SIMA appeals for immediate ban on cotton exports

03 Nov '09

4 min read

The Indian textile industry has been facing the worst ever crisis in the history during the last two years mainly due to the abnormal increase in cotton prices and the monopolistic roles played by the multinational and leading cotton traders in the country.

Consequent to the removal of the cotton textiles from the Essential Commodities Act as a part of liberalization the multinational cotton traders started dominating in the Indian market during the last two years. These traders are flooded with cheap funds and are able to cover large volume of cotton and speculate the prices.

In addition, the trader-friendly policies announced by the Government during the last two years have further strengthened their hands and seriously affected the entire textile industry throwing several lakhs of people out of jobs. Though the country has been achieving record crop during the last two years which is likely to continue in the current season also, this has benefited only the traders. During the current season, the traders are covering major portion of good quality cotton for exports and therefore, the domestic industry is not able to procure the required cotton. Normally, the cotton prices would come down by at least Rs.1,000 to Rs.1,500 per candy during October-November when compared to September. But during the current season, the cotton price has already gone up by almost Rs.2,000 per candy when compared to September price. The prices for standard varieties like Shankar-6 have already exceeded Rs.25,000 per candy as against Rs.22,600 prevailed during September 2009.

In a press release, Mr.J.Thulasidharan, Chairman, The Southern India Mills' Association(SIMA), has appealed to the Central Government to immediately ban cotton export and stop registering any cotton for export purpose considering the grave situation. Mr.Thulasidharan has said that the monsoon failure and floods in few cotton growing States have considerably affected the cotton production and the actual production might be only around 260 lakh bales as against 290 lakh bales produced during the last year. He has further said that only around 150 – 160 lakh bales would be of good and above average quality cotton. SIMA Chairman has cautioned that if these quality cotton are allowed for export, the domestic industry which need around 240 lakh bales would end up with all substandard and inferior quality cotton but would be compelled to pay the price of good quality cotton and also depend on imported cotton to meet the customer requirements.

Mr.Thulasidharan has said that the textile industry in South India which accounts for almost 50% of the spinning capacity in the country is incurring 5% additional cost towards transport, taxes, insurance etc., when compared to any destination in far east countries which are able to source cotton from India. SIMA Chairman has reiterated that the industry has been pleading the Central Government to provide working capital at a competitive cost to have a level playing field with the multinational cotton traders who are able to get any amount of fund at 3% to 4% interest rate, but the Government is yet to take any decision on this front.

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