The textiles ministry wants to regulate cotton exports and export registration to better manage supply, demand and prices in the domestic market.
The ministry has written to the ministry of commerce and to the Directorate General of Foreign Trade (DGFT) on this issue. Sources said the proposal had been endorsed by the minister of textiles, Anand Sharma, who also holds the commerce portfolio. DGFT has cited instances of mismanagement of export registration, raised by cotton associations.
In all likelihood, cotton would be taken off the open general licence (OGL) in the ensuing season, commencing from October. The commerce ministry had put cotton under OGL in 2011 for the cotton season ending September 2012.
This is in the wake of spike in cotton prices in the domestic market. In the domestic market, cotton prices are currently at Rs 37,000-38,000 a candy (a candy is 356 kg of cotton). Indian cotton mills have already contracted 10 million bales for imports and around three to four million bales have already been imported in last two-three months.
Until recently, India was a big exporter of cotton. The country’s annual harvest was 35.2 million bales, while domestic requirement was just 26 million bales. Currently, there are hardly any stock in the domestic market to feed the domestic market which is a peculiar situation, said officials.
Reportedly, in the current procurement drive, arrivals in mandis have started tapering off. This year, cotton output has been 33.6 million bales, of which 12.5 million bales have been exported, mainly to China. Against 200,000 bales of daily arrivals during the peak season, arrivals have dropped to 15,000 bales a day.
Currently, there are hardly any stock in the domestic market to feed the domestic market which is a peculiar situation, said officials. The government’s plan to create a special buffer of one million bales under Cotton Corp of India looks stretched because only 350,000 bales have been procured at a cost of Rs 500 crore. The government has sanctioned Rs 2,500 crore for the purpose.
Besides, delayed sowing due to insufficient rains is likely to affect cropping in Gujarat, the major cotton producing state. "The cotton production is likely to be subdued around 336 lakh bales as per current arrivals against previous estimate of 352 lakh bales for the current season by the Cotton Advisory Board", said an official.
Until last year, cotton exports were regulated by the textile ministry . Currently, the ministry is assessing the impact of spike in cotton prices in the domestic market on yarn prices and other downstream industries using cotton as a raw material.