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Govt lifts ban on export of cotton, new registrations on

Committee to review demand-supply situation after three weeks to prevent abnormal rise in prices

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The commerce ministry has decided to lift the ban on and allow traders to apply afresh for registration. The ban was lifted barely hours before Prime Minister was scheduled to chair a meeting on export of farm products, including cotton. However, the Prime Minister’s meeting was later postponed.

“After a comprehensive review it was decided that suspension of new registrations for exports be revoked and exports be permitted,” an official statement said after a high-powered committee comprising Agriculture Minister Sharad Pawar, Commerce and Textiles Minister and Chairman of the Prime Minister’s Economic Advisory Council held an emergency meeting earlier today to review the domestic demand-supply situation. This was held against the backdrop of a strong letter from the agriculture minister to the prime minister, apprising him of difficulties that cotton growers in his home state Maharashtra were facing because of the ban.

The committee will also review the demand-supply situation after three weeks to ensure prices do not abnormally flare in the domestic market. Officials in the agriculture ministry estimate the country can export another 2-2.2 million bales of cotton, besides the 12 million bales, already shipped. (1 bale =170 kg)

March 5: Govt bans cotton export to ease supplies for domestic textiles industry
March 12: Govt allows export of those quantities already registered with DGFT
April 9: A high-powered meeting decides to keep the cap intact. Does not allow fresh registration for export
April 10: Agriculture Minister writes to PM protesting the govt’s anti-farmer export policy 
April 18: The Cotton Advisory Board under the textiles ministry raises production estimate for 2011-12 to 34.7 million bales
April 24: Agriculture ministry ups 2011-12 production estimate to 35.2 million bales
April 30: Govt decides to lift the cap on export. Allows fresh registrations. Formal notification in a day or two

The government had banned the export of cotton on March 5, after the domestic textile industry complained of a squeeze in the supply of the crucial raw material, citing export of raw cotton in large quantities by foreign trading companies operating in India. However, within 10 days of the ban being imposed, the government eased some of the curbs and allowed export of those quantities of cotton for which registrations were already complete.

Thus, 2.5-3 million bales of cotton, already registered with the Directorate General of Foreign Trade (DGFT), could be shipped out. However, no fresh export contracts were allowed.

The clamour for more export grew after the Cotton Advisory Board (CAB) under the ministry of textiles and the department of agriculture both raised their 2011-12 production estimates. While raised it by 500,000 bales, the agriculture ministry pushed it by almost 1.1 million bales in its third advance estimates.

“The revised production estimate clearly shows the country could export another two million bales, as demand from textile mills has also dropped, in comparison to earlier expectations,” a senior agriculture ministry official had told Business Standard.

As an interim measure, the textiles ministry has directed state-run Cotton Corporation of India (CCI) to build reserves of one million bales this season to ensure smooth supply to cash-starved textile mills. The season runs from October to September.

To build the reserves, will start procuring around one million bales from June at market rates. The purchase and subsequent storage could cost the government an additional subsidy of Rs 4,000 crore.

Following the ban, cotton prices had dropped below the minimum support price of Rs 3,100 per quintal in some places. However, prices recovered after the government started purchasing cotton to build reserves.

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