Govt under pressure to ease cotton export cap (India)

Although Textiles Secretary Rita Menon had earlier ruled out any change in the current ceiling of cotton exports, a combination of factors may force the Government to decide on increasing the cotton exports ceiling.

First, the cotton prices are currently hovering around Rs. 44.000 per candy (356 kg), down from the March-end high of Rs. 62,500 in the domestic market. Prices in the international market have also dropped to US$ 1.63 per pound from the March high of US$ 2.46 per pound.

This situation has created sever distress among cotton growers and traders, as it is causing financial loss to them. They are now demanding the removal of the quantitative restriction of 5.5 million bales (1 bale = 170 kg) imposed on cotton exports to protect the domestic textiles industry when there was a sharp rise in the natural fibre prices.

Second, some leaders like the Gujarat Chief Minister Narendra Modi have sided with cotton farmers and have appealed to Prime Minister Manmohan Singh and the Union Ministry of Commerce to ease the restriction on export of cotton.

The argument put forward by the Textile Ministry for not easing restriction is that the production forecast for cotton has been lowered from 32.9 million bales to 31.2 million bales this season. This necessitates the restriction to give raw material security to the domestic textiles industry.