Cotton exports to China under scanner

A farmer grades cotton at Baswapuram in Khammam District. The government has decided to lift the ban on cotton exports, that was imposed last week. File photo

A farmer grades cotton at Baswapuram in Khammam District. The government has decided to lift the ban on cotton exports, that was imposed last week. File photo  


Even as the Director-General of Foreign Trade issued a fresh notification lifting the ban on cotton exports, the government is set to launch a probe into the “self consignments,” mostly to China, and scrutinise the export receipt certificates (ERCs) to get to the root of the sudden spurt that caught it unawares.

Though the government had registered 130 lakh bales for exports, it was only last week that the alarm bells started ringing. This sudden spurt had the government worried, as nearly 85 per cent of the exports went to China. “We are going to have a close look at the self consignments which have been shipped by individuals or companies in the recent past to verify the authenticity of exports. In addition to this, the ERCs already issued are also likely to face reconciliation,” a senior official of the Commerce Ministry said.

Following strong protests by Agriculture Minister Sharad Pawar and the Congress units of Maharashtra and Gujarat, the government announced the revocation of the ban.

The government feels that high price volatility and the sudden surge in exports had forced it to impose the ban. Around 84 lakh bales were termed exportable surplus; however, against it, 95 lakh bales have already been exported. While exports are booming, there is a slowdown in the domestic industry. The stock-in-use position stood at 29 lakh bales against the requirement of 62 lakh bales. “China itself is a big grower of cotton. However, it is a net importer, and does not export even a single bale. We need to look into the consignments wherein there is suspicion that traders have siphoned the cotton off to some front company in China and hoard it for a month or two before selling it once again to make a killing,” another official said.

Officials argued that as the rupee depreciated, Indian cotton turned out to be one of the cheapest. Out of the 340 lakh bales of crop size, 260 lakh bales are already understood to have been consumed. The government is expecting around 40 lakh bales in March and another 30 lakh bales in April. “Nearly 75 per cent of the cotton crop has already been sold. Whatever left is coarse cotton, or brown in colour, which does not command good price. The Cotton Corporation of India has a corpus of Rs. 4,000 crore for the market interventions scheme in case of any eventuality. There was no need for a ban in the first place at all. It was an ill-thought out move,” without any consultations with the stakeholders, an official said.

Commerce Secretary Rahul Khullar told journalists here the ban stood lifted as of Monday morning. “There are huge bunches of registrations; those would be scrutinised and revalidated. But no new export registrations would be done until the existing entitlements are revalidated,” he said.

Of the total of 13 million bales registered before the ban was announced, 3.5 million bales are yet to be shipped, and these will be scrutinised.

Mr. Khullar pointed out that there was a mad rush to export cotton, evident as it was from the fact that the ERCs for export of 72 lakh bales were issued in January and February. “Scrutiny and revalidation is to make sure that there is no fictitious transaction.”

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Printable version | Dec 12, 2019 9:49:14 AM |

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