Ministerial panel to review cotton export ban on March 9

Written by fe Bureau | New Delhi | Updated: Mar 7 2012, 09:13am hrs
Apanel of ministers will on March 9 review the ban on cotton exports, textile secretary Kiran Dhingra said on Tuesday, after agriculture minister Sharad Pawar said he was kept in the dark about the decision and sought Prime Minister Manmohan Singhs intervention to lift the restriction.

A committee of top bureaucrats, comprising the secretaries of commerce, textile and agriculture, took a unanimous view to ban cotton exports in the year through September after meeting twice and taking a holistic view of domestic supplies in case the shipments arent curbed, Dhingra told in a news

conference.

The Directorate General Of Foreign Trade on Monday announced the ban on cotton exports after the registration of export contracts hits a record 12.5 million bales, taking most stakeholders by surprise.

Government officials said the move was aimed at keeping supplies steady throughout the year for garment makers and some other sections of the textile industry struggling to purchase cotton in big lots due to a severe fund crunch following

demand slowdown for their products in the global market due to the macro-economic crisis and a relentless rise in raw material costs last year.

The government, however, has no plans to ban cotton yarn exports yet, Dhingra said, adding that the fate of the unshipped quantity of cotton for which registration has already been completed will be decided by the ministerial panel, headed by finance minister Pranab Mukherjee . She said traders have already shipped around 9.5 million bales

of cotton.

The country had exported around seven million bales in 2010-11, mostly to China, after keeping a ceiling on the shipments for most part of the year.

The government had freed cotton exports in 2011-12 anticipating a record harvest, aiding exporters who are lifting a bulk of the crop after a pick-up in the Chinese demand. The country

expects to produce 34.5 million bales in 2011-12, compared with 33.9 million bales last year.

Earlier in the day, a visibly upset agriculture minister said, They kept me in the dark. I came to know about this only after a notification was issued by DGFT on Tuesday. While taking such a decision it is always proper to discuss it in Cabinet Committee on Prices or in Cabinet Committee on Economic Affairs as is done with wheat, rice, sugar. So I

have raised this issue with the Prime Minister. This is highly objectionable, Pawar said.

The textile secretary said, It was unfortunate that the agriculture minister himself could not be consulted because he was out of the country when the decision was reached. And when the agriculture minister came back to the country, the textile minister had gone abroad... But the matter will now be placed before the informal group of ministers for the decision.

Pawar has been of the view that since plentiful supplies have already dragged down cotton prices significantly this year from record levels in 2010-11, there was no need for any ban as farmers earnings will further dwindle. However, the textile secretary said the decision to ban cotton exports is in line 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 even if the consumption by mills is revised downward to 23 million bales from the Cotton Advisory Boards forecast of 24 million bales in 2011-12, Dhingra said.

If the entire quantity for which registration is done is allowed to be shipped, it will worsen the domestic supply going forward, especially during the off season after harvesting is over.

We thought that suspending exports immediately and thinking about it in cool heads later about what else to do was better than being blamed for leading to a domestic shortage by allowing more than 12 million bales of shipments, she added.

Asked if putting a ceiling on exports in the beginning of the year was a better option than banning it later in the year, she said nobody expected a sudden unprecedented spurt in cotton registrations in February to more than 12 million bales. Separately, a government official said suspicion about attempts to corner licences by a few is gaining pace.

However, opposing the ban, Gujarat chief minister Narendra Modi has also sought it removal at the earliest. Gujarat is the countrys largest cotton producer.

A government official of a key producing state said, The ban will hit farmers's income badly, especially in view of the low yield this year in some states following a rough weather. More than 10 million bales of cotton are yet to come to the market and the decision will further drag down domestic prices. Why should the poor farmer be at the receiving-end of any export policy

However, welcoming the decision, Apparel Promotion Export Council chairman A Sakthivel said, While 1 kg of raw cotton provides an yield of R100, same cotton as trousers provides an yield of R500. The employment level

at raw cotton level is 0.5 worker per kg, much less than at the finished product level, as the garment sector

has employed 6 million workers.