The Cotton Association of India notes with disappointment the movement by certain sectors of the cotton chain to restrict and even ban Cotton exports. Such recommendations if implemented would bring the country back to the pre-liberalisation era of the 1980’s and early 1990’s.
Any such move will adversely affect the interest of the nation in general and that of the Indian farmer in particular. While the Indian farmer has the protection of a guaranteed MSP, this should not be the reason to prevent him realising a value for his produce which is equal to his counterpart in USA, China, Uzbekistan or several African nations.
India is expected to produce 305 lakh bales and import 7 lakh bales in the 2009-10 season and therefore despite exporting close to 70 lakh bales, after providing for domestic consumption of 240 lakh bales the season will end with a closing stock of around 73.50 lakh bales which will provide for a healthy 3.5 months of consumption.
Local prices have risen lately only in reaction to high prices in the international markets which have gone up by around 15 % in the last one month. It is noteworthy that Indian prices have gone up by less than 10% in the same period.
Unreasonably pessimistic estimates of the crop in a season which has witnessed the highest cotton acreage in history ( 100 lakh hectares) will only cause panic in the market and lead to higher prices.
Despite the rise in prices locally, Indian mills continue to get cotton cheaper than almost any of their counterparts in the world. Over and above this Indian mills have the option to import cotton without any restrictions and nil import duty unlike their competing counterparts in other countries for eg. China where mills have to face quota restrictions, duties and local taxes to import cotton.
It is highly inappropriate that when the spinning industry does not possess adequate capacity to process all the raw cotton produced in the country it should propose any restriction on export of the available surplus. Such a step would only result in the Indian farmer subsidising the Indian spinner.
The theory of ‘value added’ being raised is self contradicting. While cotton is the raw material to make yarn which is spun from it, yarn itself is the raw material for fabric and garments. Both yarn and fabric continue to be freely exportable. However, if one goes by the ‘value added’ theory this should not be the case.
Cotton acreage which has seen a rising trend recently will receive a setback if farmers do not receive a fair price as per international levels as a result of the proposed restrictions on exports.
Reports emerging from the upcountry markets show that this year is again going to see a high quality crop which will be available till the end of the season.
The country is likely to see a very comfortable stock to use ratio of 0.24 at the end of the season. While comparing the ratios with that of other countries one needs to bear in mind that India is a cotton producing country unlike Bangladesh, Taiwan etc which do not produce any cotton. Again India is a net exporting country unlike China, Pakistan or Turkey which are all net importing countries. Also the ratio for India pertains to the October-September period in comparison to the International norm of August-July period. In fact of late, cotton begins to arrive in India even before the statistical season commences on 1st October.
All in all the cotton season 2009-2010 promises to be one with a comfortable position of availability both for the domestic and export markets.
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