Cotton exports to top 100 lakh bales this year.

NEW DELHI: India's cotton exports will cross 100 lakh bales for the first time, marking a key milestone in the country's sevenyear journey from net importer to the world's second largest exporter with the cheapest cotton. At least one-third of the cotton crop may be exported this year given the pace at which deals are being signed.

India is expected to harvest a record 345 lakh bales this season at a time when the textile industry is facing its most severe downturn. Buoyant exports have come to the rescue of lakhs of farmers in India's eight cotton-growing states that had otherwise been forced to make distress sales below the minimum support price due to slow purchases by local textile mills.

India has the world's largest area under cotton, ranging between 10 million and 11 million hectares. Keen to garner revenue from this heavy outflow, mainly to China, government may consider collecting Rs10,000 per tonne as export duty from traders to fill its own coffers, said a senior official, who declined to be named.

Traders informally say such a duty will not hamper exports since Indian cotton is currently priced at a steep discount of 20 cents per pound to the Chinese market and there is ample scope for prices to rise by few more cents, he added.

"Since current market prices are still only a tad above the MSP, the government will ensure that no decision is taken to upset the market and give a wrong signal to exporters," the official said. Exporters say any export duty will be a negative for farmers since it will be adjusted in mandi procurement prices by traders and push the market down.

"If an export duty is imposed, it will get revoked within 10 days under farmer pressure. The market is still showing signs of distress because farmers are holding half the crop. It may not be advisable for the government to intervene in exports at this stage," said Bhadresh Mehta, MD, Bhadresh Trading Company, a leading export house.

Farmers in Andhra Pradesh, Maharashtra and Madhya Pradesh took to the streets in November-December last year, demanding the government raise the MSP to improve returns.

"The market is oversupplied and will remain heavily surplus even if India exports 120 lakh bales because domestic demand has been extremely slow. Most mills are holding enough cotton to last three-four months," said another trader.

Data with the DGFT show export contracts worth 100 lakh bales have been registered by traders till now, up from 78 lakh bales exported last year. The ministry of textiles is slated to meet industry and trade representatives this week to revise cotton production and consumption figures for the current season.

The main export destination is China, which is building up reserves for supplying local industry. China and India are the two world's largest producers and consumers of cotton. China is expected to import 16 million bales in 2012-13, the US Agriculture Department said, as world cotton consumption rises for the first time in three years.

Since prices within China have touched 117 cents per pound, Indian cotton priced at 97 cents per pound is appearing attractive. Cotton use worldwide was forecast for 114.5 million bales, up 4% from this year and the first increase in three years.

India was a net importer until 2003-04 after which net exports turned positive. This was mainly due to adoption of new technology (BT cotton) which increased production and liberalization of export which provided the market for increased output.

Source : economictimes.indiatimes.com