In an embarrassing policy shift, the government on Sunday said it has decided to lift the controversial ban on cotton exports imposed last week in the ?interests of farmers, industry and trade?.
?Keeping in view the facts, the interests of the farmers, interest of the industry, trade, a balanced view has been considered by the group of ministers (GoM) to roll back the ban,? commerce minister Anand Sharma said, adding that ?a formal order to lift the ban will be issued tomorrow (Monday)?.
India is the world?s second-largest cotton supplier.
The GoM, headed by finance minister Pranab Mukherjee reviewed the ban on March 9, after a directive from Prime Minister Manmohan Singh to ?urgently? review the decision, amid stiff opposition from agriculture minister and NCP chief Sharad Pawar. The government had probed into the allegations of foul play by unscrupulous traders in licence grabbing.
The move will raise hopes for exports of around 3.5 million bales of cotton for which registration had been completed before the ban was imposed on March 5.
Citing updated data, trade sources said around 13 million bales of cotton had been registered for exports, of which 9.5 million bales were shipped out. The country had exported around 8 million bales last year through September 2011. One bale equals 170 kilograms.
The decision also caps a week-long friction between the ministry of agriculture and the ministries of commerce and textiles, which started with the notification of the ban by the Directorate General Of Foreign Trade.
Government officials said the ban was imposed to conserve the raw material for sections of the cash-strapped textile industry after export registration witnessed a sudden unprecedented spurt after mid-February raising strong suspicion about foul play by traders.
However, the ban triggered protests by key producing states such as Gujarat and Maharashtra, and Union agriculture minister Sharad Pawar who argued farmers? income would be affected due to a resultant fall in domestic prices. Significantly, polls are due in Gujarat within a year.
Pawar also said he was ?kept in the dark? about the ban, prompting Prime Minister Manmohan Singh had to direct an urgent review of the decision by the GoM on March 9.
Prices of the popular Shanker 6 variety fell 6% to R33,000 per candy of 356 kg since the ban was imposed, while global prices jumped 4.5% on Monday itself responding to the ban.
However, commerce and textile minister Anand Sharma on March 7 defended the ban, saying “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”.
Sharma also said, ?”We were informed that there has been cornering of huge quantities (of cotton) by handful of big players who have exported to their own warehouses abroad. It did cause alarm.”
Last week, Textile Secretary Kiran Dhingra said the ban was also in step with the policy approved by the informal GoM in April 2010 that the country will maintain a carry-forward stock level of at least five million bales each year and “only surplus cotton should be exported”.
Exports of 9.5 million bales have brought down carry-over stocks for the next season to just 3.6 million bales and if the entire quantity for which registration is done is allowed to be shipped, domestic supplies will be jeopardised especially after harvesting is over, Dhingra said.
The country is expecting a record harvest of 34 million bales of cotton in 2011-12, up from 33.9 million bales last year.
