Govt contemplates a temporary ban on cotton exports

04 Jul '08

2 min read

The spiraling prices of cotton in the past few months has caught the government off-guard. Now, it has plans to impose a temporary ban on export of the raw material.

It is still in the proposal stages and the textile ministry is evaluating it with a intent to submit recommendations to the finance ministry next week.

Cotton prices have surged by a staggering 38 percent since last year and almost all the textile enterprises are anticipating a 10 percent drop in their profit margins due to this hike.

In an exclusive interview with Fibre2fashion, Mr KK Baheti Birla, President and CEO of Cotsyn stated, “Government should ban export of cotton and must permit export of value added items like yarn & fabrics. Since cotton is hoarded by MNCs and traders for purpose of speculation, the cost of cotton is increasing abruptly. Government should also put a sealing on quantity, allowing only 20 to 25 percent of the production to be exported. This is one of the most effective ways of putting an end to speculation by MNCs and helping local mills get sufficient cotton for consumption.”

Ironically, prices for cotton are rising despite an estimated record production of 31.5 million bales against the domestic consumption of 24.1 million bales. On the export front, outflow of the raw material is expected to rise by about 47 percent to 8.5 million bales in the season 2007-08 which is in striking contrast to 5.8 million bales exported last year. In fact, according to Cotton Corporation of India (CCI), exports may soar up to 9.6 million bales in 2008-09.

The ministry firmly believes that prices have risen largely due to unrestricted exports and hoarding activities of the middlemen. The government would definitely take a proactive stance in bringing down these exorbitant rates even if it has to ban cotton exports and provide a reduction in import duty.

Fibre2fashion New Desk - India

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