The Hindu Business Line : Subsidy for exports — Global shippers may turn to Indian cotton

EVEN as the seed cotton (kapas) prices continue to tumble, efforts by the Union Government to give shape to its offer of an export subsidy for raw cotton may force some international cotton shippers and specific cotton consuming countries in the Far-East to seriously consider sourcing Indian cotton.

With cotton price fall continuing in tandem with the international cotton futures, a price offer of 44-45 cents per kg (on f.o.b.) for domestic cotton by the Indian exporters is possible this time and will invite appreciable trade enquiries from international shippers, cotton trade sources here say.

The international cotton prices (for spot) range between 50 and 51 cents against the Indian spot price average of 49 cents but the higher crop projected for the season and the increased volume of cotton arrivals on one end and the likely export subsidy from the Government may work in favour of giving further trust to exports in the coming weeks, sources say.

Considering the higher domestic output, Indian cotton would wield the advantage of being the cheapest fibre in the international market and export subsidy would further facilitate its price advantage.

Trade sources told Business Line that thecountries that would evince interest on importing cotton are Korea, Taiwan and Indonesia, besides some international shippers. The cotton varieties that will get importers' enquiries are Shankar-6, Bunny, Brehma, Mech-1 and MCU-5.

Trade sources maintain that already a few enquiries had been received from global cotton shippers and they anticipate that with the bumper output, cotton export may touch 10 lakh bales this year.

The sources said in anticipation of the Government subsidy for exports, domestic cotton shippers had stepped up buying cotton in a few centres this week.

Spinners across the country continue to stay away from procuring cotton in a falling market, as they fear that the market is yet to bottom out.

Their fear, according to market sources, has gained strength in the wake of the continuing price fall seen since last Friday.

Most cotton varieties have lost another Rs 500 per candy in the last four days.

Monday's trading also saw a fall in prices.

In their anxiety to liquidate yarn stocks (produced from high-priced cotton), the spinners are reported to have slashed Rs 5 per kg in the yarn meant for warp and weft weaving for this month's delivery, whereas they have largely retained the last month's price for hosiery yarn.

In the face of a barren export market for yarn, the spinners increasingly depend on the local market where the-per-kg average price is said to be Rs 10 higher than what is quoted in the export market.

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