But a limit is likely on the total
quantity that can be exported so that ample supply remains for local
textile mills.   India is the world’s second largest exporter and
controls a fifth of globally traded cotton, catering mainly to Chinese
factories that sell garments to the West… Through a notification
likely in two weeks, cotton is expected back on the list of freely
exportable items (OGL) with no export tax. However, exporters may have
to continue registering their contracts with the government so that the
actual quantity shipped out is constantly monitored .
The exportable
surplus will be notified in September after the next marketing season’s
production and consumption estimates are firmed up by the Cotton Advisory Board
that has representatives from government and industry.
The decision
was taken together by the departments of textiles, commerce and agriculture, who
had been earlier asked by the Cabinet to resolve the conflict of interest
between farmers and textile mills over exports in a season of short supply”

While exporters, and indirectly farmers, are seeking overseas contracts because
prices are higher abroad, the local textile industry wants a ban on exports to
keep their raw material cheap.
In May, the textile ministry abruptly
halted cotton and yarn exports and took away incentives under pressure from the
local industry, provoking criticism from the Prime Minister’s Economic
Advisory Council.
With the government clearly willing to allow
exports, all eyes will now be on the cotton balance sheet for 2010-11.
to current estimates, India will start the new season with unsold stocks
of 4
million bales. It is expected to harvest a crop of 32 million bales.
Added to
imports, 36 million bales are expected to be available. Of this, mills –
big and small – are expected to buy 27 million bales, leaving a surplus
9 million bales. The exportable quantity will be taken from this number.

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“Since the government would like India to always have an extra
5 million bales to keep local prices in check, that leaves only 4 million bales
for export in theory. The actual figure will have to be negotiated between
exporter/ traders and mills,” said an official who did not wish to be

“font size=”2″>..
Along with textile mills, government is equally keen to keep
cotton prices low because it contributes 14% to the wholesale price index and
could thus add to inflation. It is also worried about the health of weavers and
small- and medium-sized textile mills that have not been able to buy expensive
yarn in the current season. The garment industry that employs more than a
million people has also decelerated almost 20% in last one year, according to
textile ministry data.

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The other big question will be international
prices. The ICAC Price model forecasts a 2010-11 season average Cotlook A Index
of 87 cents/lb. This implies a 12% jump over last year. This spiral has been
triggered by an unusually tight global supply pipeline that is unlikely to ease
despite good crops in India and top exporter United States.

“font size=”2″>..”We
expect local prices to remain within the ‘30,000/candy to ‘35,000/candy
band. That means they will be 11 cents/lb lower than the world
market, making exports an attractive option for traders,” the official
“font size=”2″> . ”