Cotton export under OGL will affect downstream sectors - NITMA
Textile Mills located in Northern India have flayed the government's decision to put cotton export under Open General Licence (OGL) without any export duty. The recent unprecedented rise in prices of raw cotton is already affecting the local spinning industry and consequently the employment through the entire Textile value chain such as handloom, powerloom and garmenting.
Mr. Ashish Bagrodia, President, Northern India Textile Mills Association (NITMA) in a press release stated, “The present increase in raw cotton prices is only due to un-checked exports of our valuable raw material in the early part of the current cotton season (2009-10) starting October 2009. The Government did take action by restricting cotton exports and imposed an export duty but only in April 2010 when most of the good quality cotton had already been exported.
The prices which were ruling around Rs.26000/candy in Jan'10 have shot up to Rs.33000/candy for Gujarat S-6 cotton, at present.” As per the last Cotton Advisory Board (CAB) meeting held last month, only 40.5 lac bales will be carried forward for the new season which is less than 2 months of the country's consumption. Such a stock-to-use ratio of 16% is a very precarious situation for the country as against the world's average of 40%.
For the new cotton season yet to begin in October,2010, forward contracts of 15 to 20 lac bales have already been done by international merchants and prices for the new season are already ruling around Rs.32,000/candy. If this situation persists and cotton is allowed to be exported openly during the period October'10 to March'11, the local spinning industry will be deprived of good quality cotton during the peak procurement season.
The recent announcement has added fuel to the fire. “We shall be exporting our valuable raw material, as in the case of iron-ore, to our competing countries benefiting them rather than promoting value addition within the country. Surely employment generating downstream sectors of handloom, powerloom and garmenting will be affected,”he added.
Even though our country is surplus in cotton with a cotton production of 295 lac bales during 2009-10 and consumption of 250 lac bales, the spinning mills are reeling due to non availability of good quality spinnable cotton even at the current prices, Mr. Bagrodia said. The advantage of this increase in cotton prices has not gone to the farmer but to the traders and the large international merchants since most of the farmers sell their crop by March. It appears the government has buckled under pressure from the strong lobby of international merchants at the cost of the local industry.
Mr. Ashish Bagrodia has appealed to the government to allow exports of raw cotton only after a proper detailed quantitative assessment of the requirement of the local industry is done and a maximum of 15 to 20 lac bales be allowed to be exported during the period from October'10 to March'11 which is the peak procurement season for the local industry.