letters by Pakistan and Bangladesh have created quite a stir within the
government. We believe that the commerce department is now looking at
what could be done about the old contracts and how much exports could
be allowed,” the official said”.The textile ministry had
suspended exports of cotton on April 19 following complaints from the
domestic textile industry of a 20% rise in cotton prices since October
last year, which was increasing cost of production ..The commerce
ministry subsequently lifted the suspension on May 21, after cotton
farmers and states like Gujarat and Maharashtra protested against it,
but allowed its exports only against licences ..However, there
were several contracts that exporters had entered into before the
suspension of exports last month, many of them with buyers in Pakistan
and Bangladesh, the future of which remains unresolved ..According
to Ajay Sahai, director general, Fieo, many of these contracts may have
a penalty clause which might make them liable of paying fines if they
do not export. Moreover, since the neighbouring countries have large
textile industry dependent of Indian cotton, it may also not be a wise
move strategically to deny them the raw material ..”Bangladesh’s
economy is heavily dependent on textiles (which forms 80% of its total
exports) for which they source cotton from India. We also have
bilateral trading arrangements with them under which they may demand
cotton,” pointed out Mr Sahai ..Pakistan grows a lot of its own
cotton, in fact it is the fourth largest cotton grower in the
world–but because of burgeoning demand from its textile industry it
imports about 3 million bales annually, much of it from India ..Cotton
exporters have their fingers crossed. Dhiren Sheth, president, Cotton
Association of India, says despite the government lifting the
suspension, things were not hunky dory ..”We don’t know how things
are going to play out. If the government starts issuing licences, then
we are fine. Otherwise, the problem remains,” he said ..The
government official pointed out that it was not clear yet how much
export was contracted by Indian cotton growers and the commerce
department was looking into it .