Column : No ban on cotton exports.

The government has partially relaxed the ban on exports of cotton, which it had imposed in April, by allowing shipments of export deals registered with it. However, no fresh export deals can be registered before the new cotton crop starts arriving in the market around October. There is also talk that from the next cotton crop season starting October 1, the government would fix the quantity of cotton that could be exported every year, so that both exporters and domestic industry do not suffer. The ban, which was imposed to check rising domestic prices that had gone up by almost 54% in the past one year, has now been partially relaxed in view of stabilising prices in domestic markets.

Farmers contend that banning cotton exports ultimately hurts those who were getting a good price for their produce after the global economic downturn. The textile makers argue it is the middlemen and exporters who make the cut, while the farmers remain deprived of riches. After all, textile firms have raised their price by almost 50%, citing a rise in raw material cost. One factor that is indisputable is rising domestic demand. As India targets double-digit growth, demand for textiles and other finished products will rise, fuelled by rising incomes. In fact, a recent US department of agriculture report said that domestic cotton consumption in 2010-11 in India would rise by 4.6% to 20.1 million bales, largely because of strong demand from the textile industry. With production hovering around 29-31 million bales, rising domestic consumption will continue to play a very vital role in the domestic cotton market.

In the times to come, domestic demand, rather than exports, will drive up cotton prices. Banning or curbing exports won’t provide the right solution. The way forward should be to focus on improving domestic production and pushing output above 35 million bales annually. So, even if local demand jumps sharply, surplus could be exported. For that, apart from government and states, the industry will also have to play an active role. Encouraging the use of hybrid seeds and modern techniques would benefit all, unlike confrontations with exporters or depriving farmers of their due prices.

Source : Financial Express