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Prohibition of cotton export 'timely' step - SIMA Chairman
Mar '12
The predominantly cotton based Indian textile industry is often subjected to challenges of adequate availability of quality cotton and prices. Consequent to the removal of cotton textiles from the Essential Commodities Act from February 2008, the multinational cotton traders entered into Indian cotton market and started dominating the trade.

With the abundant availability of cheaper funds, these traders are able to hoard cotton, export sizable volume threatening the fibre security of the country. Often the cotton stock-to-use ratio dipped below 20% as against the international average of 40%. Therefore, the Government had to fix a reasonable stock level of 2 ½ months as the minimum stock to be maintained. Though cotton can be imported under OGL, the Indian textile industry can sustain its competitiveness in the international market only when domestically grown cotton is made available adequately at competitive rates.

For the cotton season 2011-12, the Cotton Advisory Board (CAB) has estimated 345 lakh bales as the production, 240 lakh bales as the consumption, 84 lakh bales as the exportable surplus leaving a closing stock of 55 lakh bales. In fact, the Group of Ministers had earlier fixed 55 lakh bales as the minimum stock level for the cotton consumption prevailed during the season 2009-2010.

During the current season, though cotton exports were steady till January, 2012, a sudden unusual rush in the rate of registration which reached almost to the level of 135 lakh bales within a month and 95 lakh bales got shipped physically. Therefore, the government has rightly prohibited any further cotton exports with effect from 5th March, 2012.

In a Press Release, Mr.S.Dinakaran, Chairman, The Southern India Mills Association (SIMA) has described the government decision as timely ensuring adequate availability of cotton for the domestic sector till the end of the season. Mr.Dinakaran has stated as the textile industry, which faces the worst ever crisis in its history making the entire textile mills across the Nation to incur huge losses, is now anxiously expecting for the relief package to avoid NPAs. The acute power shortage in the States like Andhra Pradesh and Tamilnadu has added fuel to the situation. However, the price stability of raw cotton and slight improvement in yarn prices both in domestic and international markets are giving some sort of relief to the ailing textile industry.

SIMA Chief has stated if the Government would have not taken timely decision for prohibiting cotton export, the entire textile value chain in the country would have come to a grinding halt as already the physical export of 95 lakh bales has far exceeded the CAB estimate of 84 lakh bales. Mr Dinakaran has stated that the speculative bulk registration of cotton export contracts took place during the last 10 days is a shocking news for the entire textile industry in the country. He has felt the cotton export would have crossed even 150 lakh bales resulting in serious cotton shortage in the domestic market.

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