India has scrapped import duty on raw cotton and withdrawn export incentives to boost domestic stocks, the government said on Wednesday, raising the prospect of higher imports and lower prices. Trade officials said local prices, which have surged more than 35 percent in the past year, would soften while imports by traders and textiles mills could rise to 1 million bales (170 million kg).
"As an immediate result, some imports will take place now and will rise gradually. This has been a long-pending demand to ensure textile mills have sufficient stocks," Shishir Jaipuria, vice-chairman of the Confederation of Indian Textile Industry (CITI), said.
The government said in a statement the new rules would be applied from July 8. Last week, CITI said India cotton imports were likely to rise to 650,000 bales in the crop year ending September 2008 from 500,000 bales a year ago. It said growth in imports had been slowed by duties that add up to 14 percent.
The trade body urged the government to allow duty-free imports and discourage exports to rein in prices which have spiralled despite record production. Jaipuria said last week higher exports and stockpiling by big international trading firms, which want to trade it globally have led to the spike in prices. Cotton output is expected to hit a record 35 million bales in the next crop year, government estimates show, largely due to increasing usage of genetically modified seeds.
India's cotton exports are seen rising by 72 percent to 10 million bales in the crop year to September, while production is forecast to rise 17 percent to a record 31.5 million bales in 2007/08, according to CITI.
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