Price-wise the situation remains disturbing both in the quota and non-quota countries. Pakistan's military administration's reported decision not to intervene in cotton prices has imparted additional bearishness to markets for both cotton and yarn.

In European quota countries, demand for yarn seems to be faltering. Already they have made enough purchases to meet their immediate requirements and prefer to adopt a ``wait and watch'' policy for two reasons.

The world supply of cotton in 1999-2000 is expected to be more than consumption. This means that cotton prices may be further depressed in the coming months. In that event, cotton yarn values may also comedown.

Secondly, there has been a sharp decline in Pakistani cotton prices as the government there is disinclined to support falling cotton prices. Unless it changes its policy in this regard, prices for cotton yarn of Pakistani origin which are already low may be further depressed forcing other exporting countries also to lower their prices.

European importers of cotton yarn who have such ideas are not inclined to build-up inventories. They expect prices to move down further, unless some thing unexpected happens.

Under such a situation, some Indian exporters holding unutilised quotas for the export of cotton yarn to European countries are reported to have started making distress sales. Some of them are said to be selling at or even below cost. Gone are the days when they could sell these quotas at hefty premium and earn substantial profits just by transferring quotas to others, instead of taking the trouble of effecting physical shipment of goods.

These quotas have ceased to be transferable afterSeptember 30 and those who are left with them in their hands have no option but to exhaust these before the end of December 1999.

Otherwise they may have not only to pay penalty on the unutilised quota, but their future quota entitlements might also be reduced. In the past, several yarn exporters used to buy such quotas from others to step up their exports to quota countries in order to be entitled to a larger export entitlement in the subsequent year. All such activity has disappeared now. Prices for cotton yarn in European markets remain subdued.

Even in non-quota countries of Asia, prices are depressed. South Korea which has stepped up its offtake of cotton yarn over the past several months has, however, brought down its purchase prices.

It is now said to be offering only about US$2.20 per kg for 20s combed yarn. In Far eastern markets count 30s is realising just around US$2.40-2.50 per kg. Exporters point out that at such low prices, export business can be possible but that cannot yield anymargin.

Only in the Bangladesh market, there is some improvement in prices. Certain exporters are said to have been able to put through some transactions in 80s combed at about 20 paise per kg higher than what they used to realise earlier.

According to export trade sources, two changes have been made in the quota allotment policy in respect of cotton yarn exports during 2000-2004. The facility of getting export entitlement on the basis of non-quota entitlement (NQE) exports has been withdrawn.

The system of giving higher priority to those who realised better prices is also removed. However, export trade circles have virtually ignored these changes as being trivial.