Such licences are issued to those who achieve certain export performance. Imports of certain items in short supply in the local market are allowed under such licences so that exporters can make some additional profit either by importing such items or transferring the licences to others.

It is now becoming increasingly difficult to find buyers for such licences. Previously importers of precious metals used to be ready buyers of these licences. However, as imports of gold by certain agencies are allowed under OGL, the demand for licences has suffered a setback. Secondly depreciation of the rupee by about 10-12 per cent over the last 12 months have made imports of other items less profitable. Further, the imposition of new special additional duty on all imports(SAD) at the rate of four per cent (which in effect may come to six per cent) has scared away potential buyers of these licences. Uncertainties about the exchange rate have also made them reluctant to acquire in advance these licences from the market. Apart from tax exemption of export profits, this was the only incentive available to exporters but its utility is greatly eroded now.

So far as actual exports of cotton yarn from the country are concerned, 1998-99 has begun on a disappointing note with dispatches plummeting in April 1998 by 14.02 per cent to 39.18 million kg from 45.57 million kg in the same month of the earlier year. If one goes by the calendar year actual exports have plummeted by 19.05 per cent to 151.05 million kg compared with 187.29 million kg in the same period of the earlier year. Prospects for the coming months, according to leading exporters, look bleak. They point out that, out of our total exports of cotton yarn, less than 10 per cent went to quota-countries, while the balance usedto be absorbed by non-quota countries. Of the latter, east and south-east Asian countries used to absorb nearly 45 to 48 per cent. Since the start of financial turmoil in those countries, yarn purchases by them have declined sharply.

Some time back, particularly after the change in political setup in Indonesia, it was expected that economies of the Pacific coast countries would improve and so also their offtake of cotton yarn from India. However such hopes have been belied, in view of the recurrence fresh currency turmoil. Experts predict economic recession in the region in the coming months. If that happens the chances of improving exports of cotton yarn to that region might suffer a further setback.

This situation has come about at a time when textile mills have plenty of stocks of yarn and are in a position to step up production at short notice. A few months ago it was feared that cotton production in the country might go down as low as 142-44 lakh bales. However, unseasonable showers have lead tofresh flushes in certain regions -- particularly in the central belt. It is now hoped that cotton production this season might well reach the level of 148-150 lakh bales of 170 kg each. Unfortunately, some of the spinning units are curtailing their production for want of enough export demand, while domestic demand too lacks strength. Coarse and medium counts are having some demand, but finer counts remain neglected as can be seen from the following average prices for various counts of yarns.