In a major boost to the country’s cotton exporters, most of which are SMEs, the government has decided to allow exports of the raw material till the permissible shipment limit of 55 lakh bales is met.

Confirming the news, the Directorate General of Foreign Trade (DGFT) recently reported that the government’s decision to give cotton exporters more time to complete the entire shipment quota of 55 lakh bales was taken as exporters failed to exhaust the said limit by December 15, 2010.

Industry experts and sectoral analysts indicate unseasonal rains as the main reason behind delay in cotton supply in the spot market, eventually restricting exporters from achieving the target.

Till date, actual exports of the raw material are much less than 55 lakh bales, added DGFT. Considering that a number of these exporters are small players, the provision given by the government will prove beneficial for them.

To delve deep into the matter, Bizxchange contacted Dhiren N Sheth, president of Cotton Association of India (CAI), who welcomed the Centre’s decision and said, “Cotton farmers would be extremely benefited as this would help them get international price.” When asked about the quantity shipped out so far, Sheth said the actual figures would be coming soon and so it will not be wise to comment now.

Rising cotton prices

Of late, prices of cotton in the domestic market have moved up by around 12% to Rs 42,100-42,200 per candy.

According to cotton traders, robust demand for the raw material is driving the price hike. Speaking to our correspondent, Prem Rathi, proprietor of Ahmedabad-based Amrit Cotton Company said, “High demand in countries such as China and Pakistan is flaring up cotton prices. Moreover, domestic textile mills are aggressively buying cotton as they fear shortage, thereby increasing prices of the raw material. At present, cotton prices in Ahmedabad stand at around Rs 42,500-43,000 per candy.”

According to industry estimates, the country is expected to witness a surge in cotton production from 295 lakh bales in 2009-10 to over 325 lakh bales in 2010-11.