Sources argue that though liberalisation of imports under SIL may appear attractive, it is not of much value to the exporters. SIL is issued to certain categories of exporters at the rates of six to 12 per cent of the value of their exports. Assuming that in most cases such licences are issued at the rate of six per cent of the export value and if the premium of SIL is at 3.5 per cent, the net benefit on exports can be just 0.21 per cent. In case the premium moves up, say to five per cent, the net benefit to the exporter can be only 0.30 per cent.

With such meagre benefit the exporters cannot offer more competitive quotations.

Actually average prices realised for Indian cotton yarn in the overseas markets have dropped to new low of $2.82 per kg. Even at these rates shipments were low at around 36.68 million kg in June 1998. In July 1997 when the South-east Asian currency crisis started, exports were of the order of 42.22 million kg and the average price realisation was $3.52 per kg.

According to leading exporters, Indonesia, Korea and Pakistan have emerged as main competitors in the overseas exports. However, Indian exporters are benefited by factors like the rupee's depreciation and the foreign exchange retention scheme introduced by the government.

Though Indonesia is not known as a major cotton producer, it has the advantage of very low labour cost and heavy devaluation of its currency, rupiah. By importing cotton, that country is able to offer its yarn at a very competitive price.

Korea has technological advantage apart from currency depreciation. Even Brazil, Taiwan and Greece are competing vigorously in the export markets.Indian exporters point out that the finance minister Yashwant Sinha has already imposed special import duty on the ground that certain local levies, payable by domestic manufacturers, were not applicable to their counterparts abroad.

Similar benefit should now be allowed in respect of exports as well since no refund of local levies is available at present to the exporters. This place Indian exports at inherent disadvantage.

Japans which is gradually going out of the cotton spinning industry, depends largely on imports of such yarn. While Pakistan and Indonesia are firmly entrenched in that market, India is losing ground.

In view of the slack exports, production of cotton yarn in the country is sliding. Many small units have rolled down their shutters while several organised spinning mills are reducing their output. According to cotton experts this will have a major impact on cotton consumption. Whether the cotton consumption by organised mills will now reach 146 lakh bales estimated by the Cotton Advisory Board is now anybody's guess.

In view of short supply, average prices of cotton yarn for coarse and medium counts are ruling firm in the domestic market.