Under this system applications for allotment of quotas are invited from those firms which have goods ready for exports and are also holding the L/Cs.They have to ship the goods within the prescribed time-limit. The Texprocil had invited recently applications for allotment of such quotas under this system for the April-June 2000 period.

The quantity of yarn set apart for allotment for exports to EU countries was 7,786,462 kg, but applications totalled for just 3,650,499 kg (i.e. less than half the available quantity) with the result that the balance of 4,135,963 kg. had no takers.

Likewise, the quantity of yarn available for exports to the USA was about 4,50,000 Square metre equivalent (SME), but 28,639 SME remained unallotted for want of takers.

In the past when cotton yarn exports used to be very buoyant, exporters under the PPE (past performance entitlement) system, could dispose of their PPE quotas at a hefty premium in the market ranging from Rs 25-30 per kg and make a fast buck.

After doing so, they rushed to grab quotas under the FCFS Ready Goods System so as to sustain their PPE entitlements.

However, the premium on PPE quotas has now evaporated in thin air as European markets are weak at present and it is becoming increasingly difficult to utilise even PPE quotas. For instance, towards the end of the last year, many holders of PPE quotas were seen running here and there to utilise their quotas, irrespective of price considerations. The quota markets are still weaker at present.

This can be seen from the fact that large quantities of other textile products which were also available for allotments under the FCFS Ready Goods Systems had equally poor response from the exporting community. Thus, for instance, substantial quantities of cotton fabrics (grey and bleached), other fabrics, terry towels, bed linen, table and kitchen linen had few takers and large quantities of these products could not be allotted.

Likwise in the case of exports to the USA, quantities applied for allotments in the case of yarn dyed fabrics, duck, cotton sheeting, were less than available. Only in the case of a few items for exports to the USA the demand exceeded the available quantity for allotment and cut-off prices had to be fixed for them to finalise allotments among various applications. These items included satin, cotton terry towels, SHL terry towels etc.

Physical offtake of cotton yarn by non-quota countries show signs of improvement but value realisations remain hopeless in view of stiff competition in the overseas markets.

Thus while overall shipments of cotton yarn from the country in 1999-2000 show an improvement of 14.09 per cent to 554.74 million kg compared with 486.25 million kg in the earlier year, the foreign exchange earnings for the year could move up only by 8.88 per cent to US $1541.05 million from US $1415.40 million, because the average price realisation in 1999-2000 plunged further to US $2.77 per kg from US $2.91 per kg in the previous year.

It might be interesting to recall that when the Asian financial crisis started in July 1997, the average price fetched by Indian cotton yarn was around US$3.52 per kg. It is no surprise, if several spinning mills which had joined the gold rush for yarn earlier, are now struggling for their survival.

To add to their woes the union finance minister hiked the excise duty incidence on spinning mills last year and totally exempted small spinners from the excise levy making it difficult for the spinning mills to compete even in the domestic market.The domestic demand for cotton yarn remains weak, as large part of the country are in the grip of famine conditions and the purchasing power of the people remains crippled also due to relentless rise in the overall cost of living.