Open Quota Cotton Exports A Big Blow.

COIMBATORE: Terming the centre's decision to allow cotton exports under the open general licence (OGL) during the current cotton season (October-September ) as a "serious blow" and "premature" , textile mills have urged the government to allow shipments from January.

"The announcement allowing cotton export under OGL from October 1 for the 2011-12 cotton season has come as a serious blow for the cotton textile industry," said S Dinakaran, chairman, Southern India Mills' Association (SIMA). Textile industry associations have been urging the government to permit exports under the OGL only from January stating that if cotton is shipped early in the season, it would hit availability in the domestic market and push prices up.

While SIMA is not against exports, the government should ensure raw material security for the textile industry and consider the need for rebuilding adequate buffer stocks to enable domestic mills procure adequate quantity of quality cotton, Dinakaran said. This would also help in avoiding speculation during the beginning of the season.

Cotton arrivals would start in a big way only from November-end or early December as sowing had been delayed by 4-6 weeks due to late arrival of rains, he said. "The exact crop size would be known only by December," the SIMA chief pointed out.

The premature cotton export announcement for the 2010-11 season and the subsequent notification allowing export of the entire earmarked quantity of 55 lakh bales (a bale is 170 kg) in 45 days during the peak season pushed cotton prices to record highs, SIMA said. Prices skyrocketed to Rs 63,000 a candy (a candy is about 356 kgs) from Rs 38,000 in just three months, it pointed out.

"Fearing that the government might allow additional quantity for export resulting in shortage of cotton, textile mills procured cotton at over Rs 60,000 per candy," Dinakaran said. Prices later crashed to Rs 30,000 a candy and as a result , spinning mills lost over Rs 6,000 crore in just four months, he said. SIMA fears that allowing cotton exportds under OGL would lead to a repeat of the situation .

Source : timesofindia.indiatimes.com