Restriction on cotton yarn exports a blow to textile sector, CITI

03 Dec '10

3 min read

The quantitative ceiling of 720 million kgs that the Ministry of Textiles has imposed on 1st December 2010 on export of cotton yarn during 2010-11 will have far reaching adverse consequences for all the segments in the textile industry of India, according to Confederation of Indian Textile Industry (CITI). Export Authorisation Registration Certificates have already been issued for the entire quantity with a maximum period of 45 days for shipment.

In a statement issued, Mr. Shishir Jaipuria, Chairman CITI stated that this decision would push up yarn exports during the next 45 days considerably, since exports that would have normally taken place during four months up to end March 2011 will now have to be made during the next 45 days. Mills will be forced to divert supplies from domestic market to export markets during this period, reducing availability for domestic consumers of yarn.

“There was no shortage of cotton yarn in the domestic market so far, though there were complaints of inadequate availability from certain sections of the industry. But now there may be actual shortage for domestic consumers, though for a limited period” Mr. Jaipuria said.

He added that following the restriction on cotton yarn exports from India, international prices for cotton yarn will shoot up, since India is currently the largest supplier of cotton yarn in the global markets. The other major cotton yarn exporting countries such as Pakistan, Turkey and Indonesia will be the major beneficiaries of this price increase.

For the spinning industry of India, the restriction will be a hard blow in many ways, said Mr. Jaipuria.

In the first place, they will find it difficult to honour some of the commitments made to their domestic customers, for the next 45 days. And after that period, there may be a glut of cotton yarn in the country, since the domestic consumption can just not match the increasing production of cotton yarn. During January-March 2011, cotton yarn exporters of the country will not be able to supply any yarn to their overseas customers who have been importing regularly from them for decades.

“This will affect their individual reputation as well as that of India as a reliable supplier of cotton yarn” stated Mr. Jaipuria.

CITI Chairman requested government to reconsider the decision to cap cotton yarn exports, in view of these problems that the decision would create. Pending that, he said, the quantity of around 60 million kgs for which applications had already been accepted by Textile Commissioner before the ceiling of 720 million kgs was announced should be cleared immediately, since it would be unreasonable to apply the quantitative ceiling retrospectively.

He pointed out that there are a large number of spinning mills with export obligations against EPCG licences and cotton imported against Advance Licences and by EOUs. “If any ceiling is operated on cotton yarn exports, I would request government to exempt all such mills from the ceiling” stated Mr. Jaipuria.

Confederation of Indian Textile Industry (CITI)

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