Textiles Ministry proposes cap on exportable amount of cotton

Union Budget 2015-16 suggested building a long term reservoir of cotton for domestic industry

The Ministry of Textiles proposes to put a limit on the amount of exportable cotton per year and a 10% duty on the export of cotton over and above this exportable surplus.

According to official sources, it was a budget suggestion so as to build a long term reservoir of cotton for the domestic industry.

“Even if the cotton production is high this season, it is no so every year. With a ceiling put on the amount over and above which cotton can be exported, domestic demand cotton users will be assured of the supply situation.”

However this suggestion did not find favour with the ministry of commerce which has removed all restrictions on export of cotton. According to the commerce ministry, in a free economy, a grower of a commodity should have a free choice to either sell his product in the domestic market or the international market.  Putting a cap on availability of cotton for export   amounts to a protectionist measure for the domestic industry, said sources.

However the proposal is still under discussion between both ministries.

The projected balance sheet drawn by the Cotton Association of India for the year 2014-15, estimates total cotton supply at 468.90 lakh bales while domestic consumption is estimated at 306.00 lakh bales, thus leaving an available surplus of 162.90 lakh bales. Production stood at 407.25 lakh bales (of 170 kg each) during the 2013-14 season.

The procurement of cotton by the state run Cotton Corporation of India (CCI) has neared 5 billion bales of 170 kg each, during the ongoing season October 2014-September 2015, according to media reports.

The CCI is actively purchasing cotton in states where the market price has fallen below the minimum support price announced by the government. While there is steady arrival of about 250,000 to 300,000 bales of cotton on a daily basis, spinners are not actively buying cotton as yarn exports have declined considerably, as per reports.

According to the latest official data, cotton procurement by Cotton Corporation of India (CCI) hit about 2.50 million bales — the highest since 2008-09 when the state-run agency purchased a record 8.93 million bales in the entire marketing year and compared with just 40,813 bales in the whole of last marketing year through September 2014.

Most of the purchases this year have been from Andhra Pradesh and Maharashtra, the leading producers after Gujarat. One bale equals 170 kg. During the ongoing season, CCI has spent more than Rs 9,600 crore on purchase of cotton at an average price of Rs 1,060 a quintal. However, a decision on off-loading the cotton stock is yet to be taken.

CI has so far procured more than eight million bales, which is 20% of the total crop expected for the cotton year (October-September) 2014-15.

Exports have also resumed, with 3.2 million bales already estimated to have exported so far. Around 7.7 million bales were exported last year during the same period. Cotton Advisory Board expects cotton exports to stand at nine million bales. However, the industry expects it to be lower at 7.5 million bales.

Although domestic prices have improved a bit since November, they are still 5% lower than the benchmark prices set by the government in many regions, especially in Andhra Pradesh, textile industry executives said.