NEW DELHI: Pakistan and Bangladesh have demanded that the contracts for supply of cotton made by Indian growers before exports were suspended lastmonth should be honoured. In separate letters to the Indian government, they have also said that future supply of cotton to the countries should not be disturbed.

India has now put cotton on the restricted list and its exports can only be allowed through licenses issued by the government.

“The letters by Pakistan and Bangladesh have created quite a stir within the government. We believe that the commerce department is now looking at what could be done about the old contracts and how much exports could be allowed,” the official said.

The textile ministry had suspended exports of cotton on April 19 following complaints from the domestic textile industry of a 20% rise in cotton prices since October last year, which was increasing cost of production.

The commerce ministry subsequently lifted the suspension on May 21, after cotton farmers and states like Gujarat and Maharashtra protested against it, but allowed its exports only against licences.

However, there were several contracts that exporters had entered into before the suspension of exports last month, many of them with buyers in Pakistan and Bangladesh, the future of which remains unresolved.

According to Ajay Sahai, director general, Fieo, many of these contracts may have a penalty clause which might make them liable of paying fines if they do not export. Moreover, since the neighbouring countries have large textile industry dependent of Indian cotton, it may also not be a wise move strategically to deny them the raw material.

“Bangladesh’s economy is heavily dependent on textiles (which forms 80% of its total exports) for which they source cotton from India. We also have bilateral trading arrangements with them under which they may demand cotton,” pointed out Mr Sahai.

Pakistan grows a lot of its own cotton, in fact it is the fourth largest cotton grower in the world--but because of burgeoning demand from its textile industry it imports about 3 million bales annually, much of it from India.

Cotton exporters have their fingers crossed. Dhiren Sheth, president, Cotton Association of India, says despite the government lifting the suspension, things were not hunky dory.

“We don’t know how things are going to play out. If the government starts issuing licences, then we are fine. Otherwise, the problem remains,” he said.

The government official pointed out that it was not clear yet how much export was contracted by Indian cotton growers and the commerce department was looking into it.