BS Reporter / Mumbai December 23, 2010, 0:09 IST
The registration for exports of the remaining 2.5 million bales (1 billion = 170 kgs) of cotton – the total allocation was for 5.5 million bales – is likely to start in the first week of January.
According to industry insiders, exporters had already gone through the registration process for exporting the 2.5 million bales of cotton but failed to meet the December 15 deadline due to various reasons. The Ministry of Textiles on Wednesday decided not to extend the deadline and subsequently cancelled the registrations.
Earlier this week, the Ministry of Commerce had hinted that fresh registrations had to be done with the directorate general of foreign trade (DGFT), instead of the Textile Commissioner. DGFT is also working on revised guidelines for export registrations and execution of shipment. The traders believe the new norms will be favourable for the industry.
The industry had come up with three suggestions to facilitate export of cotton: (i) Exports should be registered only when a valid letter of credit (LC) is issued by a bank. (At present, exports can also be executed against cash and industry insiders feel that it opens room for trade manipulation.)
(ii) The shipment period should be reduced from 45 days to 30 days to ensure that only genuine traders will enter the buying agreement and execute deals. (The 45-day period allowed traders to negotiate with buyers with the wrong intention.)
(iii) To ensure that traders cannot hoard huge quantities of cotton in neighbouring countries like Bangladesh by opening up subsidiary offices and transport to other destinations when prices rise or buyers agree to pay a premium. (The process would delay delivery of goods for months behind the actual shipment from India.)
“Over and above, we had urged the government to take punitive actions against such traders who have malafied intentions or ban them from exports in the future,” said M B Lal former CMD of Cotton Corporation of India (CCI) and MD of a Mumbai- based cotton traders and exporter Shail Exports.
In September, the textile ministry had opened registration for 5.5 million bales of cotton exports. But, within ten days between October 1-15 the registered quantity surpassed the quota. The government, therefore, did not allow fresh registrations.
Cotton importers suddenly shifted to India when huge quantities of the crop was damaged in floods in Pakistan and China witnessed a surge in domestic use resulting into a dramatic rise in global prices. The prices of the benchmark variety of cotton Shankar 6 shot up sharply in the last three months to Rs 11,838 a quintal on Wednesday as against Rs 9,617 a quintal on September 1.
Traders, however, are divided over the quantity of cotton production in India. Lal said the country’s total cotton output should be around 35 million bales, but an industry veteran, requesting anonymity, said the total output should be at 33.5 million bales because huge quantity of crop was damaged in Andhra Pradesh.
Owing to unseasonal rainfall, around 30 per cent of cotton crop was damaged in Andhra Pradesh. Total cotton output in the state was reported at 5.4 million bales.
However, according to Cotton Association of India (CAI) estimates, the total output will remain at 34.7 million bales this season, against 30.75 million bales in the previous season. The Cotton Advisory Board (CAB), under the supervision of the Textile Ministry, had estimated the total output at 32.5 million bales.
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