India, the world's biggest cotton producer, has contracted to import 20,000 bales from Pakistan for shipment this month after Indian prices jumped because of limited supply, industry officials told Reuters.
The move is a role reversal from earlier this year when Pakistan was buying cotton from India after its output had been hit by bad weather.
"About 20,000 bales have been imported from Pakistan. Landed cost of imported cotton is lower than local prices," Dhiren Sheth, president of the Cotton Association of India (CAI), told Reuters.
Indian cotton prices have risen by 28 per cent since the start of 2015-16 season on October 1 to 40,800 rupees per 356 kg candy (77.4 cents per lb) as two years of drought took its toll on output.
Pakistani supplies are available at about 70 cents per lb on a free-on-board basis, said one Mumbai-based dealer with a global trading firm.
"Supplies are dwindling in both countries. The sharp rally in Indian prices is making imports viable from Pakistan, but it has limited quantity for exports," the dealer said.
India has so far imported about 1.2 million bales in 2015-16 and needs another 400,000 bales before the new crop starts arriving from the end of September, Sheth said.
The country has exported about 6.5 million bales of cotton this season, with Pakistan accounting for nearly 2 million bales.
Purchases from India have been pushing up prices in Pakistan, said Shahzad Ali Khan, chairman of Pakistan Cotton Ginner's Association.
The All Pakistan Textile Mills Association has urged the Pakistan government to restrict cotton exports to India in an attempt to provide raw material for domestic textiles production.
Indian industry officials, including Sheth of the CAI, said that Pakistan should not restrict exports since it imported cotton when it was in need.
Global cotton prices could rally sharply in the coming months as stocks become further depleted in key producing countries, one Karachi-based dealer said.