PM to fix cotton export quota for next crop year.

With surplus cotton available for exports expected to drop sharply to around 30 lakh bales after 125 lakh bales exported this year, prime minister Manmohan Singh will shortly convene a meeting of concerned ministers to work out the strategy to ensure that domestic textile industry is not deprived of its requirements in the next cotton year beginning October.

The meeting will take place later this month, as export quota has to be finalised by August 31, well ahead of the new crop arrival. Finance, agriculture and commerce ministers would attend the meeting among others.

“As domestic production is anticipated to be lower, textile mills may face severe shortage of cotton in case we continue with unrestricted exports. Hence, it is necessary to have an estimate of exportable surplus in place so that there is no scarcity in the coming season,” a senior government official told Financial Chronicle.

As it is, domestic cotton prices are ruling high as of today and have already breached the global prices from middle of July onwards forcing textile industry, which is the second largest employer with 125 million workforce, to look at import of cotton. Even in the ongoing crop season ending next month, Indian mills are expected to import up to two million bales.

Indian cotton prices were usually 18-20 cents a pound lower than international prices but has now surpassed global prices and that too at a time when rupee has depreciated by 20 per cent in the last one year.

Due to lower arrivals and higher demand, there has been 17 per cent increase in domestic prices in the last two months from Rs 32,800 per candy (355.6 kg) in June to Rs 38,600 per candy now.

This is a cause of concern for policy makers as yarn prices have been increasing in the domestic market since January. From Rs 214.63 per kg in January, the prices went up to Rs 224.63 per kg in April and to Rs 231.63 per kg in August.

Average cotton production in India is around 330 lakh bales out of which the domestic consumption is nearly stable at around 260 lakh bales. However, this year it was anticipated that the cotton production would touch 352 lakh bales but so far the arrivals have been only 337 lakh bales.

There was a surge in Indian cotton exports in 2010 when China imported huge quantity due to 15 per cent fall in global production. As a result, India exported 6.5 million bales, forcing government at one stage to ban exports in April 2010. The situation was somewhat similar this year when export was banned after the exportable surplus of 84 lakh bales was surpassed in June. However, the ban was lifted a week later under tremendous political pressure from agriculture minister Sharad Pawar and so far 125 lakh bales have already been shipped out of the country.

Source : wrd.mydigitalfc.com