Domestic market seen profitable by Indian textile cos

The fall in international cotton prices and fluctuation in value of rupee against dollar seem to have cast gloom on the prospects of cotton exports.

Demand for cotton in China, which accounts for about 65 per cent of the shipments from India, is expected to remain subdued due to the economic slowdown in the country.

M.B. Lal, Forward Markets Commission-nominated member of Cotton Association of India and former Chairman of Cotton Corporation of India, said that at present there is a disparity between domestic and international cotton prices and it will be more profitable for Indian companies to sell their produce here rather than exporting it.

“Cotton prices in the international market are down because China is keeping away from market,” he said.

Price scenario

Rupee had appreciated 5.2 per cent against dollar in September and but fell in the following two months.

On Tuesday, it gained nine paise to 54.68. Appreciation of rupee reduces the value of dollar receivables. However, profit margins can be protected by hedging.

Though cotton is quoted at 70-75 cents a pound in the international markets, India is currently exporting to Bangladesh at 82 cents a pound due to strong demand.

Domestic textile companies are not aggressive in placing orders for cotton as they are waiting for prices to fall.

Prices of the home grown Shankar-6 variety are currently trading at about Rs 33,000-35,000 a candy of 356 kg. There are no purchases being made by the Government agencies in Gujarat and Maharashtra as the domestic prices are ruling above the minimum support price announced by the Government, said Lal.

Textile companies will start placing orders for cotton in coming days as there is a strong export demand for yarn, he said.

Exports may dip

The Cotton Advisory Board had estimated India’s exports to dip 46 per cent to 70 lakh bales (of 170 kg each) from 129 lakh bales. Registration for cotton export with Director General of Foreign Trade was at 4.5 lakh bales as of November 5.

The Government has made registration mandatory for cotton export though it is done under open general licence. Besides, an exporter can register for only 10,000 bales at a time and has to complete his obligation before seeking further registration. New exporters can apply for 1,500 bales.

Suresh.iyengar@thehindu.co.in

(This article was published on December 4, 2012)
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