Serious cotton situation emerging in the country

13 Oct '10

3 min read

Government had decided that only exportable surplus of cotton would be shipped out of the country during cotton year 2010-11 (October-September). They had also assessed exportable surplus during the year at 55 lakh bales. Registration of export contracts with the Textile Commissioner was opened on 1st October 2010 for shipment to be effected from 1st November 2010 onwards.

However, the entire quantity of 55 lakh bales was applied for registration with 10 days and therefore registration had to be discontinued on 10th October 2010. These shipments have to be completed by 15th December 2010, as per the stipulation of registration and that would mean that 55 lakh bales will have to be procured by cotton exporters by end November 2010.

According to Government's estimates, the ending stock of cotton from 2009-10 is 40.5 lakh bales. About 60-65 lakh bales of ginned cotton is expected to reach the market by end of November 2010. Monthly consumption of cotton in the country at present is over 22 lakh bales.

Thus, out of availability of around 100 lakh bales upto end of November 2010, exporters will have to procure 55 lakh bales and around 45 lakh bales would be needed for consumption during the period, leaving no ending stock. The healthy ending stock at any given time is equivalent to 2½ months consumption, i.e. around 55 lakh bales, in order to ensure proper availability of cotton in the market. This is the norm accepted all over the world.

Thus, as against the requirement of 55 lakh bales in stock, the actual stock in December 2010 would be nil or negligible if the 55 lakh bales get exported by 15th December 2010.

This situation has serious implications for the textile and clothing industry and to the economy as a whole. Shri Shishir Jaipuria, Chairman, Confederation of Indian Textile Industry has represented to the Prime Minister of India to intervene to avoid a catastrophe, by deferring exports until arrival of cotton picks up.

The following requests have been made by Chairman, CITI:

i. Cotton exports against contracts already registered with Textile Commissioner should be delayed up to 1st January 2011;
ii. Shipment of the quantity of 55 lakh bales should be staggered over the months by stipulating a monthly cap of 10 lakh bales from January 2011 onwards;
iii. It is obvious that many of the applications for registration of export contracts are speculative. Therefore, no extension of time may be allowed for those who fail to ship within the stipulated time and further applications for registration may not be accepted from them.An export incentive of 1.5% is given by government on cotton exports, by way of DEPB. Having provided for an export duty on cotton, the export incentive may be withdrawn and export duty put into operation at the earliest.

A copy of the letter is enclosed.

Confederation of Indian Textile Industry

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