Cotton growers' associations and exporters have sharply criticised the central government for the continuation of a ban on cotton exporters. The Maharashtra State Cooperative Cotton Growers' Marketing Federation and Cotton Association of India have claimed that the group of minister's decision was pro-cotton mills and anti-cotton growers. They estimate the raw cotton price, which is currently at Rs 3,800 per quintal, may fall by at least 10% due to the government's decision.
On the other hand, the International Cotton Advisory Committee (ICAC) observed that the continuation of the export ban by India would not have a significant or long term impact on world market prices at this time. The world cotton industry has sufficient supplies to meet current demand, and world stocks of cotton are rising. Furthermore, the continuation of the ban on exports was fully anticipated by market participants.
The Commerce Ministry argued that allowing fresh exports would harm the interests of domestic mills. However, the Agriculture Ministry said more exports could be allowed, as domestic production, at 34.08 million bales, was four% more than last year’s output. Last week, as an interim measure, the textiles ministry had directed state-run Cotton Corporation of India (CCI) to build a 2.5-million bales cotton reserve this season to ensure the smooth supply of the raw material to cash-starved textile mills.
NP Hirani, chairman, Maharashtra State Cooperative Cotton Growers' Marketing Federation told Business Standard: "Undoubtedly, the government's decision to continue ban on cotton exports is pro cotton mills and anti farmers. It is really quite unfortunate. The government should allow cotton exports under open general licence (OGL) and it should not have flip flop policy in this regard. Farmers are once again the losers. Raw cotton prices are expected to fall by at least 10%."
Dhiren Sheth, president, Cotton Association of India said even during the years when India was a net cotton deficit country, cotton exports were always kept under OGL. However, it was ironical that in the years of surplus availability of cotton, export was meted out with restrictive policies now. "Despite being a net cotton deficit economy, our neighboring county Pakistan always follows the practice of maintaining free exports of cotton to ensure optimum return to the farmers and there is no logic why India, which is a surplus cotton economy now, cannot follow suit. It is in everybody’s interest that the ban on cotton export is removed without any further loss of time and we once again urge the Government to open registration of further quantities for export and make the export of cotton free under OGL without any quantitative and other restrictions with immediate effect," he noted.
Further, Terry Townsend, executive director, International Cotton Advisory Committee said: "In previous episodes, the interventions by government were disruptive because they were not anticipated, but that is not the case in this situation. If I understand the situation correctly, the government will permit the fulfillment of existing contracts for cotton with registration certificates. If this is the case, then the most disruptive aspect of the export ban, the retroactive application of the ban, will be eased." He reiterated that continuation of the ban may not have any long term impact on world market prices.
