MUMBAI: Indian cotton prices are likely to hit a fresh lifetime high this week, tracking a rally overseas and as in local demand surpasses lower-than-expected arrivals, dealers said.

"Local mills and exporters were aggressively buying to fulfil their requirements, but arrivals were low. They were not improving despite record high prices," said a senior official at Gujarat State Co-operative Cotton Federation Ltd.

Domestic cotton arrivals at Indian spot markets till Feb. 6 in the 2010/11 season rose by just 5.7 per cent on year, the state-run Cotton Corp of India said.

India, the world's second-biggest producer, had permitted 5.5 million bales for exports from Oct. 1 but met with a poor response because rains hit harvest.

An initial deadline was extended until Feb. 25 for 1.7-1.9 million bales which went unshipped.

Overseas demand for Indian cotton has increased after bad weather hit crops in China and Pakistan, both leading consumers.

In India, the price of the most common Shankar-6 variety surged by 2,500 rupees to a record high of 55,500 rupees per candy of 356 kg each on Tuesday, data with the Cotton Association of India showed.

At 7:07 p.m., the New York cotton futures contract was down 0.02 per cent at $1.7447 per lb.

India is likely to produce a record 32.9 million bales of cotton in 2010/11, topping last year's 29.5 million bales, a senior government official said last week.

More of Australia's summer cotton crop could be at risk as floodwaters caused by heavy rains flow to southern planting regions, the government's commodities forecaster said on Tuesday.