Textile industry fears no ending cotton stock by Dec

Though the government has recently taken steps to ensure that only exportable surplus of cotton would be exported in 2010-11, aggressive registration by exporters might leave the country with no ending stock by December 2011.

The registration of export contracts with the textile commissioner was opened on October 1 for shipment to be affected from November 1. About 5.5 million bales had been assessed as exportable surplus for the entire cotton year (October 2010-September 2011), which has been applied for registration within the first 10 days of opening up of export registrations.

The government estimates show that ending stock from the previous year 2009-10 is 4.05 million bales and about 6-6.5 million bales of ginned cotton is expected to reach the market by the end of November. The Confederation of Indian Textile Industries (CITI) states that the monthly consumption of cotton in the country currently is over 2.2 million bales.

Therefore, out of an availability of around 10 million bales up to November 2010, exporters will have to procure 5.5 million bales and around 4.5 million bales would be needed for domestic consumption, leaving negligible ending stock. This has made the domestic textile industry jittery.

“There would be practically no cotton stock left in the country if 5.5 million bales get exported during this time. This will lead to a cotton famine in the country and mills will be forced to close down or scale down production drastically,” CITI Chairman Shishir Jaipuria has written to the Prime Minister referring to the apprehensions of the domestic industry.

The domestic textile industry is already reeling under pricing pressures, especially the apparel export community as prices of cotton have surged to Rs 41,000 per candy in October, as against Rs 23,000 per candy during the current month in 2009. Mills have also complained on the lack of availability of cotton even at these prices.

CITI has demanded that cotton exports against contract already registered should be delayed up to January 2011 and having a monthly cap of one million bales for exports from January 2011. The chamber has further stated that it is “obvious” that many of the applications for registration of export contracts are “speculative”. Therefore, it has demanded that no extension of time should be allowed for those who fail to ship within the stipulated time and further applications for export registration should be denied.