Why India is Crippling the Cotton Industry
14 December 2010 By Dr. Seshadri Ramkumar, Texas Tech University
Editor’s note: This story first appeared in FCI’s sister publication Cotton International. Visit their website for more news and trends about the cotton industry.
One week ago, the government of India capped cotton yarn exports to protect the interest of weavers, imposing a limit of 720,000 tonnes.
The past few months have been highly politically charged with regard to the Indian cotton and cotton textiles scenario. Every segment of the textile industry has been doing its level best to protect its raw material supply, including government officials (who capped exports for this year at 5.5 million 170 kg bales), spinners, power loom weavers, handloom weavers, and dyeing and finishing units.
Regulating the exports of cotton and cotton yarn has been a subject of contention and debate every year in India. In September, officials created a Cotton Yarn Advisory Board, which was charged to create a cotton yarn balance sheet for the country.
According to the Board, for the financial year that runs from April 2010 through March 2011, India will produce 3.46 million tonnes of cotton yarn, domestic demand will total 2.66 million tones, and 720,000 tonnes will be exported. This exportable limit is the highest it’s been in three years, according to the Office of the Textile Commissioner.
On Nov. 20, the government launched an online system to register cotton yarn exports in Chennai, the capital of the State of Tamil Nadu. Tamil Nadu is the home of 60 percent of the total spinning mills in India (1,931 of the country’s 3,200 spinning mills). Unlike in the United States and other developed nations, there continues to be investment in the spinning sector.
The cotton and cotton yarn situation has received the highest political attention, including the intervention of the Chief Ministers of the State of Tamil Nadu and West Bengal. Because the textile industry is a big bread basket for millions of people in India–particularly in the southern state of Tamil Nadu—and because the election to the state legislature is coming in 2011, the textile situation is getting tense.
On Dec. 2, the Chief Minister of Tamil Nadu wrote to Dr. Manmohan Singh, the Prime Minister of India, asking him to immediately suspend cotton exports until domestic mills’ requirements are met, and to put a cap cotton yarn exports. He has also asked for an export duty on cotton yarns.
Indian spinners have received export contracts for 779,816 tonnes and have already shipped 458,047 tonnes. Indian spinning mill associations are asking the government to allow them to export all of the yarn they have contracts for. According to export regulation, spinners have 45 days to ship cotton yarns from the date of registration, meaning they will have until mid-January 2011 to export the remaining 261,953 tonnes. The spinning mills will be running at maximum capacity for the next 45 days to meet that timeframe.
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