April 10, 2012

India will not issue fresh cotton export permits

Pending scrutiny of all shipment deals since January to check whether the fibre was being stockpiled outside the country, India's Trade Minister Anand Sharma said Monday (Apr 9) that fresh cotton export permits won't be issued.

The government ordered an examination of recent export permits last month. It mainly suspects China of stockpiling the fiber.

"Until further order, there won't be any fresh registrations for cotton exports," Sharma told reporters after a ministerial panel's meeting to review the exports.

It appears unlikely that permits for more exports would be allowed by the world's second-largest cotton producer in the marketing year that started October 1, even after the scrutiny is completed.

That would mean the government's decision to lift a ban on cotton exports within a week of its imposition last month would likely amount to little. The move to halt exports was revoked only after fierce criticism by cotton-producing provinces and Farm Minister Sharad Pawar that the decision would hurt farmers.

Sharma said a total of two million bales of 170 kilogrammes each was under scrutiny and that quantity would be allowed for shipments, once the process was complete. India's series of policy flip flops on cotton exports has created uncertainty amid potential customers.

Over and above, the textiles ministry has also proposed an export tax of up to INR10,000 (US$195) per tonne on cotton as it wants to discourage exporters and prevent any local shortage of the fibre, three senior government officials, who didn't want to be named, said.

The trade minister said the ministerial panel didn't discuss the proposal at Monday's meeting. Of India's total cotton exports of 9.4 million bales in 2011-12, nearly seven million bales were shipped to China, which is stocking the fiber to build reserves, the official said.

China is buying more cotton from India because it's relatively cheaper, another Indian government official said, without elaborating on the price difference with other suppliers.

In January and February, China imported 480,951 tonnes of Indian cotton, accounting for 51% of its total imports during the period, China's customs data showed.