Over 90% of cotton exports head to competitors in textiles

As cotton shipments are set to resume today, over 90 per cent of the commodity, for which the Textile Commissioner has given permission for exports, will head to China, Bangladesh, Pakistan and Indonesia.

The Textile Commissioner has cleared shipments of 52.46 lakh bales by giving export authorisation registration certificates (EARCs), and 48 lakh bales are to these four countries.

The Centre has decided to allow exports of 55 lakh bales cotton from November 1. Registration for shipments began on October 1 and stopped on October 10 after applications for the entire quantity were received. Most of the exports are to China, said Mr Manikam Ramaswami, Chairman-cum-Managing Director of Loyal Textiles.

These four countries are our main competitors in the global textiles market. We are feeding them through our cotton exports while letting our mills to be hit, said Mr D.K. Nair, Secretary-General of Confederation of Indian Textiles Industry.

We are exporting employment to China through cotton, said Mr Ramaswami.

There is more concern over the basis on which some exporters got the EARCs.

At least 70 per cent of the EARCs have been given to exporters on cash against document (CAD) terms instead of letter of credit (LCs),said an exporter who did not wish to be identified.

According to data from the Textile Commissioner's office, 70 per cent of the EARCs have been garnered by 13 exporting firms. The accompanying table shows the top five exporting companies. The problem with CAD transactions is that they are without any guarantee or security.

Going by past records, cotton is exported against LCs that have 90-180 days credit period. This means overseas buyers did not have the capacity to pay at the delivery site, and at the same time, exporters did not have the trust to extend such credit, said the exporter.

Mr Ramaswami said: No Indian cotton goes without an LC. The CAD provision allows exporters to escape from actual selling. All these registrations have been only speculations.

The Textiles Commissioner, Mr A.B. Joshi, said that EARCs have been issued after all the documents submitted by exporters were found valid. The whole registration process has been transparent and all have been treated equally, he said.

There is a fear that under CAD, exports may not happen and this could lead to a crash in cotton prices, thus affecting growers.

But Mr Nair sad that CAD transactions take place with regard to lot of exports and exporters could be shipping cotton to their office or agents abroad.

The actual sale will happenlater. For now, the exporter will take it out and store it till actual contracts take place, he said.

An exporter said that while applying for licence to export, 75 per cent of the applicants did not open LCs.

source:CTEI