India bans cotton exports: trade group

An Indian worker sorts cotton in Dhrangadhra in 2011. India, the world's second-largest producer and exporter of cotton, has banned overseas shipments of the commodity to guarantee local supplies, a major trade group said on Monday. © AFP/File Sam Panthaky

MUMBAI  – India, the world’s second-largest producer and exporter of cotton, has banned overseas shipments of the commodity to guarantee local supplies, a major trade group said on Monday.

The ban imposed by the Congress-led government is expected to crimp global supplies and force up world prices, analysts said.

“The ban came as India’s export target estimates were met. It was also to ensure that India has enough cotton available locally,” Ravi Singh, analyst at SMC Global Securities, said.

The move — India’s second halt to cotton foreign shipments in nearly two years — was announced by the Directorate General of Foreign Trade (DGFT).

“Export of cotton has been prohibited till further order,” the notification issued on the DGFT website said. “Further export against registration certificated already issued will not be allowed.”

The ban comes just six months after India completely freed cotton export controls. India had banned cotton exports in April 2010 and lifted the ban in the same year.

The move drew a stringing response from the chief minister of the cotton-producing western state of Gujarat, Narendra Modi, who is a member of the Hindu nationalist Bharatiya Janata Party, the main national opposition party.

Modi accused the government of “conspiring with yarn manufacturers and textile mills” to keep prices down.

Modi charged in a letter to Prime Minister Manmohan Singh that the ban was imposed just before the harvest season “thereby forcing the farmers to sell cotton” for lower prices.

But India’s Apparel Export Promotion Council welcomed the move.

Cotton supply needs will be “adequately met after this good step taken by the government”, the group said in a statement.

US cotton futures prices for May jumped 4.5 percent to a high of 92.23 cents a pound on the back of the ban, while India’s MCX Kapas prices for April eased four percent on expectation of improved supplies.

Siddhartha Rajagopal, executive director of the Cotton Textiles Export Promotion Council, said the ban appeared to have been imposed because exports overshot government estimates.

India has already exported 8.5 million bales in the financial year to the end of March, he said, more than a government estimate of 8.4 million.

India’s cotton exports were on track to cross 10 million bales for the period, driven by demand from factories in China, Rajagopal told AFP.

He said the move was to reassure local textile makers who are concerned about shortages and higher prices.

India, once a net importer, is second only to China in terms of production.

The state-run Cotton Advisory Board in January lowered Indian cotton output estimates for the year 2011-12 to 34.5 million bales from 35.6 million bales.

The forecast was reduced after the cotton crop was hit by disease and changing weather patterns in the states of Maharashtra and Andhra Pradesh.

With no cotton available from India, China will start to buy from the United States at the global markets, analysts said.

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