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Cotton export ban may be lifted

BS Reporter  |  New Delhi 

The ban on cotton exports might be lifted, even as a group of ministers (GoM) meet failed to come to a conclusion on the matter.

Commerce secretary Rahul Khullar told Business Standard the ministry is contemplating lifting the ban and a final decision in this regard will be taken soon.

Officials, meanwhile, said there may be an emergency meeting on the subject tomorrow after which a notification to lift the ban may be issued.

Today's GoM was chaired by finance minister Pranab Mukherjee and attended by agriculture minister Sharad Pawar and textiles and commerce & industry minister Anand Sharma. After the meeting, textiles secretary Kiran Dhingra said,“The discussion on lifting the ban on cotton exports remained inconclusive and the GoM will meet soon to take a final call.”

As an interim measure, the commerce ministry has allowed exports of cotton, which has been already loaded on containers, till the midnight of March 4. The government had banned export of cotton on March 5. “This means around 80,000 tonnes of cotton (0.5 to 0.6 million bales), which are lying in various ports since Monday, can now be shipped out,” a senior industry official said. One bale is 170 kg.

However, no decision has been taken on those exports, which have already been registered, but are not lying in ports. Traders said 2.5-3.0 million bales (of cotton has already been registered but not yet shipped. The GoM met after the prime minister issued a directive on immediately reviewing the ban.

A delegation of Congress leaders from Maharashtra and Gujarat had met him on Wednesday. The ban on exports of cotton on Monday took an ugly turn after both the agriculture and textiles ministries hardened their stand on exports.

While Anand Sharma said exports have been banned to protect the domestic textiles industry, which did not have stocks to run their mills for the remaining seven months of cotton crop marketing year that will end in September 2012.

Pawar, however, termed the decision as being against the interests of farmers. Pawar also said he was not being informed on the decision to ban exports.

The ban was also bitterly opposed by Gujarat Chief Minister Narendra Modi, who shot off a letter to the prime minister on Monday and also farmer’s organisation of Maharashtra.

"We could not countenance a situation where the country, which is a major cotton producer, is forced to import at much higher prices to meet the domestic demand of the industry. That is why, it was a judicious and considered view taken," Sharma had said.

The textiles ministry also blamed hoarding by sister-concerns of multi-national trading companies operating in India as being the prime reason for the sudden surge in export registrations, which compelled them to recommend the ban.

“In mid-February, when a Committee of Secretaries (CoS) reviewed the export scenario, 8.3 million bales of cotton had been shipped out of the country, while the registrations were for 10 million bales,” Dhingra said.

However, by early March, when the CoS again met, the registrations had surged to 12.5 million bales, which meant that exporters had some inkling that government might clamp down on exports and has started applying heavily for registration.

“We are in a bad situation as the shipped quantity of cotton will pull down the carryover stocks for 2012-2013 season to 3.6 million bales against a requirement five million bales,” she said.

More exports would have left no cotton in the country, but to shut down the mills for the next seven months, the textiles ministry felt.

The benchmark March Cotton futures on MCX shed almost six per cent after the ban was imposed on Monday to drop at Rs 15,900 per quintal. It recouped some of the losses in the subsequent days after indications came that the ban was being reviewed.

The agriculture ministry estimates India’s cotton production in 2011-2012 at a record 34.08 million bales, up 3.2 per cent from last year.

First Published: Sat, March 10 2012. 00:31 IST