A ban on cotton exports at this juncture is unlikely to serve any purpose, textiles secretary Upendra Prasad Singh told FE. Outbound shipments of cotton are unviable now, as domestic prices of the fibre have exceeded the global levels, he said.
“On top of the high domestic prices, there are logistics costs for exports. So, exports in any case are not happening now,” Singh said on Thursday.
The textile and garment industry has been seeking an immediate ban on cotton exports on the assumption that such a move would shore up domestic supplies and curb the exorbitant rise in prices of the fibre and its by-products. Cotton prices have more than doubled in the past one year to breach the Rs 100,000-mark for a candy of 356 kg.
Singh said, unlike cotton, there is adequate availability of cotton yarn in the domestic market.
However, yarn prices, too, have skyrocketed, reflecting the jump in the primary raw material (cotton) prices. Garment companies, especially exporters who had firmed up contracts well in advance when yarn prices were somewhat cheaper, are finding it difficult now to renegotiate the deal and pass on the rise in input costs to the buyers, he added.
Acknowledging the crisis the entire textile and garment value chain is facing, Singh said the government is working with industry players to find out ways to improve domestic supplies in the short term. Some cotton import deals have been firmed up after an effective duty of 11% was scrapped recently. However, even supply from overseas against these contracts will reach only by July-August, while the new crop will start hitting the market from mid-September, he said, adding that there is a shortage now.
The government is also counting on arrivals of a variety of cotton that is harvested in summer. But the supply from this harvest is limited—about 5-10 lakh bales.
Senior industry executives have already blamed the misleading cotton production estimates firmed up by the agriculture ministry for their plight. The domestic cotton output is now estimated to be just about 314 lakh bales, of 170 kg each, in the current marketing year through September, way below the agriculture ministry’s initial projection of 362 lakh bales. Domestic consumption, meanwhile, has been estimated to be about 340 lakh bales. A more realistic projection in the beginning of the year would have prepared them better for any potential shortage, they have stressed.
An informal cotton advisory group, led by industry veteran Suresh Kotak, will hold its first meeting on May 29 to discuss how to deal with the current situation and how to draw a long-term strategy to improve cotton output and productivity in the country, among others. The group, set up earlier this month, has representation from the ministries of textiles, agriculture, commerce and finance, along with Cotton Corporation of India and Cotton Research Institute.