The government has eased cotton and cotton yarn export rules to boost overseas sales as slowing demand from China has hit India’s trade in the commodity.
With the change in rules, the government has ‘dispensed with’ the registration requirement for exports of cotton and cotton yarn, the government said on Monday in two separate notifications.
Prior to this notifications, traders were required to register in advance their targeted export volume for the year.
India is likely to harvest a record 40 million bales this crop year that began on October 1, and is set to surpass China as the world’s top producer. But a sharp drop in prices is prompting farmers to hold back supply.
Domestic consumption is not enough to absorb the rising output, and China, the biggest buyer of Indian cotton, has been scaling down its overseas purchases.
State-run Cotton Advisory Board (CAB) estimates India’s exports could drop by 24 per cent to 9 million bales in the current year.
But traders expect a much steeper fall due to weak Chinese demand.
Prices to stabilise The move is likely to help stabilise domestic cotton prices, which have fallen below the minimum support price (MSP) in some producing States due to sluggish export demand and bumper domestic production this year.
According to the U.S. Department of Agriculture (USDA) report, India — the world’s second biggest producer of cotton — is likely to export 7.69 million bales of the fibre in 2014-15 marketing year (August-July), down by 35 per cent from last year due to sluggish demand from China. China is the top cotton export market for India, followed by Bangladesh and Pakistan. Before easing export norms, the Centre had asked the Cotton Corporation of India (CCI) to procure cotton from farmers in 11 States as the rates have fallen below the MSP in Andhra Pradesh, Telangana and Maharashtra.
The CCI is the government’s nodal agency for procuring cotton at MSP, which is now Rs.4,050 a quintal for long staple.
