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Govt considers cotton export ban proposal to curb price increase

19 May , 2022   By : monika singh

Govt considers cotton export ban proposal to curb price increase

After wheat, the government is considering a proposal to ban exports of cotton, at least until the end of this marketing year, on September 30, as the relentless rise in prices of the fibre and its by-products has severely hurt firms in the textiles-garments value chain.

“The proposal (to ban exports) is on the table, along with other possible options. A decision will be made soon, after considering the pros and cons of all these options,” an official source told FE. However, any such ban, if finally approved, will likely be reviewed before the arrivals of fresh cotton crop in the mandis in October.

Several industry executives, including from the biggest garment hub of Tirupur, on Tuesday met commerce, industry & textiles minister Piyush Goyal, who asked them to come up with specific solutions within a week for further consideration, while asking exporters to reduce cotton despatches voluntarily

The government, on April 13, removed an import duty on cotton (effectively at 11%, including a 5?sic customs duty, agriculture infrastructure development cess and surcharges) to shore up domestic supplies. However, the prices still continued to rise.

India’s cotton exports jumped 48% in FY22 from a year before to $2.8 billion.

Local prices of several cotton varieties have more than doubled in the past one year. For instance, the price of the ICS-105 variety (fine 28 mm) in the key producing state of Gujarat hit Rs 1,01,000 per candy of 356 kg each on Wednesday, compared with just Rs 45,300 a year before.

As FE had reported earlier, scores of export orders have either been cancelled by Western buyers or been diverted to India’s competitors like Bangladesh, Vietnam, China and Pakistan in recent months, after the steady spurt in cotton prices forced domestic players to try and renegotiate deals.

Cashing in on a resurgence of demand from advanced economies, India had shipped out textiles, garments and allied products worth almost $40 billion in FY22, up 67% from a year before (albeit aided by a lower base).

According to the Tirupur Exporters’ Association, which has been vociferously seeking a ban on cotton exports, the price of 1 kg of cotton yarn was `200 about 18 months ago but now with the same amount, only 400 grams are available.

“This apparently reveals how much knitwear-exporting MSMEs are now undergoing financial stress on the operational front,” according to a representation submitted by the association with Union textiles secretary Upendra Prasad Singh. The body highlighted that MSMEs don’t have the wherewithal to buy cotton yarn at this elevated price and yet remain operationally viable.

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