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Cotton And Cotton Yarn

Cotton and cotton yarn: State of the industry (2000-01)

Cotton and cotton yarn: Tariffs, prices and landed costs

	Tariffs (per cent)				Prices (Jan 2001)				Landed costs (Rs/tonne)
	Customs		Excise		Dom- estic		Intnl		Pre- budget	Post budget
	00-01	01-02	00-01	01-02	(Rs/ton)		($/ton)
	24.8	24.8	9.2	9.2	77,000		2,380		141,272	141,272
Cotton	5.5	5.0	0.0	0.0	57,366	1	1,427	2	71,604	71,265

1 Market prices of H-4 variety.
2 International prices of Memphis/Eastern Midd. 1-11/32"

Source: CRIS INFAC

• Cotton yarn production is estimated to increase by 2.5 per cent.
• Domestic demand for cotton yarn, is estimated to increase by 1.8 per cent, due to a increase in the demand for fabrics. Overall export demand is expected to increase, inspite of a slow down in cotton yarn exports, due to an expected increase in the exports of fabrics, made ups and garments to the US and the EU.
• Cotton yarn prices increased due to an increase in domestic demand, and an increase in the prices of blended yarn.
• Margins of cotton yarn spinners are expected to increase, due to a higher increase in the domestic and export prices of cotton yarn as compared with the increase in the domestic prices of cotton.

Cotton and cotton yarn: Budget impact

Impact factors

Company name	Impact	Impact factors
Bombay Dyeing	Neg	A, C, E, F, G
(58.60, 60.70)
Arvind Mills	Pos	A, C, F
(10.85,11.20)
GTN Textile	Pos	B, D, F
(18.55,18.55)
Mahavir Spinning	Pos	B, D, F
(45.70, 45.10)
Vardhaman Spinning	Pos	B, D, F
(42.20, 42.20)
Malwa Cotton	Pos	B, D, F
(31.20, 31.20)

Note Figures in brackets indicate the closing share prices, on February 27, 2001 and February 28, 2001, respectively.
pos= positive neg= negative neut= neutral

Source: CRIS INFAC

A: The imposition of an ad-valorem excise duty on independent textile processors is expected to have a negative impact on such processors. As ad-valorem duties were already imposed on composite mills, their relative competitiveness in the domestic market is likely to improve. B: The removal of the concessional excise duty on cotton yarn manufactured by SSI's is expected to have a positive impact on organised cotton yarn players in the domestic market. However, GTN Textiles would not be impacted, as it exports a significant proportion of its output.

C: The imposition of excise duty of 16 per cent on branded garments is expected to have a negative impact on branded garment producers. However, Arvind Mills has hived off its garments business into a subsidiary, and hence will not be directly impacted.

D: The reduction in the customs duty on textile machinery, from 15 per cent to 5 per cent is expected to have a positive impact on the industry.

E: The introduction of accelerated depreciation of 50 per cent per annum on machinery bought by the weaving, processing and garments sector under the Technology Upgradation Fund is expected to have a positive impact on the industry.

F: The reduction of surcharge on corporate tax, from 13 per cent to 2 per cent and the expected decline in interest rates, is expected to have a positive impact on producers.

G: The reduction in the effective customs duties of DMT, from 32.6 per cent to 24.8 per cent, is expected to negatively impact Bombay Dyeing. This is due to the expected decline in the domestic prices in line with the decline in landed costs.

Rediff-CRISIL Budget Impact Analysis
Budget 2001

Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.

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