Raw cotton export ban not to arrest rising prices

The government’s move to ban the export of raw cotton to arrest spiralling prices in the domestic market is unlikely to have any significant impact, as export contracts worth more than 7.9 million bales have already been registered.

Late last night, the government, in a notification, suspended registration of raw cotton export shipments indefinitely with effect from April 19, 2010.

The contracts registered with the textiles commissioner, for countries such as China, Bangladesh and Indonesia and Pakistan, prior to the ban (till April 8, 2010), were outside the purview of the ban, said Binod Nangalia of Chamber of the Textile Trade and Industry (Cotti), on the sidelines of a press meet here today.

India generally exports up to 8 million bales of raw cotton every year. However, last year, the exports were low at about 4.2 million bales.

“Pursuant to the inter-ministerial meeting on steep increase in cotton prices, the government has decided that the registration of export contracts prior to shipment of raw cotton.shall now be suspended with effect from April 19 till further orders,” the order said.

Earlier, the government had imposed a duty of Rs 2,500 a tonne on raw cotton exports with effect from April 9, to check the commodity’s price.

Nangalia said, in the last 10 days, prices of raw cotton had seen minor correction in the domestic market. Prices have come down from Rs 30,000 a candy (370 kg), to about Rs 29,000 a candy of cotton.

“However, ideally prices should not be more than Rs 20,000-22,000 a candy,” said Nangalia. This year ( September2009-October 2010), cotton production in India is expected to be about 30 million bales, against 29 million bales last year.

Even though world production of raw cotton has dipped by five per cent, in India its production has risen due to a 40 per cent increase in minimum support price (MSP) of raw cotton in 2008-09.

With the international demand for raw cotton from India on rise, prices grew by about 30-35 per cent in the last six months. “The step taken by the government is too late to give desired results,” said Nangalia.