NEW DELHI – Indian traders are demanding more cotton exports after local prices tumbled more than 25% in the past month, with cash-strapped textile mills slowing purchases, senior trade and industry officials said Monday.
Domestic cotton prices fell to 44,000 rupees ($980.76) per 356 kilograms as of May 13 from 58,800 rupees a month ago. India, the world’s second-largest cotton supplier, has fixed the cotton export quota for the year to Sept. 30 at 5.5 million bales, but traders have already shipped the entire approved quantity.
Local textile mills have been opposing higher cotton exports as they say that it could lead to a domestic shortage, but traders say the local market is swamped with cotton as mills are not buying.
"Let there be no cap on export quantity. Let everybody [exporters and mills] compete and buy cotton from farmers," Cotton Association of India President Dhiren Sheth said.
The traders’ body plans to soon write to the government, asking it to lift the cotton export ceiling of 5.5 million bales for 2010-11, he added.
Last week, Trade Secretary Rahul Khullar said a ministerial panel will decide whether to allow more cotton exports. He didn’t elaborate.
Global cotton stockpiles are at multi-year lows and large producers such as China and Pakistan are increasingly turning to India for supplies to keep their textile mills running after floods cut their crops.
The farm ministry has also been pushing for additional exports of 1.5 million bales during 2010-11 to help farmers maximize returns, but the textile ministry–the central ministry for cotton distribution–says more exports will jeopardize efforts to keep supplies steady for local textile mills.
"Many textile mills had to stretch themselves to buy the raw material when the prices were very high earlier this year. Now, they don’t have much working capital to continue with the buying, so domestic prices have fallen," said D.K. Nair, the secretary general of the Confederation of Indian Textile Industry.
Further exports would worsen the situation for textile mills struggling to secure supplies, he added.