The Centre has come out with an order imposing restrictions on further exports of raw cotton as part of an effort to ensure that adequate quantity of the raw material was available to meet the needs of the domestic garmenting and handloom sectors.
In a notification issued on Monday, the Textile Commissioner has directed that not only there would be no more registration of contracts for export of cotton, there would also be restrictions in the case of exports, for which registration certificates have been already issued but where the process of shipping is yet to be completed.
Highly placed official sources said that exporters, who have already obtained the EARCs (Export Authorisation Registration Certificates), but who were yet to complete the process of shipping, would be allowed to revalidate the certificates. It would, however, be subject to the condition that a' carry over stock of 50 lakh bales of the raw material was available at the beginning of the next cotton season, as decided at an inter-Ministerial meeting chaired by Finance Minister earlier this month.
The Centre, the sources said, may allow shipment of only about 15 lakh bales more this year, out of the 25 lakh bales that are yet to be shipped out, considering that as of now only about 40 lakh bales of the raw material is expected to be available as carry-over at the end of the current cotton season.
[The Textile Commissioner had issued certificates for a total quantity of 85 lakh bales this year. Of these 60 lakh bales have so far been shipped.]
Justifying the notification, the sources pointed out that there had been a significant shortage in cotton production across the world this year, with China alone registering a drop of 15 per cent and noted that if such a restriction was not imposed, domestic consumers, particularly the handloom and garmenting sectors which employed a large number of people, would be hit badly.
“Right now, cotton is available only in India and the U.S. and the Indian price is cheaper than that in the U.S. by about 7 per cent. Consequently, several countries, including China, had been focussing on importing from India as a first resort. If we don't act now, we will be reduced to a position where exporters from other countries using our cotton would be able to offer garments and handlooms in the world market at a price much cheaper than our exporters.”
“We are particularly worried about what would happen in July and August, considering that the next cotton season will begin only in October and the present level of stock would last for just about two more months''.
Soundariya Preetha writes from Coimbatore:
According to an official, with this move, cotton availability in the domestic market is expected to increase and cotton prices are likely to come down.
Industry and trade sources said that of the 292 lakh bales of cotton production expected this year (October 2009-September 2010), just about 22 lakh bales were yet to arrive at the market. With the suspension of export contract registration, cotton and yarn prices would stabilise. By next season, the Ministry should come out with a cotton fibre policy. It should take steps to get data on the actual cotton production and stock available, they said.