ICA turns down Indian importers request to cancel cotton contracts

27 Jul '22

2 min read

Pic: 123rf.com

In the face of adverse market conditions, Indian textile mills who had contracted for cotton imports may have to face huge losses as the International Cotton Association (ICA) has refused to facilitate these mills with cancellation of their orders. Instead, it has suggested that the importers can sell back as per the bylaws of the global body.

In a letter sent to Tamil Nadu Spinning Mills Association (TASMA), who had communicated on the issue, ICA said that any contract that is subject to ICA bylaws and rules may not be cancelled.

ICA clarified that the contract can be invoiced back at the market price at the date of closure. However, the conditions will be applied if specified in a particular contract.

As per Rule 238, if for any reason a contract of part of a contract has not been, or will not be, performed (whether due to a breach of the contract by either party or due to any other reason whatsoever) it will not be cancelled. The contact or part of a contract in all instances, be closed by being invoiced back to the seller in accordance with the rules in force at the date of the contract. As per Rule 239, prevailing prices on the date of closure will be applied for invoicing back.

But Indian importers feel that changing market conditions give unwarranted advantage to the exporters. Maharashtra’s Ichalkaranji based businessman Bharat Shah said that any trade has basic rule of avoidance of undue benefit for any side. As an international body, ICA should support its members for sustainable trade. The body did not say anything on the issues raised by TASMA. In current volatile market conditions, it is quite complicated to perform trade amid high risk of huge losses. ICA’s stand supports foreign exporters to have huge benefits while importers incur losses.

It is important to mention that Indian importers had contracted at very high prices. But the prices crashed in the following months. The depreciation of the Indian rupee against the US dollar is also adding to miseries of the Indian importers. Delay in shipment also disrupted plans of the importers for consumption of imported cotton.

According to the market sources, around 10 lakh cotton bales of 170 kg were contracted by the Indian importers who are facing huge losses. Specifically, south India based mills had imported cotton due to scarcity of domestic supply.

Fibre2Fashion News Desk (KUL)

More Textiles News - India...