DUSHANBE, April 6, 2011, Asia-Plus -- The government of Tajikistan plans to temporarily impose export duty on raw cotton, according to the Ministry of Energy and Industries (MoEI).

The source at a MoEI says the export duty on raw cotton is aimed protecting domestic textile producers that are in trouble because of shortage of raw materials.  According to him, the Ministry of Energy and Industries has offered imposition of export duty on cotton export and the president seconded the proposal.

A special working group has reportedly been set up to work out a mechanism and define the rate of the export duty on raw cotton.  The group is to submit its proposals for consideration to the government in May this year.

The source says they have proposed to set the cotton export duty rate at 20 percent.  “But the final decision on this issue will be made by the government,” he noted, adding that the cotton export duty will be imposed temporarily until “the situation in the international cotton market is stabilized.” 

The MoEI specialists expect the international cotton prices to rise in 2011, and “therefore, the government must take measures to protect domestic market.”

Besides, the working group is also considering the possibility of exempting domestic producers from paying a 10 percent tax on sale of cotton, “because high international cotton prices plus tax burden make output of domestic producers noncompetitive,” the source said.  

They are also considering the issue of making changes to the procedure of sale of cotton fiber in Tajikistan that was worked out in 2008 and has reportedly become obsolete and inefficient.  Domestic producers have purchased domestic cotton at higher prices than cotton exporters.  The price increase, which was intended to ease the debt burden on cotton growers, has put domestic textile producers at a disadvantage.

Specialists say the export duty on raw cotton is an effort to control the prices in the domestic market and the export duty may reduce the price of cotton in the domestic market.

We will recall that in a report released at a news conference in Dushanbe, Deputy Minister of Economic Development and Trade, Saidrahmon Nazriyev, revealed on January 26 that the Ministry of Economic Development and Trade (MEDT) has offered to raise export tax on raw cotton in order to boost domestic supply.

“We must provide our domestic textile producers with raw cotton.  The number of new textile factories in the country is growing from to year,” said Nazriyev, “Domestic producers are currently able to process 64,000 tons of cotton into manufactured goods.  Tajik cotton producing farms, however, have sold only 10.4 percent (little more than 30,000 tons) of cotton in the domestic market, while more than 300,000 tons of cotton was yielded in the country last year.”

According to him, cotton farmers prefer to export cotton due to rise in the international cotton prices.  “Compared to 2009 the international cotton prices rose 78 percent last year.  As of December 31, 2010, the price of one ton of cotton was more than US$4,000,” said the deputy minister.  “Therefore, Tajik cotton farmers prefer foreign traders to domestic producers.  Since, we cannot make cotton farmers provide domestic enterprises with raw cotton, we are forced to use other mechanisms to boost domestic supply.”

According to the Agency for Statistics under the President of Tajikistan, Tajikistan has exported 17,895 tons of cotton fiber for US$68.859 million over the first two months of this year.  Over the same period last year, Tajikistan exported 21,390 tons of cotton fiber for US$27.8959 million.