The Government has imposed a restriction on theexport of cotton aiming to cool down the domestic prices. Like a coin with twosides, this move is criticized as appropriate from the view of textileindustry, while exporters and farmers are raising protest.
With an imposition of the export duty on cotton, theGovernment has currently stopped cotton exports. However, this restriction doesnot apply for the cotton which is already registered for exports which accountsto 7.9 million bales. On an average, cotton exports amount to 8 million bales ayear.
During the recent months prices of raw cotton have soared by35%. Industry experts predict that the restriction would bring a psychologicaleffect in the prices. The notification aims to restrict the shortage of rawcotton within the country, and manipulate its price which is currently rangingaround Rs. 30,000 per bale.
From its own viewpoint, the industry is justified indemanding for a cotton export ban as domestic prices have increaseddramatically proving uneconomic for the industry. During the past one yearcotton prices have raised by 54% forcing the textile makers to increase pricesby 50%. The Government has also imposed a duty of Rs. 2,500 per ton on theexports of raw cotton on the top of a 3% duty on the exports of cotton wastes.
Despite the intention to control the domestic prices, themove has evoked mixed reactions. With the cotton prices touching its peakduring the past month which is the highest in the past two years, cotton pricesat the global level may inflate further. Though exporters are benefited,farmers feel this as a loss making venture as they are forced to sell theirproduct in the domestic market for less price.
Indiais the second largest producer of cotton next to the US. With an increase indemand from countries like China cotton prices have gone up. India, with sufficient stock was meeting the global demand. With the current ban on cottonexports have forced the buyers to seek alternative options. A price hike isanticipated in Britain, Pakistan and other parts of the world. Textiles are themain exports of Bangladesh generating around $15.56 billion revenue. 30% oftheir cotton requirements are met by India. The current ban is likely tointerrupt the functioning of their textile industries. It will result in anincrease in their production costs, and further cause unwanted delays indelivering the merchandise as well.
Expert predictions say that the ban is likely to last forfive or six months. Indian traders are now buying bulk quantities of cotton atrock-bottom prices, which will later on be sold at inflated costs at the globalmarket. However, the overall scenario of textile exports still seems bleak.
References:
Comments