Ahmedabad:
A central agency has begun cotton procurement at minimum support price (MSP) in Andhra Pradesh where prices have crashed after Monday’s export ban. Exporters and traders are foreseeing big claims after contract defaults as more than 14 lakh bales which have been contracted are yet to be shipped out.
“With cotton prices ruling at MSP of Rs 3,300 a quintal, we have started procuring it from Warangal, Guntur and Adilabad districts in Andhra Pradesh,” said an official of Cotton Corporation of India (CCI) in Mumbai. CCI procured 5,000 quintals from Guntur district on Monday and over 7,000 quintals from the three districts on Tuesday.
Traders said prices of 29.5-30.5 staple length cotton fell by 5% on Monday at the Adilabad market. CCI had not procured cotton from Andhra Pradesh in the previous year. However, prices in other major markets across the country were still ruling higher than the MSP. Cotton prices were 25-30% higher than the MSP in Gujarat, 10-15% in Maharashtra and 30-35% in Rajasthan.
Ahead of the two-day strike announced by ginners across the country, farmers have started offloading cotton stock. “Farmers have been getting good quality cotton to the market. Small mills from south India, larger mills like Vardhman and Nahar from north India and multinational trading companies like Louis Dreyfus and Paul Reinhart made steady purchases,” said Saurashtra Ginners Association secretary Anand Popat.
Exporters were confident of the government allowing shipments in the coming days. “Over 25 lakh bales have been registered (for exports) and not shipped. We expect the government to revoke the ban. If it doesn’t happen, exporters will face claims and arbitration with their buyers,” said Cotton Association of India president Dhiren Sheth.
It takes 15-20 days from the signing of the contract to getting the letter of credit (LC) for an exporter. In addition, 3-4 days are required to register their contracts with the Textile Commissioner’s office. Further, depending on the availability of vessel, shipments take place in a week to ten days.
According to estimates, exporters’ unshipped long position against registration certificate (RC) was at 10.53 lakh bales. Companies which handled international arbitration suits and claims in the previous year want to avoid a repeat this year.
“I had four international arbitration cases and innumerable claims which we eventually settled. It leaves a bad taste for all business partners,” said Cotton Association of India (CAI) additional vice president and Bhadresh Trading Company MD Bhadresh Mehta. The company’s unshipped long position against RC was at 2.50 lakh bales.
“International Cotton Association rules and regulation on cotton contracts are very stringent and we are already getting innumerable queries from our buyers. We expect the government of India to look into the issue,” said Mehta. Uncertainty over the issue has led exporters whose cotton is in ports to wait for clarity.
“Over 25,000 bales were ready to be loaded on vessels in Mundra and Pipava ports for China. We are now reviewing the situation as port charges and duties will be levied if we don’t offload the cotton. We have to once again book godowns and warehouses apart from taking an insurance cover,” said Rajkot-based Jaydeep Cotton director Mansukh Patel.
Small traders who have been directly exporting cotton to China bypassing large international traders and Indian export houses are feeling the heat.
“I had exported 45,000 bales and was yet to get the LC for 2,700. The buyers are demanding deliveries. Veiled threats have also been made,” said a trader, who has 6,000 bales unshipped long position against RC.
source: http://www.EconomicTimes.IndiaTimes.com / Home> Budget 2012> Markets> Commodities / by Madhvi Sally, ET Bureau / March 07th, 2012
