Cotton exports quota likely to be raised by 1.5 mn bales

26 May 2011 Evaluate

With the prices of cotton showing little signs of rebounding due to excessive supply compared to the domestic demand and also because of restrictions in cotton exports, the government is now expected to lift the quantitative restrictions limit imposed on cotton exports, in order to stabilize the dropping prices. Given the pressure from farmers and from the ginning industry, the government is likely to allow cotton exporters to export an additional 1.5 million bales in the current season.

India, the second-biggest cotton exporter after the US, had in October last year permitted the duty-free export of up to 5.5 million bales, a relatively small volume, which has already been exhausted by the exporters. The limit was imposed following the sharp rise in prices of the commodity hitting the domestic textile industry.

However, since the fourth week of March, the situation has changed and prices of the natural fibre have plunged sharply due to piling of fresh stocks and huge carry over stock from the last season and around 45 lakh bales of carry over stock has been lying unsold in the warehouses.

Meanwhile, industry body ASSOCHAM too has called for lifting the ceiling on cotton exports to protect interests of farmers citing the reason that there will be a huge surplus of supply over the domestic demand in the current crop year. With opening stock of the year at 45 lakh bales, the production was estimated by the Cotton Advisory Board at 320 lakh bales, while the domestic consumption was estimated at 240 lakh bales.