If the overall exports of cotton yarn (including sewing thread) from the country in 1997-98 were better at $1,577.63 million compared with $1,512.70 million in the earlier year despite the currency turmoil in east Asian countries from July 1997, it was because prior to the crisis, much exports took place and the real impact of the crisis was felt much later than July 1997.

It is therefore, feared that the total exports of cotton yarn in 1998-99 will be much lower than in 1997-98 as the impact of the lack of demand from the east Asian countries which used to account for 45 per cent of our exports might be felt throughout the year.

Severalspinning mills are said to be nursing substantially unsold stocks of cotton yarn despite overall cut-back in production. They are, therefore, said to be selling their yarn in the export markets at cutthroat prices with sufficient credit facilities to attract buyers. Some Indian spinners have reportedly sold recently cotton yarn of 2/30s around $3.20 to 3.25 per kg (C&F) on 90 days credit basis. Earlier this yarn could fetch $2.10 to 2.20 (C&F) on credit for 90 days.

The main reason for this is that some of the spinners are nursing heavy stocks of yarn despite some overall decline in production. This is evident from the fact the stock of yarn with mills had reached 84.95 million kg by the end of December 1997, compared with 79.38 million kg at the end of the previous month. Almost throughout 1997 (except in December 1997), stocks of yarn with the spinning industry remained well below the level of 40 million kg. In June 1997 they stood as low as 72.33 million kg and have been slowly rising since then, in viewof the decline in the overseas demand and sluggishness in the domestic offtake.

Exports to quota countries have been continuing as usual. In view of insufficient quotas these allocations command a premium of Rs 30 - 31 per kg in the open market. Many EOUs which were set up with a view to tapping non-quota markets are seen to be buying such quota from the market in order to export their yarn even to quota countries. It is complained that the present system of quotas gives allocations to those who are not interested in effecting exports, and deny these to those who actually want to effect exports such arbitrary quota system may have been stream-lined.

The slack demand for yarn is having its impact on the demand and prices for cotton. Despite a sharp decline in cotton crop this season compared with that in the earlier season, cotton prices for some popular varieties have fallen during the last couple months by about Rs 1,000-2,000 per candy. For instance in the last few months the LRA variety has fallen fromRs 20,000 to Rs 18,300, H-4 from Rs 21,000 to Rs 20,000, Shankar-6 from Rs 22,000 to Rs 20,700. MCU-5 from Rs 27,000 to Rs 25,000 and DCH-32 from Rs 32,500 to Rs 31,000 per candy. The local demand for cotton yarn is subdued to summer holidays and power cuts. Price movements have been very narrow as can be seen from the average prices for various counts of yarn (in Rs per 5 kg).