India unlikely to sell cotton to local mills

Indian traders selling cotton unlikely to honour most deals after failing to get registered with export authorities.

ISLAMABAD: Indian traders selling cotton to Pakistan are unlikely to honour most of the deals for nearly one million bales after they failed to get registered with export authorities, industry officials said on Friday.

Textile firms in the world’s third-largest cotton consumer were banking on neighbouring India to meet their needs after massive flood damage to the domestic crop caused an estimated shortfall of about four million bales.

They said that a cancellation of Indian contracts or even delay will eat into profits of the textile industry, which accounts for about 60 per cent of the country’s total exports.

Traders had booked about one million bales for delivery from November to January from India, the world’s second largest producer, industry officials say.

“Eighty per cent of the Indian dealers have said they had not been able to get themselves registered for cotton export,” Yasin Siddik, Vice Chairman of All Pakistan Textile Mills Association (Aptma) told Reuters.

“It means that cotton is not coming. It means cotton in our domestic market will remain short and prices will remain firm,” he added.

India suspended the online process of registering cotton exports early this month after receiving applications equal to the stipulated exportable surplus of 5.5 million cotton bales. Most Pakistani dealers believe Indian exporters used suspension of registration as an “excuse” to escape their contracts because of rising international cotton prices in recent weeks.

Rising US cotton prices and uncertainty about the Indian contracts have sent cotton prices soaring in the domestic market as well in recent weeks.

Domestic cotton was being traded up to Rs8,500 ($99.60) per maund (37.32 kg) on Friday, according to Naseem Usman, chairman of the Karachi-based Cotton Brokers Forum.

The government, in April, had hoped to produce 14 million bales of cotton in the 2010-11 season, compared with about 12.7 million bales the previous year, when the country had to import about two million bales of 170-kg each. Because of August’s floods, government and industry officials now estimate an output of about 11.6 million bales, meaning more imports from various sources, including India.

India has delayed exports by one month until November 1 after late rains delayed the harvesting process, but Siddik said he did not expect much coming out of that into Pakistan now.

Published in The Express Tribune, October 30^th, 2010.