Indian Govt eases cotton export cap

After months of differences between the agriculture and textiles ministry over lifting the cap on export of cotton, Indian government on Wednesday finally allowed export of another 1 million bales of cotton in 2010-2011 crop marketing season that started in October (1 bale=170 kg).

With this, almost 6.5 million bales of cotton will be allowed to be exported this year.

Earlier, it had capped export at 5.5 million bales. However, the agriculture ministry had opposed the cap on the grounds that production this year was more than the consumption.

“We have allowed additional export of 1 million bales of cotton this year,” Commerce minister Anand Sharma told reporters after a group of ministers’ meeting. All other details about the method of exports and the timeframe in which the cotton needs to be shipped will be determined by the commerce ministry.

Sources said in Wednesday’s meeting, the textiles ministry had opposed easing of the export cap on the ground that production of cotton in 2010-2011 is estimated to be 31.2 million bales, down from the earlier estimate of 32.5 million bales.

In such a situation if more exports are allowed then the surplus left at the end of the season will be even less than the country’s monthly consumption. However, its objection did not find much support.

According to the agriculture ministry’s third advanced estimate, production of cotton in 2010-2011 is estimated to be around 33.92 million bales, almost 40 per cent more than last year.

Agriculture minister Sharad Pawar had twice written letters to the Prime Minister requesting him to lift the cap on exports in the interest of farmers. Cotton prices have softened from Rs 62,000 a candy to Rs 45,000 a candy (1 candy =376 kg) in the last few months.

Meawnhile, the Confederation of Indian Textile Industry (Citi), the apex body of textilies industry in the country, termed the government's decison to allow more exports as 'disturbing'.

“We have met the minister on Wednesday and urged him not to allow more exports or else the country will be left with very little cotton by the end of this season,” Shishir Jaipuria, chairman of Citi told Business Standard.

He said as per their assessment after on Wednesday decision, the country's closing stock of cotton will come down to just 1.75 million bales, which is not even sufficient to meet one month's consumption.

"We consume around 2.3 million to 2.5 million bales of cotton every month and after on Wednesday decision, the surplus with come down to just 1.75 million bales," Jaipuria said. He said the closing stock of cotton would have been around 2.75 million bales if the government struck to its earlier decision to cap exports at 5.5 million bales.