“Cotton quotas allotted to various exporters by the Director General of
Foreign Trade (DGFT) are on sale in Gujarat, the biggest producing and
trading state in the commodity.
” “..

As quotas were allotted to some with no prior experience in cotton
exports, many of them are now offering their quotas to serious players
at a premium or on a profit sharing basis.
” “..

The situation is somewhat similar to the grey market in the Initial
Public Offering of shares. Retail investors sell their application forms
or allotted shares to operators, for a charge. In the case of cotton,
it is the quota allocated to applicants that are on sale. ” “..

Of 928 applicants (and 1.9 million bales) allotted a quota (on January
10) for exports, 672 got permission to export only 500 bales (a bale is
170 kg). Another 31 applications were allotted above 10,000 bales. It
was in the interest of quota holders and traditional exporters to
combine the lots and export, to save costs. A 10-15 per cent margin in
exports made such sharing attractive. ” “..

A trader in Ahmedabad confirmed being approached by one such individual.
“We have been contacted by an individual who offered us his quota of
500 bales for export to Pakistan. Surprisingly, he wasn’t even aware
about the prevailing prices of cotton. He demanded 146 cents per pound
for the lot, around seven per cent higher than our actual costing. This
has become like share trading, where you pay a premium to buy shares in
the grey market,” he said, requesting anonymity.
” “..

‘Want my quota?’ ” “.
Echoing similar sentiments, S Stalekar, vice-president, cotton division,
Sagar Group of Enterprises, said: “Taking benefit of the situation,
non-traditional exporters charge a premium anywhere in the range of
2.5-10 per cent of the total value of export.” ..

“Those who do not have any experience or expertise in the cotton export
market are now approaching serious players with offers to execute cotton
quantities allocated to them. Even if they are paid 40 per cent of the
margin, it is still lucrative, as margins are as high as Rs 4,000 per
candy (356 kg),” said Arun Dalal, owner of the Ahmedabad-based leading
cotton trading firm. ” “..

To make the licensing policy simple and transparent, DGFT had not
included ‘’prior experience’’ as a pre-condition for people seeking the
export permit. Apart from serious players, many non-traditional
exporters applied and got the quota allocation. These included
individuals, cotton testing laboratories, SMS service providers,
companies engaged in solar energy solutions, chemicals and other
agriculture commodities.
” “..

Marketmen alleged the allocation was improper in the sense that many
non-traditional exporters got significant quotas, while some regular
cotton exporting companies got less.
” “..

The rush for the permits was because international cotton prices are
higher than domestic prices, offering certain profits. “The
international prices are higher by 20-25 cents per pound, which has
opened the avenue for huge profits for a normal exporter, too,” said an
Ahmedabad-based cotton trader.
” “..

Cotton prices are 170-174 cents per pound in the international market, and 147-150 cents per pound in the domestic market.