above the declared/revised exportable surplus," sources said.

The government would declare the exportable surplus of cotton in September every year based on the production-demand estimates made by the Cotton Advisory Board (CAB).

It has also suggested registration of cotton export contracts with Directorate General of Foreign Trade (DGFT) to monitor the pace and the manner of exports.

That apart, the Ministry has proposed that an inter-ministerial group (IMG) including Agriculture, Commerce, Textile and Finance Ministries, would review the cotton position from time to time and make recommendation to vary or suspend export duty after assessing supply-demand situation.

The Ministry said the imposition of export duty on cotton will lead to revenue collection and also improve inclusiveness of textile industry in the economic activity.

However, the Agriculture Ministry has opposed such a move and suggested liberalised trade regime, while Finance and Commerce Ministries have supported the move, sources said.

The Finance Ministry has observed that IMG would recommend appropriate export duty rate. But the duty beyond Rs 10,000 per tonne can only be imposed through a Finance Bill.

Noting that establishing marketable surplus is highly uncertain and liable to manipulation, the Planning Commission has advocated imposition of 5-10 per cent ad valorem export tax on cotton instead of 10 per cent duty on exportable surplus.

However, the Prime Minister' Economic Advisory Council (PMEAC) has recommended imposition of minimum level of import and export duty of 10 per cent on cotton.

India, the world's second biggest cotton producer, is estimated to harvest 34 million bales (of 170 kg each) in the 2013-14 marketing year (October-September), while the domestic consumption would be around 25-26 million bales.