India: Ministry plans Cotton Distribution Policy

Market News

India: Ministry plans Cotton Distribution Policy

The Textiles Ministry is planning a cotton distribution policy that proposes to impose a 10 percent duty on shipments of the commodity beyond a declared exportable surplus. The move is aimed at bringing stability in prices of the natural fiber. According to Union Minister of Textiles, Kavuru Sambasiva Rao, "India produced 35 million bales of cotton in the 2012-13 season (October to September) and in the next season it will be between 37-40 million bales, which means we will have enough of cotton. To bring in stability in prices for the industry, we have proposed the Cotton Distribution Policy.”

Under the policy, the Ministry had recommended imposition of an export duty of 10 percent ad valorem at freight on board (FOB) or Rs 10,000 per ton, whichever is less, for all cotton exports exceeding the declared/revised exportable surplus. Last week, the Cabinet Committee on Economic Affairs (CCEA) had deferred a decision on the cotton distribution policy and the matter was referred to a group of ministers including commerce, textiles and agriculture, following differences of opinion among various ministries. The duty has been proposed to encourage shipments of value-added textiles.

The Cotton Advisory Board (CAB), under the Textiles Ministry, usually meets every quarter to estimate cotton output, consumption, exports and imports but it has not come out with any review since April this year. Also, the CAB is yet to come out with its review on cotton for the next year. As per the CAB, India's cotton production was estimated at 34 million bales (170 kg each) for the 2012-13 season against consumption of 27 million bales and exports of 8.1 million bales. However, the country has exported about 10 million bales in the 2012-13 season compared to about 12.7 million bales in the previous year.