The government has decided to halt cotton exports from April 19 to ensure adequate availability of raw cotton for the domestic industry.
While the move is in line with the demand of the industry, it comes when the cotton season is drawing to a close and the best of the produce has already been sent to countries such as Pakistan, Bangladesh and China.
Since October, the industry had been demanding that the government regulate sale of raw cotton. As the economic recovery set in, the demand for cotton, both domestically and globally, saw a significant increase, which led to a consistent surge in raw material costs.
“Even though prices have started to cool, one has to wait and watch how they move. Such a policy is coming late as the best cotton has been shipped off and what is left is the end-of-season cotton,” said P Nataraj, managing director, KPR Mills.
Even as production of raw cotton in India in 2009-10 is projected at 29.2 million bales (a bale is 170 kg), marginally higher than the 29 million bales in 2008-09, domestic consumption rose 9.17 per cent while exports surged 128.6 per cent during the financial year.
According to the Cotton Advisory Board, such a scenario is likely to leave a stock of 4.05 million bales in 2009-10 compared to 7.15 million bales in 2008-09. Ideally, the ending stock should be 5.5-6 million bales, sufficient to meet the requirement of the domestic industry for three months.
Industry says at present, not even 10 per cent of the end-of-season raw material is fit for making high-quality fabrics.
“There are two things. One is that the cream has already gone. The other is that despite such a measure, there may be a shortfall in availability of cotton and the industry will be forced to import at a much higher price than at what we have exported,” said D K Nair, secretary general, Confederation of Indian Textile Industry.
Moreover, most had already purchased heavily during the peak season, the best time to get good-quality raw material, at prices between Rs 27,000 and Rs 29,000 per candy (1 candy = 356 kg). Some in the industry say the move may not help the spinning industry, even as cotton prices cool, as most have already done their buying and will use the cotton bought at much higher prices.
“The positive effects of such a move are quite limited for the industry. Our demand was to regulate the industry so that the domestic industry does not lose out on the cream of cotton. However, this has not happened,” said P V Chandran, managing director, Ambika Cotton Mills.
