Most of these quota-holders find themselves in an entanglement this time as the chances of their completing their quotas by the end of 1999 look remote.

This is because the European markets for cotton yarn remain unusually depressed this year, though shipments to non-quota countries have picked up though with poor price realisation.

It might be interesting to note that major buyers in European markets like Italy, Benelux, Germany, the UK, Spain and Portugal have made lower purchases of cotton yarn from India this year. In fact barring Greece and Austria all other European markets have reduced their buying of Indian cotton yarnthis year. One of the reasons for this is that textile demand in European markets has remained depressed this year. Besides, Turkey and some South East Asian countries have been offering fierce competition in European markets with the result that price realisations have fallen to unattractive levels.

Some of the manufacturers of yarn have started approaching end-users directly thus bypassing intermediary importing agencies. Thirdly, there is an increasing trend to import garments instead of getting yarn and converting the same into fabrics and apparel.

The net impact of this can be seen to underutilisation of the European export quota for the year. The overall quota for export of yarn to Europe this year has been fixed at 30,826 tonnes.

This is unlikely to be achieved looking to the fact that in the first nine months of 1999, shipments have reached only about 59 per cent of the quota instead of nearly 75 per cent last year.

In absolute terms, despatches have amounted to just 23,668 tonnes in thefirst nine months of 1999 compared with 29,309 tonnes in the same period of the preceding year.

It is quite possible that some of these quota holders might have already transferred before the end of September 1999, their quotas to others in view of the depressed conditions in European markets. They may be feeling happy now.

Those who did not or could not do so may have two options left to them.

Either they should be prepared to effect shipments to Europe at unremunerative prices and put up with the resulting loss, or pay penalty for non-fulfilment of quotas.

Shipments of cotton yarn to non-quota countries have considerably improved of late with the result that despite the setback in exports to Europe, overall exports of cotton yarn in the first six months of 1999-2000 have been higher by 18.02 per cent in volume at 279.33 million kg against 236.69 million kg in the same period of the preceding year.

In value terms, the increase has been of the order of 10.91 per cent at US $780.28 million comparedwith US$703.54 million in the first half of 1998, indicating a fall in average unit value realisations. According to export trade circles while it is possible to effect sales to non-quota countries one has to be prepared to accept unremunerative prices. Currently 20s single is said to be selling around just US$1.90 per kg and 32s around $2.50 to 2.60s.

It is doubtful whether one can make any profit by selling yarn at such unremunerative rates. The European markets are still worse. They ask for 16s count at $1.80-1.90 per kg whereas its cost may exceed $2.00 per kg. This explains why holders of export quotas for European markets find themselves caught in a knotty situation.