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Indian cotton prices unlikely to increase sharply
Mar '12
The Government of India's decision to partially rollback the ban on export of cotton issued earlier this month is not likely to result in a substantial increase in the prices of cotton, according to industry experts.

As per the latest decision, the Central Government has allowed cotton export under open general license (OGL), but has stopped issuing new registration certificates (RCs). Even the RCs issued before the ban need to be revalidated prior to actual exports.

The benchmark Shankar 6 variety was being traded in the range of Rs. 33,500-34,000 per candy of 356 kg on March 14. This is a slight increase over the price of Rs. 33,000 per candy on March 5, 2012, following the ban on cotton exports. Prior to the ban, the price was around Rs. 35,000 per candy.

Mr. NP Hirani, Chairman of The Maharashtra State Cooperative Cotton Growers' Marketing Federation, told fibre2fashion, “The partial lifting of ban on cotton exports has led to limited rise in cotton prices, but much impact is not expected because the Government has permitted only those exports for which RCs have already been issued; fresh registration has been prohibited. So, there will be only a marginal increase in rates of cotton.”

On a similar note, Mr. Dharmesh Mehta, Director of Gokul Cotton P. Ltd. said, “The ban on cotton exports has been removed, but only those who have already registered are allowed to export. New registrations have been closed by the Government. So, the lifting of ban on cotton exports will not lead to a substantial rise in prices of cotton.”

Commenting on the Government's decision to partially rollback the ban on cotton exports, Mr. Sanjay Kumar Jain, Joint MD of T.T. Ltd., said, “The impact of the Government's decision on the industry is going to be very bad. The decision to ban cotton exports was based on fundamental reasons and it has been partially lifted for emotional and political reasons.”

“The current average prices of cotton are still 30-40 percent higher than what they used to be until a few years earlier. Meanwhile, the productivity of cotton has also gone up. So, the Government needs to analyze whether the cotton farmers are really in distress. On the other hand, if cotton availability is poor during the end of the season, we will have to import cotton at a higher price,” he states.

Suggesting a solution, he avers, “To avoid similar circumstances from recurring year after year, the Government needs to frame a clear cut fibre policy laying down all the guidelines depending on the crop size and its usage within the country.”

Fibre2fashion News Desk - India

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