Following the sharp drop in prices of cotton in the past couple of months, the Union government is reviewing the commodity’s export policy.
It had capped export for the current year at 5.5 million bales (170 kg). The industry wants export, given the low domestic demand and the resulting drop in prices.
A delegation of the Gujarat Cotton Ginners Association (GCGA) that met the Union finance minister, textile minister and political secretary to the Congress party president earlier this week were told the Cotton Advisory Board would examine the situation.
Following this reason for hope, prices in the Mumbai market rose in the past two days. Prices of the benchmark Shankar-6 variety went up from Rs 43,000 per candy (356 kg) to Rs 45,000.
GCGA president Dilipbhai Patel said textile Minister Dayanidhi Maran said the CAB would meet next week. “This process may take about three weeks and by that time the monsoon would arrive. So, we explained to Ahmed Patel, political secretary to the Congress chief Sonia Gandhi (and who’s from Gujarat) that the decision should be taken in five-seven days, else it will not be useful. He indicated for a positive result in a week’s time,” said the GCGA head.
According to the president of Ginners Association of Punjab, Bhagwan Bansal, about 4.5 million bales are estimated to be with traders, ginners and exporters and another two million bales of raw cotton are lying unsold with farmers in Gujarat, Maharashtra and Madhya Pradesh. “So, even if an additional quota of 1.5 million bales is allowed, we would have sufficient stocks,” he said.
Room is needed, emphasise for fresh crop arrivals, to commence in September/October. In the absence of corrective measures, prices would further crash due to excess supplies, said a cotton trader. He added prices in the international market are not as lucrative as last year but it is still viable to export. With spinning mills planning to cut output by a third from Tuesday (they are closed on Monday in protest at unfavourable government policies), there may be a further drop in demand for cotton.
Ginners and traders are using the argument that the farmer would be hit if prices and demand continue to sag. Said Dhiren Shah, president of the Cotton Association of India: “Cotton acreage, which has seen a rising trend in India in recent years, will receive a setback if farmers do not receive fair prices.” Global cotton prices are 30 per cent higher compared to prices prevailing in the country and farmers will soon have to take a call on sowing, Shah sai. Adding: “If exports are not allowed, huge carryover stock will result in further lowering of prices before the new crop comes.”