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Ban on cotton exports a hasty decision – Expert
03 May '10
3 min read
According to an expert, the textile minister's decision of placing a ban on exports of raw cotton was a decision taken in a hurry. Due to this, cotton prices in Gujarat fell by almost Rs 2,000 per candy.
Driven by the sudden increase in the cost of the commodity across the globe by 20–25 percent, registration of new export contracts was suspended last week by the textile commissioner, following orders from the textile ministry.
According to industry experts, the ban is likely to last for five to six months. Noting this, experts claim that, a carry forward stock of about four million bales towards the end of the cotton-year is enough, which did not merit a ban on overseas sales by the textile commissioner.
More so, the ministry is expecting that, the farmer will trade cotton at a cheaper rate. According to the source, if the government continues with the ban on overseas sales of raw cotton then the farmer is left with no choice but to sell his commodity at a lower rate.
As per the data revealed by the Cotton Corporation of India, India produced 29.2 million bales of cotton during 2009-10 fiscal as compared to the previous fiscal's figure of 29 million bales. Hence, the total available cotton, including the carry forward bulk quantity, amounted to about 37.5 million bales as compared to its demand of 33 million bales thereby, indicating excess of 4.5 million cotton bales.
The ministry levied the ban, two weeks post the release of the above mentioned data, therefore industrial experts feel the decision was taken in a hurry.
Owing to this ban, the commerce ministry avers that, cotton growers of Gujarat and Maharashtra will be the main sufferers. As growing cotton has become a loss-making venture for both farmers and exporters, growers might cultivate other crops, which are likely to attract lesser interference from the government. In 2009-10, while Gujarat produced 9.8 million bales, Maharashtra produced 6.1 million bales.
While in December 2009, PG Makhija, Executive Director, Gujarat Ambuja Exports Limited, urged the government to impose ban on raw cotton exports, so as to avoid stocking of raw cotton to overcome crisis in the local cotton market; last week, Gujarat Chief Minister, Narendra Modi, requested the Prime Minister to lift the ban.
Meanwhile, Indian cotton traders are in the verge of minting money by buying bulk quantities of the cotton commodity at rock-bottom prices, which will then be sold at inflated costs at global market prices.
According to an industry source, currently, raw cotton prices are higher owing to its high cost in the international market. Therefore, a suggestion was put forth by industry experts to carry over the bulk quantity as they did not see much of a crisis of the commodity for now.
Driven by the sudden increase in the cost of the commodity across the globe by 20–25 percent, registration of new export contracts was suspended last week by the textile commissioner, following orders from the textile ministry.
According to industry experts, the ban is likely to last for five to six months. Noting this, experts claim that, a carry forward stock of about four million bales towards the end of the cotton-year is enough, which did not merit a ban on overseas sales by the textile commissioner.
More so, the ministry is expecting that, the farmer will trade cotton at a cheaper rate. According to the source, if the government continues with the ban on overseas sales of raw cotton then the farmer is left with no choice but to sell his commodity at a lower rate.
As per the data revealed by the Cotton Corporation of India, India produced 29.2 million bales of cotton during 2009-10 fiscal as compared to the previous fiscal's figure of 29 million bales. Hence, the total available cotton, including the carry forward bulk quantity, amounted to about 37.5 million bales as compared to its demand of 33 million bales thereby, indicating excess of 4.5 million cotton bales.
The ministry levied the ban, two weeks post the release of the above mentioned data, therefore industrial experts feel the decision was taken in a hurry.
Owing to this ban, the commerce ministry avers that, cotton growers of Gujarat and Maharashtra will be the main sufferers. As growing cotton has become a loss-making venture for both farmers and exporters, growers might cultivate other crops, which are likely to attract lesser interference from the government. In 2009-10, while Gujarat produced 9.8 million bales, Maharashtra produced 6.1 million bales.
While in December 2009, PG Makhija, Executive Director, Gujarat Ambuja Exports Limited, urged the government to impose ban on raw cotton exports, so as to avoid stocking of raw cotton to overcome crisis in the local cotton market; last week, Gujarat Chief Minister, Narendra Modi, requested the Prime Minister to lift the ban.
Meanwhile, Indian cotton traders are in the verge of minting money by buying bulk quantities of the cotton commodity at rock-bottom prices, which will then be sold at inflated costs at global market prices.
According to an industry source, currently, raw cotton prices are higher owing to its high cost in the international market. Therefore, a suggestion was put forth by industry experts to carry over the bulk quantity as they did not see much of a crisis of the commodity for now.
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