The Indian government's decision to make 5.5m bales of cotton available for export from the beginning of this month have been criticised by The Confederation of Indian Textile Industry (CITI) for creating an artificial shortage of the fibre for domestic spinning mills.
CITI is now calling on the government not to make any more raw cotton available for export markets during the year.
Registration of cotton export contracts began on 1 October, with the entire 5.5m bales quota snapped up in just ten days. But most of these registrations were speculative, CITI claims.
It suggests that if any of this cotton has not been shipped by 15 December it should not be released for shipment or fresh registration for at least two months. The hope is that by then the amount of cotton arriving in the market will have picked up.
"The situation can improve only if exports are postponed to the extent possible at this stage," CITI says.
It also suggests that any further registration of cotton export contracts should only be allowed against letters of credit, instead of the previous cash against documents (CAD) basis, for which no documents other than a contract were required.
The group also warns against the introduction of controls on exports or prices of cotton yarn, in the long-term interest of the entire textile value chain. Many spinning mills have export obligations for cotton yarn, it says, especially those in India's special economic zones (SEZs).
Last Friday (19 November) owners and senior managers in around 50,000 manufacturing units across India shut their factories to take part in a nationwide protest against a shortage of cotton yarns and rising prices.
The action, organised by the Apparel Export Promotion Council (AEPC), was aimed at persuading the government to ban cotton yarn exports to ensure there is enough available for domestic producers.
Indian cotton prices in India have more than doubled in the past year, from INR23000 ($501) a candy (356kg of raw cotton) in October 2009 to INR47000 ($1,025) earlier this month.
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