India's government is planning to set up a cotton price stabilization fund by imposing a tax on exporters, said Minister of Textiles K Sambasiva Rao.

Speaking at an industry meeting in Hyderabad, Rao said the price stabilization fund would ensure a certain amount of predictability in cotton prices so fluctuation would not affect cotton growers and ginners as drastically in the future.

The Minister suggested the price stabilization fund could be managed by the Cotton Corporation of India (CCI) and could be used when there are large variations in cotton prices.

In order to maintain the fund, Rao explained that cotton exporters would have to contribute to the proposed new fund, and the amount collected would be used to build up a suitable inventory. The Textiles Ministry has yet to finalize the amount of taxes that would be collected from exporters.

The proposal to set up the stabilization fund will be forwarded to the Ministry of Commerce and the Cabinet Committee on Economic Affairs, and, once the proposal is approved, it would become mandatory for exporters to contribute to the fund, the Minister added.

This year, India's cotton exports are likely to reach 10 million bales of 375 lbs. each, down from last year's total of about 12 million bales.

The Cotton Advisory Board previously estimated India's cotton exports this year would reach 8.5 million bales, but the depreciation of the Indian currency vis-à-vis global currencies − including the U.S. dollar − worked in exporters' favor.

According to the Minister, India produces textiles worth $85 billion annually, while its textile exports stand at around $35 billion per year.

Source: Fibre2Fashion