But that is not certain. Though the East India Cotton Exchange (EICA), the only association cleared to start futures trading in cotton, has submitted its bylaws and futures contract details to the Forward Markets Commission (FMC) for clearance, a good number of cotton traders, brokers and millowners seem to be apprehensive about whether EICA will be able to deliver a worthwhile product that will be successful. More so when a majority of EICA's 400-strong membership is dormant.

The apprehensions were voiced last week by a small section of members of the East India Cotton Association (EICA) who attended a `warm up' meeting called to inform them about the reintroduction of cotton futures by the self-set deadline of July 17,1998.

Though millowners have formally welcomed the reintroduction of futures, they are not sure what they will gain from it. Especially since the contracts cannot be enforced for delivery. "Taking up a membership with EICA will not benefit us", said an executive of one of the top five cotton consuming mills, requesting anonymity. "EICA is more of a traders' club which will not be able to guarantee the supply of our requirements. In an era of free trade, getting our cotton requirements from international markets is far easier."

An EICA member was equally uncertain about futures: "At a time when there is a general tendency to renege on commitments even for smaller amounts, it is not known how EICA will be able to ensure the performance of major delivery contracts. EICA will have to conduct a thorough exercise to clear our doubts and apprehensions."

Others worry that the contract may have nothing for the farmer. "The proposed Indian Cotton Contract of EICA is likely to be restrictive and appears to bebiased in favour of cotton consuming mills, while not benefiting the farmers, who too are an integral part of the cotton economy."

Given these doubts, EICA president Suresh A Kotak is conscious that he has a major job on hand to convince the skeptics. "We have thought of all possibilities and are in the process of convincing all concerned about the benefits of cotton futures," Kotak told the members last week at their warm-up session.

"We have submitted the draft bylaws to the FMC and if there is any delay in commencing cotton futures by July 17, it will be because of clearance and other related aspects and not (because of delay) on our part," Kotak said.

To make sure that EICA produces a viable futures plan, office-bearers of the association had visited the New York Cotton Exchange (NYCE) and other adjoining cotton trading centres of the developed markets to gain first-hand knowledge of trading practices.

Over the next one month, the association plans to try convincing all concerned about thebenefits of cotton futures -- including cotton farmers, millers and ginners. They will visit all major cotton producing and trading centres in India and conduct mock trading and introductory sessions. In Mumbai, this introductory session and mock trading is expected to be held some time this week.

Once the draft byelaws get the FMC nod, EICA plans to get them ratified at an extraordinary general meeting of its members scheduled on July 7.

The rush to meet the July 17 deadline, according to sources, is because cotton traders and speculators (from Punjab, Gujarat and Mumbai) at the South India Cotton Association in Coimbatore (Tamil Nadu) are planning to stake a claim to trade cotton futures in case the EICA slips up.

After the ban in 1966, the FMC permitted only non-transferable specific delivery (NTSD) contracts at various FMC-recognised associations across the country. But the cotton economy has come a long way since then. The freeing of global trade has brought with it the associated risks of priceand currency volatility for various cotton varieties. This has made it necessary to introduce some kind of hedging and price discovery mechanism for growers and users alike.

Proposed cotton contract:

The East India Cotton Association (EICA) last week submitted to its members the details of the proposed Indian Cotton Contract for consideration. The contract, which will be taken up at an extraordinary general meeting of the association's members on July 7, is part of the changed bylaws sent to the Forward Markets Commission (FMC) for final approval.

The proposed Indian Cotton Contract (ICC) will be traded through one hedge contract encompassing almost 80 per cent of the cotton varieties grown in the country. There are five delivery months -- December, February, April, June and September -- which means three contracts shall run simultaneously at any point of time. These contracts will be settled daily.

Trading on the Cotton Exchange will be between 11.00 am and 4.00 pm on weekdays and between11.00 am and 2.00 am on Saturdays. The following are the other details of the contract:

Basis variety: Roller ginned 26 mm; fine grade; 3.6 to 4.2 micronaire having strength of minimum 18 gm/tex 1/8" gauge stelo level (not 1/8 gauge pressly level).

Tenderable: Three mm above the basis variety, and two mm below the basis variety. One grade "off" with discount; two grades "on" with premium.

Tenderable places: Any place where the cotton is pressed; also can be tendered at Mumbai, Ahmedabad, Coimbatore, Madurai and Indore but the tenderer is entitled to claim nothing more than the price for spot delivery and the applicable taxes.

Unit of trading: 55 bales (93.50 quintals, one truckload of cotton).

Unit of price quotes: Rs per quintal; spot delivery, ex-sellers godown.

The ICC will be permitted a maximum price fluctuation of Rs 150 per 100 kg during any day. It will be traded on a party-to-party basis between clearing house-entitled members only. Every clearingmember, clearing-cum-trading member and trading member shall be fully responsible for all his commitments irrespective of default(s) on the part of their clients and/or other member(s) with whom he has dealing(s).

Default of any one or more members shall not affect the rights and liabilities of others for their own contracts in any way. No clearing house entitled member shall fail to discharge his liabilities merely on grounds of default of others.

Observers feel the proposed features may force buyers to incorporate the uncertainties arising of delivery and quality in price quotes, which may result in lower than expected prices in the case of futures contracts. The contract may, therefore, be more beneficial to bulk consumers of cotton (millers and ginners) and not growers.

Also, given the wide range of cotton grown in the country, just one hedge contract is said to be "too restrictive and unfavourable" even for bulk cotton consumers. Before futures were banned, there were as many as five differentcontracts to suit the diverse cotton requirements of bulk consumers.

Lastly, to become a member of the clearing house, the person/entity has to be an EICA member, whose membership has a price tag of Rs 52,000 (Rs 25,000 as deposit, Rs 25,000 entrance fee and Rs 2,000 annual fee). The EICA member then has six options to chose from for trading in cotton futures: