Centre to finalise quota for cotton exports next week

The Union government will liberalise the rules for export of cotton but impose quantitative restrictions on shipments out of the country.

Commerce secretary Rahul Khullar told reporters that the quantity of tax-free export will be decided next month after assessing overall production and demand. Last week, the government had issued a notification to lift the ban on export and also end the export tax from October 1.

“Officials from the ministries of textiles, commerce and agriculture will meet on September 1 to decide how much would be the cotton produce this year and what is the domestic requirement and based on that, we will derive the amount of exportable surplus,” Khullar said.

He said the government would allow export of cotton up to the quantity decided without the export duty. “Once the limit (that will be decided) is reached, a prohibitive tax regime will come in.”

He said the cap on exports would ensure “orderly exports and adequate domestic availability and at the same time ensure that domestic prices remain stable”.

The government had placed cotton under the restricted exports list earlier this year after a surge in exports was thought to have resulted in a rise in local prices. Items in the restricted list need an export licence from the Directorate General of Foreign Trade (DGFT).

Gujarat’s benchmark cotton variety, Shankar-6, was around Rs 33,000 per candy (356 kg) on Thursday. In the forward market, it is Rs 32,500 a candy for next-month delivery. Exporters are booking cotton in the forward market, too.

Sources also said the textile ministry has called a meeting of exporters and textile mill representatives on Saturday to gauge the situation. Expectations in the cotton market is that when government representatives meet on September 1, an initial quota of five million bales (a bale is 170 kg) of exports may be fixed for the season. Alternatively, this may be limited to just a million bales per month.

Arun Dalal, a cotton dealer in Ahmedabad, said, “Government seems wise this time in allowing exports, as last season’s high exports led to a spurt in prices and then the suspending of exports.”