Government Regresses on Cotton Export Policy .

We have seen rudderless cotton policy of the Government of India, because of which Indian textile industry had had to suffer grievously for almost two years. It is incredible that the India, which produces and consumes the cotton most in the world, save China, had had no policy even to register the exports of cotton, which went on and on for year after year, by the Government, leave aside the question of regulation of exports. It was almost no man's land, where anybody could get away with any thing, right from advance purchases to exports as cotton was listed under "free" exports. The Government even went to the extent of subsidising the exports, even when the indigenous cotton mills were feeling the heat of not only availability of cotton at exhorbitant prices but also highly degree of scarcity. But It is only on persistent demand by all the trade bodies put together that the Government realized that it has do something and designated an institution-trust me-for the first time, with whom all the prospective or intending exporters would seeks registration. The Government was persuaded (in fact, pushed into) categorizing cotton in Restricted List and the export subsidy was also withdrawn. But all this happened, after considerable damage had been done to the textile and garment industry, including exports.

It can be termed only as epileptic act on the part of the Government of India to have once again repeated the act of allowing unbridled export of cotton right before the beginning of cotton year that starts from October. This precisely is insane as it works clearly and loudly against the national interest of first fulfilling the home demand, before allowing exports. This has once again sparked loud protest from all the stake holders of Indian textile industry.

It is, to my mind, only a second occasion when all the trade bodies in India, who have stake in textile and garment industry and exports, joined together not only to write a letter, jointly as well as severally, to an Economist Prime Minister Dr. Man Mohan Singh, veteran Finance Minister Pranab Mukherjee, an ebullient Commerce Minister Anand Sharma and a sulking Textile Minister, Dayanidhi Maran and other high ranking officials of the Government, and addressed a joint press conference to highlight the dangers in Government placing cotton exports in the free list. This conglomeration of trade bodies chiefs also sought an interview, which may not be easy to come by.

The Backdrop

Before we take up and examine the textile industry's case, we need to take an overview of the facts which are relevant to the issue of cotton exports. Briefly:

1. India has the highest production (around 20% of world production 295 lakh bales in 2009-10, with an estimate of 325 lakh bales for 2010-11) and consumption in the world, save China;

2. Cotton-based textile and clothing industry employs over 25 million workers directly and over 36 million in allied sectors, mostly in cotton farming.

3. A huge capacity of about 20 lakh spindles have been added during last two years alone.

4. Over one trillion rupees have been invested in Textile and Clothing sector during last three years, with cotton textile segment accounting for around 75%.

5. India has one the lowest Stock to Use Ratio in case of cotton, which is as high 39% in China, 21 in the US, 35% in Pakistan, 77% in Brazil and 26% in Turkey, as compared to 12% in case of India.

Textile Industry's Case

According to textile industry, cotton prices in India are currently at an all time record high, in spite of a bumper crop of 295 lakh bales during cotton year 2009-10 (October-December). Shankar -6 which is our standard cotton was being sold at around `23000 a candy (355 kg) at the beginning of the year, but it is now being sold at `38000 a candy and is scarcely available even at this price. The current price is more than 50% higher than the Minimum Support Price fixed by Government. And the prices continue to increase every day.

A substantial portion of the price increase has been after most of the cotton reached the hands of traders and, therefore, farmers have not been benefited from such increase. Export of over 83 lakh bales (nearly 30 percent of the crop) played an important role in the unprecedented increase of domestic prices. The Government announcements of cotton exports being removed from restricted list resulted in an increase of around `6000 a candy within a few weeks. Increase in cotton prices pushed up prices of yarn and fabrics affecting exports of value added products. Increase in the prices of textile products has also added to inflation and affected the livelihood of the masses.

Source : fibre2fashion.com