Restrict cotton exports to 5.5 million bales, says CITI

The Indian garment manufacturing industry was having

a splendid run with the country having shaken off the economic downturn. However the sudden increase in cotton prices in India is threatening to put a spanner in the works. In October 2009, a candy of cotton was priced around Rs 23,000 and by this November, it went up to Rs 47,000 a candy and has settled at Rs. 45,000 at the moment. This has directly affected cotton garment manufacturers who are reeling under this explosive price hike. And to make matters worse, there has been a shortage of raw materials as a result mills are facing a tough time purchasing cotton from the market.

In a bid to rectify the local situation, Confederation of Indian Textile Industry (CITI) feels that the government should seriously consider its recommendations and implement them as soon as possible. CITI’s recommendations include the government to restrict export to only 5.5 million bales this year; if any quantities out of the 5.5 million bales for which export contracts have been registered remain unshipped within the stipulated last date of December 15, 2010, these may not be allowed for shipment or fresh registration at least for the next two months by which time cotton arrivals in the market would pick up. Further, CITI also recommends that any further registration of cotton export contracts may be allowed only against Letters of Credit and that no controls are introduced on exports or prices of cotton yarn, in the long term interest of the entire textile value chain.

Though prices of all textile products have been increasing in both the domestic and global markets, there is normally a time lag between the price increases in raw materials and in finished goods. CITI has requested the commerce ministry to provide sufficient export incentives to the value added segments until the overseas markets are able to absorb the increase in their raw material cost in full. Consolidation of production facilities in these segments for bringing their efficiency levels at par with the global competitors also needs active support of the government.