Source: Financial Express

■ Says shipments hit a record 900 million kg in 2012-13

fe Bureau New Delhi, April 2

The Apparel Export Promotion Council (AEPC) has sought a ban on cotton yarn exports, barring a few varieties, arguing that a lack of parity in the price rise in the fibre and the yarn is adversely affecting garment export orders.

In a letter to textile and commerce minister Anand Sharma, AEPC chairman A Sakthivel said: “The situation has become alarming and shocking to the value-added garment export sector. As much as 25% cotton yarn price increase in just five weeks has in fact shattered the planning of the garment sector... cotton yarn exports, except 60s count and above, may not be permitted.” Yarn exports hit a record 900million kg in the fiscal year through March31, he added.

Sakthivel said cotton yarn prices had increased by R35 a kg in just one month through March 24, and yarn producers raised the rates again by R15 a kg on Monday, leading to a price rise of R50akginjustfive weeks by creating ‘artificial shortage’. He said although cotton prices are ruling around the October 2010 level, yarn prices (of 40scount)have hit R250 per kg, compared with R204 then. By contrast, cotton prices in Gujarat (ICS 105, 29mm variety) have gone up by nearly 5% since March to R39,200 per candy of 356 kg, according to data by the Cotton Association Of India (CAI), the exporters' body.

He said whenever export demand increases, cotton yarn prices are “hiked in the domestic market abonormally” at a much faster pace than the rise in cotton prices, hurting value-added segments, including garments manufacturing, and apparel companies find it difficult to finalise export orders.

Such a situation may cause loss of buyers’ confidence in purchasing garments from India. For their part, spinners said they suffered heavy losses in the two years through 2011- 12 due to record-high cotton prices in 2010 and a subsequent volatility in the global market, but they couldn't pass it on to the consuming industries then. They said they needed to incur some “legitimate profits” to stay afloat.

However, Sakthivel demanded that the duty drawback facility on cotton yarn exports be stopped or cotton yarn imports should be permitted at zero duty just like cotton so that the prices of the basic raw material for  garment makers remain stable. Significantly, while yarn producers have asked the government to offload official cotton stocks to ease prices of the fibre, garments manufacturers and exporters have demanded restrictions on yarn shipments to curb prices.

Last month, in a letter to Sharma, Confederation of Indian Textile Industry chairman SV Arumugam had said cotton prices in the domestic market had "increased steeply because of an artificial shortage of cotton in the market, which is created partly by hoarding of cotton by traders, and partly by non-release of procured cotton by the CCI and other procurement agencies".

However, CAI president Dhiren N Sheth said an analysis of the export price data, compiled by the Direcorate General Of Foreign Trade, revealed the ratio between the average rate of yarn shipped this year and that of cotton is much higher in 2012-13 than a year before.

He demanded that CCI offload stocks to the highest bidder and at an appropriate time to maximise returns for itself and cut losses to the exchequer. Government agencies usually buy cotton at MSPs and sell the stocks later at market rates. The losses on account of the procurement operations are reimbursed by the government.  (Source: Financial Express)