Cotton export ban will leave negative impact on BD textiles

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FE Report
Country's apparel manufacturers have voiced concern over India's export ban on cotton, saying that it would cause a catastrophic impact both on production and export of local textiles and readymade garments.
They expressed the fear that, as a result, the prices of imported cotton and yarn will increase significantly, thus affecting the competitiveness of locally-made apparel items.
Indian Directorate General of Foreign Trade (DGFT) on Monday imposed ban on cotton export with immediate effect to conserve supplies for local mills.
Last time in April 2010 India imposed similar ban on cotton export but withdrew it before the year end.
"It is very shocking news for us. The ban will put very negative impact on our industry," president of Bangladesh Textile Mills Association (BTMA) Jahangir Alamin told the FE Monday.
Bangladesh meets nearly 45 per cent of its cotton needs through importing from India, the second-largest cotton exporter in the world.
"A similar ban by India in April 2010 raised global cotton price to 2.40 dollar per pound from 60 US cent causing sufferings to our mills," said Mr Alamin.
He said as the news of Indian cotton export ban spread, demand in the other sources will go up significantly raising its price manifold.
"Even if we go for other sources like Uzbekistan, USA or Burkina Faso, lead time will be a factor. Thus, many spinning mills will go out of stock," he said.
Mr Alamin said the Indian government should allow export of cotton for which contracts were signed and letters of credit (LCs) were opened before the announcement.
"The Indian government in April 2010 did not entertain the LCs or contracts signed before the ban market [and] we will suffer long term," Dhiren N. Sheth, president of the Cotton Association of India, told the Financial Times.
"More importantly, this is bad for farmers as the price of cotton will go down locally?.?.?.?We urge the government to rethink this regrettable decision."
India's textile companies have been complaining that they are losing competitiveness versus their rivals in Bangladesh and Pakistan because of rising cotton prices in India. The Indian trade regulator's move is expected to push down cotton prices in the country.
"There was no need to ban cotton exports," Prem Malik, deputy chairman of the Confederation of Indian Textile Industry, told Bloomberg. "Probably the government was concerned about the quantity that was already registered to be exported. The registered quantity was more than the government's estimate of exportable surplus."
India has already exported 8.5m bales of cotton this fiscal year, which ends March 31, higher than government targets, on the back of strong demand from China, which account for about 80 per cent of overall exports.
Cotton prices in the domestic market are between Rs34,000 ($682) and Rs35,000 per candy of 356kg each, according to Reuters data. They hit a record high of Rs61,700 rupees per candy in March 2011.
Cotton production in India is forecast to fall short of analysts' expectations after diseases spoiled crops in the states of Maharashtra and Andhra Pradesh, cutting yields. The harvest may reach 34.5m bales in the year that began on October 1, compared with previous analysts estimates of 35.6m bales.