With the government’s decision to issue fresh permits for exporting the remaining 2.5 million bales of cotton in January, cotton prices have started going up again.
Export houses in Panipat — famous for their home furnishing items — are lamenting the government’s decision, as it would have a strong repercussion on the Panipat industry, which is already grappling to come out from tremors of slowdown. Exporters in Panipat had earlier gone on a strike on November 25, in lieu of hardships faced by exports due to cotton prices.
Prem Vijh, president, Panipat Exporters Association, said the government’s step permitting fresh registration of exports for the remaining 2.5 million cotton bales would again start fuelling the cotton prices in market. Despite India being the second largest producer of raw cotton, cotton prices have registered a sharp increase this year. According to members of the Panipat Exporters Association, prices of cotton had increased 60 per cent in the last three months, due to the Directorate General of Foreign Trade circular issued on August 17, which permitted export of 5.5 million bales of cotton from October 1. Prices of 2/20s cotton yarn had earlier increased 100 per cent from Rs 105 to Rs 210 per kg. The temporary ban on export of cotton had somewhat eased the prices of yarn, but with the government’s decision to allow fresh registration for exports, the prices are again going up.
On an average, export houses in Panipat consume 300,000 cotton yarn every day. So, the cost of yarn form a substantial part of the total cost of home furnishing products.
Besides, the decision to allow export of cotton is forcing exporters to book orders on a weekly basis, instead of on a monthly basis, which threatens to jeopardise margins. Making bookings on weekly basis is tough for exporters, since it means for long orders. In exports, orders are obtained for a delivery schedule of three-four months (in certain cases, even for six-12 months).The export of cotton not only threatens to eat away profits of exporters, but also the shortage poses a challenge for exporters to successfully met their obligations.
The Panipat exporters lament that instead of encouraging export of value-added products, the government was exporting raw materials. So, by permitting exports they are creating trouble for our own industry and helping our competitors. The exporters demanded government should focus on enhancing export of value-added products.
