"Since the beginning of the current year, the prices of raw cotton has showed signs of firming up vis-a-vis the international prices," said highly placed sources in the textile ministry.

"This would essentially mean that the exports prospects for the commodity would receive a further setback," said highly placed sources in the Union textiles ministry.

With the Pakistan cotton ruling at a mere US cents 40 per pound, the exports of Indian cotton look far from brighter. At the same time there has been a huge carryover stocks and hence the decreasing rate of returns to the producers have emerged as the central problem.

One major reason as to why the prices of Pakistan cotton continues to be favourably low in the international market is due to the fact that the their government procured cotton from the producers at fixed rate. "Unlike in India were the minimun support price (MSP) mechanism leads to a distortion of the prices," said ministry sources.

Carryover stocks for raw cotton, as per the ministry of textiles have been estimated at 49 lakh bales for the season of 1999-2000, which is also the all-time record high.

The total production of cotton in the current season is estimated at 216.5 lakh bales including an opening stock of 36.5 lakh bales from the previous cotton season.

Along with this the total estimated imports stand at 1.5 lakh bales which has been made on the basis of actual arrivals and contracts already entered into by the user industry with their respective foreign suppliers or even those which are in the pipeline.

On the demand side, the mill consumption has been placed at 167.5 lakh bales as against 145.51 lakh bales estimated for the previous season."The poor financial conditions of the mills, cheaper imports as well as subdued demand for yarn in the domestic market were also responsible for the huge carryover stocks.

At the same time the estimates of consumption by the SSI units and non-mill consumption have been placed at seven lakh bales and 11 lakh bales estimated for the previous season.

Cotton exports have been estimated at 1.5 lakh bales as compared to one lakh bales estimated for the previous season, as per sources in the textile ministry.

The government has been bringing home the fact that the mill industry, cotton traders, producers and the institutes need to hammer out new solutions to tackle the decline in the returns.

A continuous hike in the minimum support price for cotton for sustaining confortable returns to the cotton producers is not a favourable option, the government has emphasised that the industry as well as the producers themselves needed to enhance the quality of cotton to compete in both the domestic as well as in the international markets.