Sets February 25 deadline for shipment, will levy penalty of Rs 10,000 a bale if exporters fail to meet the target.
The Directorate General of Foreign Trade (DGFT), under the Union Ministry of Commerce, has announced it will start accepting applications for fresh registration of cotton exports from Friday.
DGFT has restricted the export quantity at 100,000 bales (one bale = 170 kg) for each exporter and will levy Rs 10,000 a bale as penalty if exporters fail to execute shipment within the stipulated time after receiving the registration certificate (RC). The receipt of application closes on January 6, 2011.
Though the quantity for which DGFT has invited applications is not yet ascertained, industry sources forecast it at 2.5 million bales (1 bale = 170 kg). Of the 5.5 million bales of exports allowed for the current season, merely three million bales were exported during the stipulated 45-day period between November 1 and December 15. Hence, DGFT’s current registration certificate (RC) is estimated not to surpass the residual quantity of 2.5 million bales.
DGFT will compile applications during January 7-9, while the quantity of allocation will be declared on January 10, within a week after the closure of receiving applications.
Submission of documents, like the letter of credit (LC), details of exports proposals, including the name of overseas buyers, scrutiny of application and issuance of RC are proposed to be conducted between January 11 and January 25, 2011 while exports need to be executed fully by February 25, 2011.
Meanwhile, cotton prices rose 2.15 per cent across all varieties following the news of opening up of export registration. The benchmark Sankar-6 variety surged to Rs 12,092 a quintal here on Thursday, as against Rs 11,838 a quintal the previous day. In the second half of December, cotton prices have jumped nearly eight per cent on high overseas demand.
DGFT has made several changes in the application format prepared by the textile commissioner, for which it has received mixed reactions from cotton traders.
M B Lal, a veteran cotton trader and exporter based in Mumbai, said, “Firstly, the export quantity of 100,000 bales is a welcome move, which will restrict players from cornering additional quantity not meant for exports. But, guidelines require some modifications.”
Secondly, a heavy penalty of Rs 10,000 a bale would be levied on export quantity that remained un-executed within the stipulated time, he said. Thirdly, a week’s period each for registration and allocation of quantity, coupled with a month’s time for shipment, is enough for real exporters; this would not allow traders with malafide intent to store quantity for future exports, as was the case during the regime of previous textile commissioner, Lal added.
When exports to the tune of 5.5 million bales were allowed by the government in September, traders registered the quantity within 10 days, according to trade sources. But, they failed to execute the shipment due to various issues including non-availability of quality cotton and lack of transportation.
According to Shirishbhai Shah, partner of Bhaidas Cursondas & Co, one of the country’s largest cotton exporters, application quantity should have been restricted to 100,000 bales. If the number of applications exceeded, the available quantity should be divided among applicants proportionately, he says. The current scheme would benefit traders who seek shipment with inflated quantity, whereas those who applied for the real quantity would suffer, as they would get the least share, said Shah.
Another drawbacks in the current system is the penalty. Shah said if the shipment was not executed because of circumstances beyond control, like non-availability of cotton from ginners, then a penalty would have to be paid.
Total cotton output in the country is estimated at 33.5 million bales in 2010-11, against year’s 29.5 million bales. Exports demand is up from countries like China and Pakistan, where domestic crops were hit due to adverse climatic condition.
