FIEO seeks suspension of raw cotton exports

The Federation of Indian Export Organisations (FIEO) has sought immediate suspension of raw cotton exports so as to ensure availability of adequate quantities of the raw material domestically for value addition and exports in the form of finished garments and clothing.

In an identical memorandum to the Prime Minister, the Finance Minister, the Deputy Chairman of the Planning Commission, the Commerce and Industry Minister, and the Minister of State for Commerce and Industry seeing suspension of export of raw cotton at least up to the end of the current financial year as a palliative to the problems plaguing the textile industry, the FIEO President, A. Sakthivel , said that the basic raw material cotton plays a major role in the textile industry, which accounts for more than 60% of fibre.

He said apparel, made-ups and fabric exporters want cotton yarn at competitive rates to compete with China, Bangladesh, Sri Lanka and Vietnam, where the textile industry has been provided humongous stimulus with many of them beating Indian exporters in the global market by importing raw cotton from India.

He drew the attention of the Government to a decline of 11.4% in exports in October as compared with the same month of 2008, while exports of readymade garments fell by 30% from USD 732 million in October 2008 to USD 517 million in October 2009.

Sakthivel said during the cotton year 2008-09 (October-September), the Government increased the minimum support price (MSP) by around 43% against the previous year, leading to substantial increase in cotton prices, primarily fuelled by speculation of international cotton traders who have access to cheap capital to import from India.

There are reports that nearly 20 lakh bales of cotton has already been bought by traders for exports pushing up domestic cotton prices in the process. MSP operation ensures that cotton farmers get remunerative prices for their produce. Increase of cotton prices in the market through speculation basically helps only traders at the cost of both the farmers and the textile industry.

Over 18 lakh bales of the new crop have already been cornered by a few large traders for export which has driven the domestic cotton prices up in a week’s time. Already export contracts for over 10 lakh bales have been registered with the Textile Commissioner and more registration pouring in. Suspending cotton exports temporarily will help the textile sector to sustain themselves in the global export market, he said.

The FIEO chief said that while raw cotton exports yield about Rs 65/kg, exports of readymade garments fetches about Rs 450/kg on average basis, which results in 700% value-addition besides having spinoff effect on the economy particularly on employment.

As November to March is the most crucial period for cotton economy since most of the best quality cotton produced in the country comes to the market during this period, he warned that any fall in cotton quality will have a detrimental effect on garment exports.

Taken from Business Line