High Court strikes down eligibility norm for extra cotton export quota

The Bombay High Court has struck down the Centre's stipulation that only those who exported cotton during 2008-09 and 2009-10 crop years (October-September) are eligible for getting additional export quantity that was allowed on June 9.

Disposing of a slew of civil applications and writ petitions against a Directorate-General of Foreign Trade (DGFT) June 17 notification, a Bench headed by the Chief Justice Mr Girish S. Godbole ordered that the deadline to complete the quota process be extended to August 8.

The process, set to have been completed by July 15, includes submission of documents to the DGFT, their scrutiny and issue of registration certificate. Since the clause stipulating the eligibility for export was struck down, the court also held as invalid the norm that applicants could apply only for the highest quantity they exported during 2008-09 and 2009-10.

Additional exports

On June 9, the Union Government decided to allow additional exports of 10 lakh bales (170 kg each) of cotton apart from the 55 lakh bales allowed earlier this year.

The additional quantity was allowed since cotton stocks had accumulated with farmers, ginners and traders after consumption took a hit following a slowdown in the textile industry.

The Bench clarified that its direction on these petitions would not come in the way of the Centre formulating “appropriate policy for the subsequent years”.

The court said that the DGFT should ‘receive, consider and process' all applications made before July 6, the date when allocations were to have been announced.

Allocation

For those who had applied by June 25, the last date for filing applications, the DGFT should allocate proportionally with a ceiling of 4,250 tonnes.

This allocation, directed to be in multiples of 25 tonnes, should be made by July 27, the court said.

It also said that those who had applied for a quota between June 25 and July 6 would be allocated the minimum quota of 100 tonnes.

If anyone had applied for a quantity lower than 100 tonnes, they, too, would be allocated the minimum quantity of 100 tonnes.

Impact on prices

The additional export quantity was cleared by the Government to help buoy raw cotton prices that had dropped nearly 40 per cent between May and June 10.

The allocation has not helped prices improve with prices dropping to Rs 30,000 for a candy of 356 kg against over Rs 60,000 in early May.

With textile mills burdened with yarn inventories and garment units facing problems of rising input costs, cotton consumption has dropped sharply.

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