Indian textile mills welcome cotton export ban

09 Mar '12

4 min read

The recent ban on cotton exports imposed by Government of India is being broadly welcomed by textile mill owners as they see cotton prices going down, while ensuring enough stock of cotton for the rest of the year.

Speaking to fibre2fashion, Mr. BK Patodia, CMD of GTN Textiles, said, “While filling the balance sheet for the Cotton Advisory Board (CAB), it was decided that there should be a carry forward of 6 million bales (1 bale = 170 kg) of cotton, which is roughly 2.5 months consumption for a balanced supply and demand situation.”

“Suddenly, we came to know that 2.5-3 million bales were registered for export, which was obviously a speculative consumption. The large trading companies have warehouses abroad. So, if cotton stocks are transferred from India to overseas and are sold from there, then we will have virtually no carry over or very low carry over, which would be quite disastrous for the textile mills. This would have also affected our prices. Hence, the Textiles Ministry has done the right thing by banning cotton exports,” he adds.

Talking about affect on cotton prices, he says, “The cotton prices will not crash as already 9.4 million bales have been exported, so the carry forward is very low. In any case, if the prices go low, so long as they are above the minimum support price (MSP) it is fine, and when they fall below the MSP, the Cotton Corporation of India (CCI) has been authorized funds for cotton procurement from the market. In fact, it has already started some procurement in Andhra Pradesh, so there should be no worry on that account.”

Explaining the affect on spinning mills, he says, “However, it would be the spinning industry that would suffer in the whole bargain. 2011-12 has been a disastrous year for the spinning industry due to drop in prices and these mills have no capacity to repay the loans for the expansion and modernization done under the TUFS and we have asked for restructuring loans.”

“On the other hand, if they allow free exports of cotton, then the cotton prices will actually shoot up and create more difficulties for these mills because they will be scrambling for cotton and the textile industry does not have enough working capital as they have been actually losing money for the last one year,” he adds.

Mr. KK Agarwal, Chairman, Alps Industries Limited, said, “The ban should have been imposed earlier. According to the Cotton Advisory Board, registration of 3 million bales of cotton for export was done just 3-4 days prior to the ban. If the ban would not have been imposed, we would have to import cotton from outside.”

“Moreover, some traders were not selling cotton to genuine overseas customers and it was being stored in warehouses outside India. Around 67 percent of cotton export was to China, which was just building reservoirs of cotton imported from India. So, the Government has taken the right step by banning cotton exports,” he adds.

Analysing the benefit of ban on cotton exports to textile mills, he says, “It may benefit the textile mills in a way that cotton prices will go down by 3-5 percent and because of this export demand will increase and yarn prices will not go down. This is because international prices of cotton will go up since export from India is banned and surplus of cotton will not be available. The US cotton, Australian cotton and Brazilian cotton will also be benefited by this move. Yarn prices, at least in the international market, should not go down and profitability will increase by around 3-4 percent.”

Fibre2fashion News Desk - India

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