Encouraging cotton scenario

The cotton season October 2011-September 2012 witnessed a significantly higher cotton export from India of 120 lakh bales than the CAB estimated 80-85 lakh bales. Strangely enough, based on the original estimates, textile mills must have imported during the period more than 15 lakh bales, which is much higher than the average of 10 lakh bales imported during the last seven years. Thus both the export and import of cotton are considered the highest during the seven-year period. While the surge in exports can be easily explained away with the growth in crop yield, the higher import is really intriguing, particularly in view of the fact that India is the second largest producer of cotton in the world. The industry may argue that what was imported was mainly the extra long staple cotton variety which is not available in the country in large quantities.

The emerging cotton scenario seems to signal a reversal of trend in production and demand for cotton prevalent in the last two years, perhaps the worst-ever period for Indian mills. The Government’s unpredictable cotton and yarn policy was mainly to blame for the plight of both cotton growers and mills during 2011-12. The sudden, unexpected mid-year allotment of 10 lakh bales of cotton for export, in addition to the original allotment of 55 lakh bales, upset the whole calculation of both the growers and mills. The Government move did not benefit the farmers who had by then sold off their stocks at negligly low rates, but the handful of international traders with huge resources who had earlier bought cotton at throwaway prices and sold it at exorbitant rates to make windfall profits. What added to the woes of mills was the Government decision to suspend yarn exports. Though lifted a little later, the ban on yarn exports threw the entire spinning industry out of gear. Burdened with growing unsold stocks of yarn, mills all over the country are still struggling to come out of the crisis. Their operations have been completely paralysed, with most of them having downed their shutters or are working far below capacity. The year preceding was equally trying for the industry with widespread shortage of cotton hitting almost all units.

The textile sector is highly optimistic of the proposed legislation by the Centre intended to collect accurate data on cotton production, crop yield, domestic consumption, stocks with the industry stakeholders and on the surplus cotton available for export. The overall attempt is to end the nagging uncertainties gripping the cotton economy as well as the textile industry, caused mainly by conflicting cotton output estimates made by the Ministries concerned as well as by CAB and other agencies. Caught in a dilemma, the Textile Ministry has often failed to effectively handle cotton distribution in the absence of accurate details on production and consumption.