Pak, Bangla Want India To Honour Cotton Contracts

Pakistan and Bangladesh have demanded that the contracts for supply of cotton made by Indian growers before exports were suspended last month, should be honoured.
In separate letters to the Indian government, those countries have also said that future supply of cotton to them should not be disturbed. India has now put cotton on the restricted list and its exports can only be allowed through licenses issued by government.
“The letters by Pakistan and Bangladesh have created a stir within the government. We believe that commerce department is now looking at what could be done about the old contracts and how much exports could be allowed,” an official said.
The textile ministry had suspended exports of cotton on April 19, following complaints from the domestic textile industry of a 20 per cent rise in cotton price since October last year, which was increasing cost of production. The commerce ministry subsequently lifted the suspension on May 21, after cotton farmers and states like Gujarat and Maharashtra protested against it but allowed its exports only against licences.
However, there were several contracts that exporters had entered into before the suspension of exports last month, many of them with buyers in Pakistan and Bangladesh, the future of this remains resolved. According to Director general of FIEO, Mr. Ajay Sahai, many of their contracts may have penalty clause which might make them liable of paying fines if they do not export. Morever, since the neighbouring countries have large textile industry depended on Indian cotton, it may also not be a wise move strategically to deny them raw materials.
“Bangladesh’s economy is heavly dependent on textiles (which forms 80 per cent of its total exports ) for which they source cotton from India. We also have bilateral trading arrangements with them under which they may demand cotton, Mr. Sahai pointed out.
Pakistan grows a lot of its own cotton, in fact, it is the fourth largest cotton grower in the world, but because of burgeoning demand from its textile industry it imports about three million bales annually, much of it from India. Cotton exporters have their finger crossed. President, Cotton Association of India, Mr. Dhiren Sheth said, despite the government lifting the suspension, things were not hunky dory. “ We do not know how things are going to play out. If the government starts issuing licenses, then we are fine. Otherwise, the problem remains,” he said.