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Unrestricted exports to create cotton shortage - CITI

01
May '12
Confederation of Indian Textile Industry (CITI) has stated that unrestricted exports of cotton would create a serious cotton shortage in the country during the last few months of the current cotton year ending September 2012.

Reacting to the decision taken by government on 30th April 2012 to reopen registration of cotton export contracts without any restrictions, Shri S.V. Arumugam, Chairman, CITI stated that he had brought it to the knowledge of the Prime Minister, Finance Minister, Textiles Minister and various other authorities in government before the decision was taken that the country does not have any exportable surplus and therefore no further shipments may be permitted from the current year's crop.

Shri Arumugam explained that as per government's Cotton Advisory Board (CAB), the closing stock of cotton for the year would be 25 lakh bales as against 50 lakh bales that had earlier been stipulated by the Group of Ministers as minimum closing stock required.

He added that CAB had earlier identified the exportable surplus at 84 lakh bales, but exports of 115 lakh bales had already been allowed by the government before taking the present decision on allowing unrestricted exports.

The industry was driven into a crisis last year because of vide fluctuations in the prices of both cotton and yarn and restrictions imposed by government on cotton yarn exports.

Majority of textile mills in the country made huge losses and the industry is therefore finding it difficult to repay loans. In fact, we have requested government and RBI to relax the NPA norms and allow repeated rescheduling of term loans by textile mills in order to help the industry to tide over the crisis.

In this context, the mills are not in a position to buy their requirements on a long term basis because they do not have necessary funds. However, the demand for yarn and other textile products is now recovering and the requirement for cotton in the industry would increase in the coming months.

In such a situation, exporting large quantities of cotton at the present stage would leave the industry at the mercy of traders for obtaining cotton from global markets during at least two months of the cotton year, i.e., during August – September 2012.

Rupee depreciation has already made cotton exports lucrative and imports costly. With further erosion expected in rupee value, the situation would be precarious during August - September.

Shri S.V. Arumugam appealed to the Prime Minister, Finance Minister and Textile Minister to review this decision and to avoid large exports of Indian cotton to the competing countries.

He pointed out that most of India's exports of cotton were to China which is our largest competitor for value added textile products. The advantage of competitively priced Indian cotton would be transferred to the Chinese textiles industry at the cost of Indian textiles industry unless export of cotton is restricted to the exportable surplus.

Since substantial quantities above the exportable surplus have already been shipped out, Chairman, CITI, requested for an immediate suspension of further registration of contracts for exports.

Confederation of Indian Textile Industry (CITI)


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