Chennai, June 24:
Shankar-6 cotton was quoted at Rs 41,000 for a candy of 356 kg a fortnight ago when the Centre decided to allow additional exports of cotton.
Prices for the natural fibre then increased to Rs 45,000 a candy on hopes of fresh demand. However, things have turned out to be different. Within a week after the export quota was announced, prices dropped back to Rs 41,000.
This week, the fall in price has continued. On Thursday, Shankar-6 was quoted at Rs 37,000, a fall of 10 per cent since the beginning of the week. However, on Friday, it increased to Rs 38,500.
The sharp drop in price has led to voices among the industry seeking more exports.
In particular, ginners, led by those in Saurashtra, are seeking additional exports but with a rider. “Ginners should be provided a quota for exports,” said Mr Anand Poppat, Vice-President of Saurashtra Ginners Association.
Earlier this week, the Centre began registering applications for additional exports of 10 lakh bales (170 kg each). Registration ends this weekend and applications will be scrutinised until July 5. Quotas will be announced on July 6 and those allowed to export must have their shipments cleared by September 15.
The Centre on July 9 decided to allow 10 lakh bales in addition to the 55 lakh bales that were allowed earlier in the season that began in October. That allocation got over by January on demand from China, Bangladesh, Indonesia and Pakistan.
“Exporters had bought ample stocks. They will be exporting from those stocks only. That's why there is no demand for cotton in the market,” said Mr Poppat.
“Mills are not buying because they are left with huge inventories of yarn. Since there is no demand for cotton in the country, some more exports should be allowed,” he said.
The Saurashtra Ginners Association had gone on strike last month demanding that the Centre allow export of 25 lakh bales of cotton.
“Due to lack of domestic demand, we could have an additional carryover stock of 50 lakh bales. This could spell trouble, particularly for farmers, when the new crop arrives in October,” Mr Poppat said.
“If ginners are given a special quota, we can ensure better price for growers, demand for cotton will increase,” he claimed.
Domestic demand for cotton has dropped after spinning mills decided to cut production by 30 per cent. Apart from huge inventories, they are also irked by the Centre not providing duty drawback facilities for exports.
On the other hand, the garment industry has been affected by woes faced by units in Tiruppur. Garment units in Tiruppur have been affected after dyeing units in the town were ordered shut by the Madras High Court for polluting the Noyyal river water.
Meanwhile, the Punjab Government, too, has joined the chorus demanding additional exports.
source-business line
steven
management trainee-fundamental analysis
DENIP consultants Pvt Ltd
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