CITI urges govt. to review decision on cotton exports

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Namrata Kath Hazarika | 09 Dec, 2010
The Confederation of Indian Textile Industry (CITI) has urged the government to monitor the cotton export situation carefully as actual production of cotton this year may be less than even 300 lakh bales against CAB's earlier estimates of 325 lakh bales.

"As against CAB’s estimates of 325 lakh bales, actual production of cotton in the country during the current year may be less than 300 lakh bales since there have been loss of crop in Gujarat and Maharashtra because of excessive rains and in Andhra Pradesh, because of floods," CITI said in a recent press release.

The government, therefore, should not allow extension of shipping period or re-registration for any quantities that may remain unshipped on expiry of the EARCs already issued, CITI viewed, adding that the situation can be reviewed after cotton arrivals stabilize and a clear picture emerges on the actual crop size and consumption during the year.

"In case any exportable surplus is determined after the review, it may be allowed for registration only against Letters of Credit or Advance Payment amounting to not less than 10-15 percent of the value of the contract, in order to avoid speculative registration," it said.

On cotton yarn exports, CITI, however, expressed a different view, pointing out that quantitative ceiling of 720 million kgs. may be withdrawn since there is no shortage of cotton yarn in the market and demand for cotton yarn has started declining both in the domestic and international markets.

Further, the industry body suggested that the mills which have export obligation against EPCG licenses or Advance licenses and EOUs as well as SEZ units may be exempted from the ceiling, since they are mandated by government to complete their export obligation.

Also, blended yarn with cotton content above 50 percent but below 85 percent is not accounted as cotton yarn in the production data of government. But these are classified as cotton yarn for exports. Since their production data has not been taken into account while assessing the exportable surplus, such yarns may be exempted from the ceiling imposed on export of cotton yarn.

CITI also requested that there is apprehension in the industry on speculative registrations which might have taken place for cotton yarn export. Therefore, no extension may be allowed in the period stipulated in the Export Authorization Registration Certificates (EARCs) for shipment.

And, any quantities that may remain unshipped within the validity period of the EARCs may only be allowed for registration against fresh applications backed by Letters of Credit or Advance Payment amounting to not less than 10-15 percent of the value of the contract.

Moreover, applications for registration of about 60 million kgs of cotton yarn had been received by Textile Commissioner, in addition to the 720 million kgs for which EARCs had been issued, before the quantitative ceiling was imposed by government.

EARCs may be issued against these applications, since refusal to do so will be tantamount to enforcing the ceiling retrospectively, CITI's letter suggested.