Ministerial Panel Could Approve Additional Cotton Exports.

A ministerial group likely to meet early next week could at long last clear cotton exports over and above the already approved 5.5 m bales for 2010-11 (October-September cotton year), advantaging cotton farmers who have yet to complete around 25% of the year's sowing, going by last year's trends.

A government official disclosed that allowing an additional 1.5 m bales for export was currently being considered by the Centre and could be endorsed by the ministerial panel. Pressure has been mounting on the governemnt to reduce quantity restrictions imposed on cotton exports.

The political emasculation of the DMK in the recent TN assembly elections and on account of the 2G scam, infact, may play a key role in helping open up exports. Textile minister Dayanidhi Maran , who met the PM after the CCPA on Monday in the Capital in the thick of the 2G scam allegations, was perceived as close to the millers and traders in southern India, batting pro actively for them thus far in preventing exports at the Centre. Now, though, his clout and political leverage in the UPA at the Center appears to have waned some.

Accordign to analysts, an export decision by the ministerial panel would be positive for cotton farmers. The price indications are good for the farmer, they contend. As of May 27, the area under cotton has been estimated at 9.5 lakh ha compared to 8.11 lakh ha same time last year. The final area under cotton in 2009-10 was 11 m ha. Compared to the high of Rs 6000 per qtl for the long staple, prices now reign at a much lower Rs 4375/qtl. Notwithstanding that steep drop in prices, they are still a good 45% higher than the prescribed MSP.

Ironically, it was the cotton farmer alone who had failed to benefit from the rising raw material prices earlier although millers were prompt in hiking the price of finished garments and cloth.

Now, despite the marked plunge in prices, the industry has made public its intention to not pass on the benefits of currently dropping raw material prices to the consumer. Cotton textile prices went up 25% YoY as measured by WPI. propped up by the government's earlier decision to cap this year's exports at only 5.5 m bales. The move was buttressed heartily by millers and traders who were suspected to have stocked up yarn in tandem with higher prices.

Going by the CAB's estimate up to February on markets arrivals, 29.4m bales have arrived in markets already. That indicates that only very little is left with the farmers since the CAB estimated an output of 32 m bales. "Despite that, since sowing will go on for some time more, an export decision could still help the cotton farmers given good global market prices," a sectoral analyst said.

Significantly, though, that puts a crucial question mark on the output estimates of the farm ministry, which has got this wrong several times. Ministry estimates pegged cotton output at a much higher 33 m bales.

Source : economictimes.indiatimes.com