Trade with Commodities: Cotton imports set to surge 60%

Thursday, May 21, 2009

Cotton imports set to surge 60%

Product Seen Cheaper At International Market, Imports Could Touch 10 Lakh Bales

INDIA is likely to register a 30-60% increase in cotton imports in the current cotton year (Oct'08-Sep'09) as international prices quote at a marginal discount to domestic prices after the government increased the floor price, or the so-called MSP, of cotton.
    Against six lakh bales of 170 kg each imported last year, the country could import about 8-10 lakh bales this year, say industry officials. DK Nair, secretary general, Confederation of Indian Textile Industries (CITI), says imports could tot up to 10 lakh bales in the current year. "Imports of extra long staple cotton will account for between four and five lakh bales and short and medium staple variety 6 lakh bales," he said.
    KF Jhunjhunwala, chairman of Cotton Textiles and Allied Products Research Foundation, and past president of Cotton Association of India said the country will import nearly eight lakh bales this year. "Five lakh bales of cotton have already arrived in the country and additional three lakh will arrive by September 30," he added.
    Domestic prices have increased over global prices due to a 40% increase in minimum support price (MSP) by the government. Medium long staple cotton prices increased by over 31% to Rs 2,500 a quintal and price of long staple cotton was increased by 48% to Rs 3,000 a quintal compared with previous year's prices.
    "Imports took place when global prices were periodically cheaper at between 1.5% and 2% than local prices," Mr Jhunjhnuwala said. At present, domestic prices of cotton 28-29 mm variety, popularly known as Shanker-6, have been trading between Rs 21,500 and Rs 22,500 per candy (one candy equals 356 kg) over the past quarter. Prices, globally, are now trading on a par or 55 cents per pound less than domestic prices.
    Traditionally, imports, primarily of extra long staple cotton, domestic production of which is low, have been in the range of 5 -6 lakh bales.
    Meanwhile, exports are estimated to be lower by 30% this year due to a reduction in global demand following the economic recession. India is likely to export not more than 5 lakh bales against 8.5 lakh bales last year primarily due to a fall in demand from China and Pakistan, Bangladesh, Indonesia and Hong Kong.
    Of the estimated production of 29 million bales this year, 28 million bales have already arrived and the remaining may arrive by the end of cotton year in September 30.
    nidhi .sharma 1 @timesgroup .com