Govt mulls export curbs on cotton, yarn to check prices

In a move to curb the rising prices of raw cotton and yarn, the Government of India is mulling various measures to discourage the export of these commodities.

On yarn, it is likely to notify suspension of the duty concession of 7.5 per cent available to exporters under the Duty Entitlement Pass Book (DEPB) scheme.

It might also make the registration of cotton yarn export compulsory, to keep track of the development. At present, only registration of raw cotton export is mandatory. The other step possible is imposition of a two per cent export duty.

In the wake of a tight global demand-supply position, prices in the domestic market had shot up this cotton year (October-September). The price of Gujarat’s benchmark Shankar-6 variety, Rs 21,000 to Rs 22,000 a candy (356 kg) at the season’s onset, are now Rs 29,000 a candy.

Given the rising prices of raw cotton, the Southern India Mills’ Association and the Confederation of Indian Textile Industry had demanded a ban on exports from India. This was opposed by the traders’ body, the Cotton Association of India, which said there was no need to do so.

About 7.9 million bales (each bale is 170 kg) have already been registered for exports, of which 5.5 million have been shipped so far, mainly to Hong Kong, China, Pakistan and Bangladesh. China’s share in that is 56 per cent and these four countries together account for nearly 80 per cent of exports, according to data from the textile commissioner.

The firm levels of cotton prices fuelled cotton yarn prices. Prices jumped this year by 40 to 45 per cent. Hit hard by the soaring yarn prices, the Tirupur Exporters Association members (in Tamil Nadu) recently went on a day’s fast to protest. The knitwear units there had contended they could not survive in the global market with this level of yarn prices.

The cotton yarn industry believes withdrawal of DEPB benefit would bring down the prices in India. “The cotton yarn market has eased in the past two days. Yarn exports have slowed, due to the rupee rising against the dollar. Cotton yarn prices are likely to fall by five per cent in the days to come as a result of suspension of DEPB benefit to yarn exporters,” said Bharat Malkan of IB Yarn Agency, based in Mumbai.

The Cotton Advisory Board (CAB) met today and estimated the crop at 29.2 million bales for 2009-10. This is marginally lower than its estimates last December of 29.5 million bales. The acreage had risen from 9.4 million hectares in 2008-09 to 10.18 million hectares this year.