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Traders gain from govt's flip-flop cotton export policy
May '12
Traders and farmers with crop-holding capacity are the ones to have benefited the most from the Indian Government's changes in cotton export policy this year.

The Government had first imposed a ban on cotton exports from the country in March this year, which was lifted after a gap of nearly two months.

Accordingly, the prices of cotton went down after the export ban was announced, and they picked up momentum again as soon as the ban was lifted.

Small-scale farmers who lack crop holding capacity incurred loss by selling the crop at the existing market price during the intervening period. The traders who bought cotton from them at low prices as well as few wealthy farmers who held on to their harvest are now making profits, as the prices have returned to the pre-ban level.

Speaking to fibre2fashion, Dr. NP Hirani, Chairman of Maharashtra State Cotton Growers' Co-Operative Federation, said, “The Union Government's decision to lift the ban on cotton exports is a welcome one, but it has come too late, as small farmers had sold their cotton crop long back.”

“The Government's decision would, however, benefit in the long run to farmers who are sowing cotton. At the moment, it is the traders who will benefit the most by the decision, because the farmers do not have cotton with them. Only those farmers who have a lot of money with them have the capacity to hold cotton,” he adds.

“Instead of serving the interest of the farmers, the Government's decision about cotton exports is influenced by mill owners who want a huge profit margin. If cotton exports are allowed, the profit margins of mill owners go down,” he opines.

Cotton prices in Indian markets hovered around Rs. 4,500 a quintal when the ban on exports was announced. Subsequently, the prices came down to around Rs. 3,600 a quintal. After the recent announcement of the lifting of the ban, the prices have again bounced back to Rs. 4,500 per quintal.

Mr. Hirani supports continuous open export policy for cotton. He says, “In 1991, it was decided that cotton would be treated under the Open General License (OGL) system for exports. Until last year, the same policy prevailed. I request the Government of India to keep cotton exports completely open and not change this policy at all in future.”

“India's cotton production is increasing year-on-year, while consumption is not growing at the same pace. Exporting cotton is the only way of earning good money from surplus cotton,” he asserts.

Fibre2fashion News Desk - India

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