Pune: India’s forward export contracts of cotton have more than doubled from about seven lakh bales in September 2017, driven by increased demand from China, lower domestic prices and depreciation of the rupee. Traders said exports would go up in this financial year despite expected projections of tight supplies and increase in minimum support price (MSP) by the government.

"We have signed export contracts for 14-16 lakh bales (of 170 kg each). About 75% of these contracts are for export to China,” said Atul Ganatra, president, Cotton Association of India (CAI). “The 25% duty imposed by China on cotton imports from the USA will make Indian cotton more affordable to Chinese buyers.”

In 2017-18, India could not sign as many forward contracts since cotton availability was restricted. This year, traders are upbeat because Indian cotton is the cheapest in the international market and demand from China is looking up.

Ganatra said he expected total exports to China to increase to 30-40 lakh bales this year, up more than threefold from eight-nine lakh bales last year.

Bangladesh and Vietnam are the other buyers that have signed some forward contracts for Indian cotton. Indian traders export maximum quantities of cotton in November and December since India is the only country where cotton is available at that time.

“In 2017-18, we had exported 10 lakh bales every month from November to January,” said Manish Daga, director, CAI.

Concerns such as uncertainty over yield due to late sowing in Gujarat, pest incidence in Maharashtra and Telangana, 2% decline in area sown under kharif crops and increasing domestic consumption of cotton may limit exports. However, traders said that factors supporting exports are strong too.

In India, cotton is currently priced at about Rs 48,000 per candy of 356 kg each. The central government has increased the MSP for raw cotton seeds for 2018-19 season 28.1% year-on-year to Rs 5,150 per quintal. “The price of each cotton candy of 356 kilogram at MSP is Rs 47,000. Indian cotton exports will remain competitive even at MSP as the depreciation of the Indian currency will aid exports,” said Ganatra.

India will have to compete with Brazil, though, to get a larger share of Chinese demand. The United States Agriculture Department too expects India’s exports to increase in 2018-19.