Discussions over cotton exports on Monday

An inter-ministerial group is slated to meet on Monday to discuss the vexed issue of cotton exports, a point of dispute between the agriculture and commerce departments. The finance, industries and textiles ministries would also be represented at the meeting.

The commerce ministry feels fresh exports should not be allowed over the already sanctioned 12.5 million bales (a bale is 170 kg), as it would harm the interest of domestic mills. The agriculture ministry believes more export could take place, as domestic production is four per cent more than last year, at 34.08 million bales.

Yesterday, as an interim measure, the textiles ministry directed state-run Cotton Corporation of India (CCI) to build up 2.5 million bales of cotton reserve this season, to ensure smooth supply of the raw-material to the cash-starved textile mills.

The cotton season runs from October to September.

To build the reserve, CCI will start procuring around a million bales from April, at market rates. The purchase and subsequent storage is expected to cost the government an additional subsidy of about Rs 4,000 crore. So, finance ministry inputs are needed, since the Union budget has said subsidies are to be contained below two per cent of gross domestic product this financial year and at 1.75 per cent over the next three years. Volatile global crude oil prices and the proposed food subsidy bill could add to the burden.

At present, cotton prices are about Rs 4,000 per quintal, higher than the government’s Minimum Support Price of Rs 3,100 per quintal. Output is estimated at a record 34 million bales in the 2011-12 season, with consumption at 21.6 million bales. On March 5, the government had imposed a ban on cotton exports due to fears of domestic shortages. Following intense political pressure, it had to partially ease the prohibition after a week. It allowed shipment of only those quantities already registered with the Directorate General of Foreign Trade. As a precaution, all such registrations were required to be revalidated.

According to textiles minister Anand Sharma, the domestic industry is reeling under severe shortage of cotton, coupled with huge rise in its prices. Justifying his decision to impose the ban, later withdrawn, Sharma, also minister of commerce and industry, noted China was building its own stock.

Meanwhile, cotton exporters whose registration certificates are being revalidated by the commerce ministry allege a deliberate attempt to single out those exporters with business operations abroad. “Of the total 1.8 million bales of cotton sent for revalidation, just around 500,000 bales have been cleared till Wednesday,” a senior industry official said.