Yarn manufacturers of the city are a happy lot as exports to China have accounted for a major boost for the industry, translating into an overall expansion of 12% to 15% over the last year.
China has been importing yarn from India mainly on account of high cotton prices back home and a restrictive import duty regime on cotton imports, which have made importing yarn a relatively cheaper option.
Director (material) of the Vardhman group IJ Dhuria said the cotton prices in China had risen mainly due to an increase in the minimum support price by the Chinese government. It had proved to be a deterrent for the Chinese manufacturers, he added.
Chinese firms have to pay 40% duty on free import of cotton, while the duty on import of cotton under the government decided quota is fixed on a sliding scale formula. However, on yarn there is a fixed custom duty of 3% only.
He said the market trend suggested that the Indian yarn industry was going to see an increase of 12%-15% in the yarn exports, mainly on account of the Chinese response.
President of Northern India Cotton Association Rakesh Rathi said, "Even though the cotton industry in India was facing a slump in exports, the yarn industry was certainly heading for a big boom in the exports due to an increase in the demand from the Chinese market.
"On the one hand, the Chinese government has increased the support price for cotton, making it costlier as compared to the last year. In addition to this, the Chinese government has imposed an import duty on cotton after a certain quantity," he said.
"However, there is no such duty on yarn imports. So, the companies in China are preferring to import yarn, instead of cotton," explained Rathi.
Rathi also expected a slump in the Indian cotton exports: 6 million bales this year, against 12.40 million bales last year.