According to reports reaching here from Coimbatore, a suggestion was made at the recent meeting of Texprocil's yarn-committee that export sales should be allowed without insisting on the opening of L/Cs by overseas buyers in order to push up export business.

There was, however, a strong opposition to this move on the ground that in such a situation, if the buyer refused to clear the goods or declined to make payments, exporters would be put to losses.

The present system provided sufficient protection to exporters, so much so that even during the South East Asian crisis, exporters did not suffer on account of any failures of overseas firms.

Besides, even under the present system it was possible for the exporters to extend necessary credit facility to overseas buyers by making the L/C payable onlyafter it expires of the period of credit.

The ill-conceived proposal to introduce a system of minimum support prices (MEPs) for cotton yarn exports also misfired as expected. Those who advocated it reportedly argued that this was necessary to avoid competition among Indian exporters in the overseas markets.

Those who were against it were said to be of the view that this might open up flood-gates for underhand dealings. It might be virtually impossible to monitor every transaction and enforce such MEPs. Unscrupulous exporters may thus be able to sell below such MEPs by offering to overseas buyers discounts under the table, while honest exporters might lose business.

Besides, implementation of such MEPS might have to be handed over to some bureaucrats who might be far removed from market realities to modify the same from time- to- time, keeping in view the changing business conditions in the overseas markets.

Thus exports might be actually hampered. Moreover, it might not be possible to maintain secrecyabout such MEPs and overseas buyers would not be prepared to pay anything more than MEPS which consequently might become maximum prices at which exports would have to be effected.

Furthermore, as long as there were no such common systems in other countries, exporters from there would be able to sell below our MEPs and will be able to grab business at our cost, if it were possible to rigidly enforce our MEPs.

The yarn committee reportedly reviewed the present conditions in the export markets for cotton yarn and felt that the situation was still weak.

A suggestion that imports of cotton from the US be made on condition that the yarn produced from it be exported to the US did not make any headway, as any such arrangement would depend on willingness of the US to agree to it.

Despite the increase in overall shipments of cotton yarn from the country in the first seven months of 1999, exporters are not happy for two reasons. One, the increase is mainly due to more offtake by S Korea. And two, the pricerealisations remain very much depressed, in view of stiff competition from CIS countries, China, Pakistan as well as from certain African countries.

The overseas buyers are moreover not prepared to enter into long-term contracts and prefer to buy on hand-to-mouth basis, since supplies being more than demand are readily available from diverse sources whenever needed.

Cotton yarn of 30s single is currently fetching only about US$2.60 per kg while 20s carded is being sold around US$2.10 to 2.20 per kg. The OE 7s variety is fetching only about US$1.40 per kg. Weakness of the export market can also be seen from the fact that the third party exports command a premium of just Rs 2 or 3 per kg compared with about Rs 25 per kg last year. European market remain weak.