Spinners pay price of unproven Indian organic cotton

A number of Bangladeshi spinners who imported organic cotton from India are in trouble as they are yet to get the authentication certificate – called a transaction certificate (TC) – from their suppliers in more than a year now.

At least 18 millers now fear huge losses following possible order cancellations as their buyers seek TCs as proof that the raw materials they collected from the spinning mills are made of organic cotton.

The millers have repeatedly tried to reach out to the suppliers to get the certificates – which are supposed to be provided within a month of the procurement, but to no avail, according to Bangladesh Textile Mills Association (BTMA).

The BTMA said some of the Indian suppliers had provided TCs for the supplied cotton, but the certificates were later proven fake and subsequently withdrawn by the Control Union.

The mills manufactured yarns and fabrics with the procured cotton and supplied those to factories nominated by local and foreign buyers and now some buyers have started seeking compensation from the millers for their losses on sales of products made with fabrics of uncertified cotton.

Against this backdrop, last month, the BTMA sent a letter to the Indian High Commission in Dhaka, the Cotton Association of India, the International Chamber of Commerce Bangladesh (ICCB) and other parties concerned, seeking measures to this end.

In the letter, the BTMA says its member mills have become victims of fraudulent activities and such unethical practice needs to be stopped.

"Since BTMA's member mills import cotton from India frequently, this kind of incident may deteriorate the existing bilateral relationship between Bangladeshi spinners and Indian cotton suppliers as the issue relates to huge financial implications," BTMA President Mohammad Ali Khokon said.

"We apprehend that this may lead to a misunderstanding between both countries as well," the BTMA president added.

The yarn made of organic cotton is sold directly to local garment entrepreneurs along with garment or textile factories nominated by foreign buyers, which are then exported abroad.

Bangladeshi importers say they import most organic cotton from India as the price is relatively lower in that country. A small amount of organic cotton is also imported from other countries.

According to the BTMA, Bangladesh imported 7.5 million bales of raw cotton in FY20, and more than a quarter of it came from India. But, the BTMA does not have information on the amount of organic cotton imported during this time.

According to the importers, Indian suppliers are not giving transaction certificates for 16,100 tonnes of organic cotton imported by 18 Bangladeshi companies against 23 LCs. Certificates were issued to only three importers, which were later revoked as they were fake.

As per Tuesday's rate, the import price of conventional cotton is $1.05 per pound, while that of organic cotton is $1.78 per pound. If the latest market price is taken into account, the cost of 16,100 tonnes of organic cotton would be around $63 million.

Envoy Textile Mills Limited, one of the largest textiles in the country, imported 600 tonnes of cotton from two Indian companies – Agritech Industries Pvt Ltd and Glossy Impex Pvt Ltd.

But, the mill has not got any TC from Agritech Industries. Glossy Impex provided Envoy with the certificate, but it was later proved to be fake.

Md Ataur Rahman, head of supply chain (cotton and yarn) at Envoy Textile, told The Business Standard, "We have already exported fabrics manufactured with that cotton and supplied to foreign buyers. But we could not give them the transaction certificates as we did not get those from the Indian suppliers.

"We think the organic cotton that Indian suppliers provided us is fake. That is why they cannot provide us certificates."

Maksons Spinning Mills Limited and Israq Textile Mills Ltd have also fallen victim to anomalies of Indian cotton suppliers.

"I imported 1,500 tonnes of cotton. They provided the TC but it was later cancelled. Many like me faced the same problem. We have already contacted our trade body, but have not got any solution," said Fazlul Haq, owner of Israq Textile Mills Ltd.

According to BTMA sources, they have identified at least nine Indian cotton exporters who are not certifying organic cotton or giving fake certificates. The list includes Agrotech Industries Pvt Ltd, Gujarat Cotton Corporation, Axiata Cotton Limited, Glossy Impex Pvt Ltd, Ghanshyam Agro Resources, Basil Commodities Pvt Ltd, Kratos Impex Ltd, Sri Salasar Balaji Agrotech Private Limited and Narendra Overseas.

An investigation, carried out by the Global Organic Textile Standards into organic cotton fraud in India, also revealed 20,000 tonnes of cotton were incorrectly certified as organic through a scam abusing the Indian government certification system, just-style reported November 2020.

Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told TBS, "The certification problem apart, the price of organic cotton has also recently gone up. That is why we are discouraging our members to take orders for organic cotton-made clothing."

"The demand for organic cotton-made garments has increased worldwide. The price of this cotton is around 40% higher than the normal cotton. Cotton production requires a lot of fertilisers and pesticides, which are harmful to the human body. But organic cotton does not use any harmful chemicals," he said.