A move by the Directorate General of Foreign Trade (DGFT) to allocate cotton exports quota of 19 lakh bales to 928 applications, has stirred up a controversy. Traders and exporters are peeved by the decision to allocate the quota to almost all applicants in proportion to the applications filed by them, and also not scrutinising the track records of those who sought quota.

“The DGFT has applied a cap of one lakh bales as quota in the allotment. But it should have also applied the cap on the submission of applications. Genuine exporters have got left out,” said a trading source who did not wish to be identified.

Since the DGFT did not fix a cap on the applications, it received requests to export over crores of bales (170 kg each), against a domestic production of 3.29 crore bales.

An exporter from Kolkata said one of the exporters who did not get acknowledgement for his e-mail application, sent it three times and finally gained by getting nearly a lakh bales as export quota.

A Mumbai-based exporter said an exporter blacklisted by the Liverpool Cotton Association had got a significant quota.

“While calling for applications, the Government should have asked for proof of past performance. Maybe, export and financial performance. Or even past performance of cotton turnover so that someone trading in the domestic market will also get opportunity to export,” said the Kolkata-based exporter.

Scrutiny

After allocating the quotas on Tuesday, the DGFT also simultaneously began scrutinising documents before issuing the export authorisation registration certificates (EARCs). The scrutiny will go on till January 25.

Registration for cotton exports began on December 31 and ended on January 6. The DGFT called for applications to export cotton after only 36 lakh bales of the 55 lakh bales allocated for exports could be shipped out.

While announcing the export quota, the Centre said exports should be over by December 15. However, holidays and unseasonal rain hit procurement of cotton by exporters, leading to the quota being unfulfilled.

The Centre fixed the export quota after the Cotton Advisory Board projected an output of 325 lakh bales in September last. This was raised to 329 lakh bales last week, resulting the Commerce Secterary, Dr Rahul Khullar, saying that a decision on raising the export quota would be taken this week.

While a couple of exporters have got quotas to export around one lakh bales, the rest have uniformly got 500 bales as the allocation.

Some of the exporters are irked by some of those who have got the export quotas to sell them at a premium.

“The quotas are being sold between Rs 3 lakh and Rs 5 lakh for 500 bales. A large number of these people are those who don't know anything about cotton. Someone trading in pulses or steel or yarn has got the quota,” said the Mumbai-based exporter.

“The DGFT may say that the EARCs will be given only if a proper letter of credit is in place. But it won't take much time to produce a LCs and those buying the quota are ready to provide the LCs,” said the Kolkata-based exporter.

Though exporters say that the grey market is beyond the control of the Government, it should have been alert enough to bring in the checks and balances while calling for applications. They are also upset that some of them had raised these issues with the DGFT but they had not been addressed.

Cotton prices

Meanwhile, raw cotton prices have increased by over Rs 200 a quintal to above Rs 4,500 in various parts of the country, mainly Gujarat that produces nearly one-third of the crop grown in the country. In Punjab and Rajasthan, prices hit Rs 5,000 on Wednesday.

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