According to leading exporters the average price fetched by Indian cotton yarn plunged to US $2.85 per kg in May 1998 from US $3.46 per kg in the earlier year, indicating a drop of 117.63 per cent. The main reason for this is that the demand for cotton yarn continues to recede in Southeast Asian countries due to the prevailing crisis in their economies.

These countries once used to absorb about 46-48 per cent of our cotton yarn exports. Unless their economies recover, the chances for any immediate improvement in cotton yarn exports look bleak. This is evident from another fact as well. Normally lower prices should have led to more exports.

However, this didn't happen. The volume of exports also declined for the first two months of 1998-99 by 11.56 per cent at 34.65 million kg in the same period of the earlier year.

This implies that the export target of $1,700 millionthat is being fixed by the authorities for cotton yarn and sewing threads for 1998-99 might remain a far cry. The argument, by the authorities in support of the target, is that even for the previous year the target was fixed at $1,700 million and it cannot therefore be lowered for the current year.

However, this argument seems to ignore the fact that currently several of our important markets are in a bad shape and they cannot absorb more yarn simply because we fix a higher target which may not be feasible.

Furthermore, even last year actual exports could reach only $1,577.63 million though the export target for the year was fixed at $1,700 million. The chances for any improvement in exports this year remain bleak. Even if we achieve actual exports to the order of $1,400-$1,500 million it can be termed good performance in view of the present unfavourable market conditions.

Furthermore, Pakistan has devalued its currency by 4.2 per cent to Rs 46 a dollar. This may enable it to offer stiffercompetition in the narrowing overseas markets. The CIS countries are also offering increasing competition because of their abundant cotton production and low labour charges.

Exporters who had earlier mooted a proposal to fix minimum export prices (MEPs) for cotton yarn exports in a bid to curb undercutting, have decided to place their proposal in the cold storage realising that the authority to fix such prices and revise them from time to time.

Besides, bureaucrats aren't quick in revising the prices to keep in tune with market conditions and this may only retard our exports. Even if MEPs were fixed it might not be difficult to undermine them through underhand dealings and it might be almost impossible to keep track of these.

In the local market, coarser counts evoke some demand and are therefore steady, but finer counts are soft in the absence of enquiries and the supplies exceeding the demand. This can be seen from the average prices for various counts of yarn in the table.