The government?s decision to put a blanket ban on cotton exports for an indefinite period will not have any significant impact on textile manufacturers as the committed amount is quite large and there is no way that the government can backtrack on this, according to the Chamber of Textile Trade & Industry (COTTI), the apex body for textile trade in eastern India.
COTTI?s Binod Nangalia said the textile commissioner has already registered 79 lakh cotton bales for export this year, up from 49 lakh bales exported last year. ? This quantity is already committed and there is no way the government can stop shipment of this,? Nangalia said.
Indian rules require exports of cotton to be registered with the textile commissioner and only registered quantities can be exported.
COTTI president Vijay Kumar Binayaka said the cotton season starts from October of a year and extends up to September next year. The registrations for exports are mainly done between September to April and the majority of registration for the current season has already been done. This ban can only restrict registration of 4-5 lakh bales and the initiative taken is too late to little, Nangalia added.
The textile ministry has put a ban on exports of raw cotton through suspension of registration from April 19 for an indefinite period, though the textile industry has been demanding it for a long time to contain spiralling cotton prices in the domestic market.
Cotton prices in the domestic market is already up by around 35% at Rs 30,000 per candy (370 kgs make one candy) and the ban at this stage would hardly make any difference to domestic prices, Nangalia, convener of Texvision ? 2010 said.
COTTI is organising its third Texvision, a textile trade exhibition, from April 25-29.
COTTI secretary Bulaki Das Mimani said since cotton production worldwide has been 5% less than usual, there has been huge demand of raw cotton from India, which has deprived textile manufacturers of the country from getting good quality cotton at reasonable prices.
?The ideal price should have been Rs 20,000 per candy and this could have prevailed even after a 40% hike in minimum support price (MSP) for farmers done in 2008,? Mimani said.
The MSP for cotton is currently at Rs 2,520 per bale, he added.
Nangalia said the export duty of Rs 2,500 per tonne was effective from April 9 but within 10 days the government has clamped down on all exports.
This would put a pressure on international raw cotton prices and prices of finished products internationally are bound to go up. In India the prices of finished products have gone up by 15-20%, not proportionate with the increase in input cost. But if prices of finished products go up internationally, it would at least compensate the losses of current exports of finished products. The losses on current exports would be on account of the rupee further strengthening against the euro, Nangalia said.
The rupee has strengthened 9.6% against the euro for the week to April 17 and is expected to remain at this level or rise a bit for the coming few weeks.
