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Pak & B'desh push India to honour pre-ban cotton contracts

02
Jun '10
Pakistan and Bangladesh governments have demanded that, India should honour the contracts, which were made by the Indian producers for cotton supply, prior to the ban on exports that was made last month.

In separate letters from their individual governments, Indian government is also requested to continue the future supply of cotton to these nations, without any disturbance.

Currently, cotton is placed under the restricted list and it can only be exported via licenses issued by the government.

The Indian government is currently in a fix, owing to the letters received from both Pakistan and Bangladesh. As of now, the Indian commerce department, is assessing the old contracts and charting out a figure, so as to come to a conclusion of the overall amount of cotton that could be permitted for exports.

Following complaints received from the local textile industry, of 20 percent hike in prices of cotton since October last year, resulting in to rise in production cost, cotton exports were banned by the Textile Ministry, on April 19.

However, on May 21, the Commerce Ministry lifted the ban, on receiving objections from cotton growers and states such as Gujarat and Maharashtra and permitted cotton exports only against licences.

But, many contracts were inked by exporters prior to the ban, which came into effect in April. Many of these comprised of buyers from Pakistan and Bangladesh, but there future still remains in jeopardy.

Now, it is heard that, there could be a possibility that, most of these contracts may be carrying a penalty clause, which would in-turn hold exporters responsible for paying these fines, if cotton is not exported in the time period mentioned in the contract.

In addition, textile industries of the neighbouring nations are extensively dependent on Indian cotton, and therefore denying this raw material to them, could turn India as a defaulter.

For instance, Bangladesh's textile industry is a major revenue contributor for the country's economy. Its textile industry forms 80 percent of the country's exports for which, cotton is purchased from India. Bangladesh also has two-way trading arrangements with India, under which they are likely to demand cotton.

Although, it is the fourth largest cotton manufacturer in the world, Pakistan's is unable to meet with the rising and extensive cotton demand of its textile industry. Hence, yearly it buys around 3 million cotton bales, most of it from India.

Situation was bleak, even when the government had lifted the ban on exports of cotton, and therefore, cotton exporters have kept their fingers crossed. The problem is likely to sustain if the government does not act fast.

Fibre2Fashion News Desk - India


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