• Supply and demand in the national market

    Chapter 6 - Market profiles - India 


    Cotton farmers sell their produce in market yards through an open auction/tender system following the prevalent market practices in the various yards. The main buyers are local ginneries, traders and commission agents, as well as government agencies such as the Cotton Corporation of India (CCI). Farmers are free to sell their produce to any of the above-named buyers, and even not to sell if they find the prices are too low. The arrival span is spread from October to April/May, with peak arrivals from December to February. June to September are the lean periods for cotton arrival.

    The pace of cotton demand from the domestic textile industry is a crucial determinant in stabilizing prices. Most of the mills plan their purchase programme taking into consideration the different cotton varieties to be procured from various cotton growing areas. While progressive and rich buyers may make aggressive purchases if market conditions are favourable, the medium and small mills cover their cotton requirements for short intervals. Normally, demand from the mill sector is more concentrated in-season and is scaled down during the off-season.

    Specific cotton quality requirements of the domestic textile industry

    India is the largest exporter of cotton yarn in the world, with 23% of world trade. Indian mills require ELS cotton for the production of super-fine yarn counts of 60s and above. Made-ups and other textile articles also require fabrics manufactured from ELS cotton. India’s production of ELS cotton is far below the local requirements of the textile mills.

    Import developments over the last few years

    During the period from 1999/00 to 2002/03, there were large-scale imports of cotton into India, mainly because of price considerations. International prices nose-dived in year 1999/00, when prices reached their lowest level for 30 years.

    In addition to imports driven by price considerations, domestic cotton production was not encouraging, resulting in domestic prices being much higher than international prices.

    With significant improvement in cotton production in the last few years, the export and import scenario has changed drastically. Even after meeting the increasing cotton requirements of the domestic textile industry, there is surplus cotton for export sales and, at the same time, no imports are taking place purely on price considerations. The imports that are taking place are for specific quality of ELS grades to cover its short supply in the domestic market.

    Analysis of import tariff structure

    The applied rate of duty (as at July 2006) on cotton falling under tariff line 5201: Cotton, not carded or combed is 10%. The effective rate of import duty including Special CVD and Education Cess is 14.8%. The example below illustrates how duty is calculated on imported raw cotton.


    (I)  CIF price of imported cotton 
    (ii)  Landing charges (@ 1% of CIF) 
    (iii)  Landed cost or assessable value [(I) + (ii)] 
    (iv)  Basic customs duty @ 10% of (iii) 
    (v)  Special CVD @ 4% of [(iii) + (iv)] 
    (vi)  Education Cess @ 2% of [(iv) + (v)] 
    (vii)  Effective rate [(iv) + (v) + (vi)] 
    (viii)  Final import price [(I) + (ii) + (vii)] 

    Presently, there is no import duty preference for cotton imported from African countries.

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    Cotton Exporter's Guide

    Brochure - African cotton promotion
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