Cotton exports may fall as domestic prices rise

AHMEDABAD | CHANDIGARH: Having exported 85 lakh cotton bales in 2007-08, India might not even achieve its targets of exporting an estimated 50 lakh bales in 2008-09. And despite the latest estimates by the Cotton Association of India (CAI), which has put exports at 40 lakh bales by August 2009, the industry believes higher domestic cotton prices might limit exports to mere 30 lakh bales.

As per the apex body of cotton trade CAI���s crop estimates released on Monday, India would export 40 lakh bales, 10 lakh short of the Cotton Advisory Board (CAB) estimates in February 2009. ���While CAB estimated that India could export 50 lakh bales in the current crop year, as per estimates of CAI statistics committee on May 30, we could just export 40 lakh bales,��� said CAI president Dhiren Sheth.

The textiles commissioner���s office has so far registered exports of 28 lakh bales that will be done till July 2009 end. Of that, mere 16 lakh cotton bales have left for their destinations in China, Bangladesh, Pakistan and Indonesia. ���The CAI estimates of 40 lakh bales are on the higher side. Even if we are able to export 28 lakh bales by July, we would not be able to touch the export target of 40 lakh bales by August, when the cotton season ends,��� points out a senior executive of Coimbatore-headquartered The South India Cotton Association.

In 2007-08, India exported 85 lakh cotton bales, a majority of which went to China. However, ever since cotton prices played havoc in the domestic market, owing to abysmal 40% hike in MSP, not just the mills, but even traders and exporters kept off cotton purchase. The government���s decision to offer 5% incentive on export of cotton, too, has not seemed to have helped.

���Only a handful traders could avail of the raw cotton export incentive, considering by the time when it was announced in February 2009, most of cotton exporters could not have booked orders since we were almost in the middle of the crop year. India might not achieve the target of 40 lakh bales looking at the current market trends,��� points out Arun Sakhsaria of DD Cotton, adding, ���If the MSP continues to play spoilsport, we might face a
hurdle even in 2009-10.���

With domestic prices of Shankar-6, the most popular variety of cotton, ruling at Rs 23,500-23,800 per candy, exporters believe that exports would not pick up unless the prices fall by at least Rs 2,000 per candy. ���Domestic prices are too prohibitive for us to be sold in the international market that has cheaper cotton from the US and African nations. We could not procure fresh stocks from September 2008-January 2009, thereafter which CCI got hold of the stocks. How do we expect to export even 40 lakh bales?��� notes another exporter. Gujarat and Maharashtra account for a majority of the cotton that India exports. As per CAI, till May 30, 2009, arrivals from Gujarat stood at 89 lakh bales and that from Maharashtra stood at 63.75 lakh bales.

While CAI is all set to hold meetings with the Centre seeking extension of the 5% subsidy on export of raw cotton, Confederation of Indian Textile Industry (CITI) has been seeking that the government scrap this scheme with immediate effect. ���The subsidy did not have any economic justification. While the government wants to encourage exports of raw cotton, it forgets to address the fall in exports of cotton textile products. How could the government make cotton uncompetitive to the domestic textile sector while enabling our competitors in South East Asia to avail of our cotton,��� points out CITI secretary general DK Nair.