High domestic price may lead to a drop in cotton exports

High domestic price may lead to a drop in cotton exports

New Delhi: Cotton exports from India, the world’s second biggest supplier, may drop this crop year as growers withhold overseas sales to benefit from higher domestic prices fixed by the government.

Exports in the 12 months ending 30 September may be less than 8.5 million bales a year earlier, said Subhash Grover, managing director of state-owned Cotton Corp. of India, the nation’s biggest buyer of the commodity. “There is no parity in prices to sell in the international market," he said in Mumbai on Monday. “Exports are not taking place now."

India’s government, facing an election by May, increased the minimum purchase price by as much as 48% in September to protect the incomes of 10 million cotton farmers. Cotton futures traded in New York have fallen 39% this year as global consumer spending reduced because banks restricted lending.

Futures closed at Rs22,597 per candy (356kg) on the Mumbai-based National Commodity and Derivative Exchange Ltd on Monday. That’s 47% more than international prices.

“Yarn manufacturers and other users are only buying for hand-to-mouth consumption," Laxmi Narayan Gupta, director of TDN Fibers Ltd, said over the phone from Indore.

The price increase “has created a major problem for the textile industry" in India, Shishir Jaipuria, vice-chairman, Confederation of Indian Textile Industry, which represents 20,000 mills, said last week.

Jaipuria is also managing director of Ginni Filaments Ltd. “We’re not competitive because of higher costs and we will lose our customers in the international market."

India may export $7.5 billion (Rs35,475 crore) worth of garments in the year ending March, compared with $9 billion a year earlier, R.K. Dalmia, chairman of the trade body, said last week. He is also a senior president with Century Textiles and Industries Ltd.

The country’s cotton output may increase 2.2% to 32.2 million bales in the year to 30 September from 31.5 million bales a year earlier, according to Cotton Advisory Board. An Indian bale weighs 170kg.