Textile industry demands ban on cotton exports

Unnecessary, says ministry, as the country has enough stock.

The country is likely to export close to eight million bales (1 bale = 170 kg) of cotton in the current cotton year ( October 1 onwards) if the pace of bookings for export continues unabated, much to the dismay of the textile industry.

The industry says such a level of exports could result in a repeat of the 2007-08 cotton year, when exports reached almost 10 million bales, catapulting prices to historical highs and making domestic players less competitive against global peers.

Last year, the export was only around 3.5 million bales. Higher export is on the back of decline in worldwide cotton production and signs of revival in the global market, which will increase cotton consumption by two per cent. Current cotton prices are already up over 15 per cent compared to the corresponding period last year.

Says Shishir Jaipuria, chairman of the Confederation of Indian Textile Industry, said, “Exports should be suspended for three months, till February, to gauge the real situation. So far, already around 1.5 million bales have been bought by traders for export, which has pushed the domestic prices to as high as Rs 25,000 per candy (1 candy = 356 kg) in the spot market. If no action is taken to curb the outflow of cotton, exports may reach beyond eight million bales.”

During the October-November period last year, cotton prices were in the range of Rs 21,000-22,000 per candy. According to the Cotton Advisory Board (CAB) of the Union ministry of textiles, the production for 2009-10 is estimated at 30.5 million bales, up by 5.2 per cent from 29 million bales last year.

A senior official in the Ministry of Textiles told Business Standard, “As of now, there are no plans to put a ban on cotton exports. Cotton prices have shot up in tandem with international prices. The country has enough cotton for the season, with a carry-forward stock of around seven million bales.”

Home cotton consumption is expected to be 24 million bales. “Even if we export close to eight million bales, industry will have sufficient cotton,” the official added.

However, not agreeing with this, industry players questioned the quality and even the quantity of the carry-forward stocks of cotton, which, according to them is only on paper.

World cotton production, according to the latest release of the International Cotton Advisory Committee, is likely to decline by 4.5 per cent, the lowest in the past five years. Whereas, global consumption is estimated to be 2.16 per cent higher. This is mainly due to a dip of 16 per cent in China’s cotton output. Increases in India, the US, Pakistan and Australia are expected to offset the declines in China, Brazil, Turkey and Mexico.

Currently, cotton prices in the world market are 63.9 US cents per pound, 24 per cent higher than in the corresponding period last year.

Daily arrivals strengthen
Cotton sowing for the season 2009-10 is almost over, except for the winter crop in Tamil Nadu, where 40 per cent of the work is done. Daily arrivals are gathering momentum, being now 125,000 bales. Data from the Cotton Corporation of India show 2.95 million bales have arrived so far.