Cotton Corp allowed to export

For this cotton season (October-September) of 2012-13, the Centre has allowed exports by the Cotton Corporation of India (CCI). Typically, the corporation's role is limited to buying cotton from the market if prices fall below the minimum support price and stabilising the market by intervening when required.

Friday's announcement would make CCI cash-ready to procure new crop. Also, it would help secure foreign exchange at a time when the rupee is on a decline. And, farmers would get better prices, as exports would lead to a fall in carry-forward stocks.

CCI is understood to have stocks of 11,00,000 bales (one bale is 170 kg), which it isn't able to sell in the open market. In the foreign market, there is good demand for Indian cotton. However, as open market prices are higher, exports by private traders are unviable. CCI exports cotton at prices 15-20 per cent higher than its purchase cost.

Allowing CCI to export cotton is seen as a move to keep cotton prices high when the new crop starts coming to the market from October - if CCI doesn't have stocks, it would be ready to buy the new crop at high prices. Cotton prices are expected to rise in the open market from Saturday, owing to exports by CCI.

Arun Dalal, an Ahmedabad-based cotton broker, said, "Allowing CCI to export cotton is a good move. It would provide the corporation cash to procure new cotton, when the new season begins from October." At current prices, CCI could fetch $360 million in case it exports its entire stock.