Bloomberg News

India to Review Cotton-Export Ban as China Seeks Withdrawal

March 09, 2012

A panel of Indian ministers will review a ban on cotton exports today amid speculation that the suspension may be eased after protests from farmers, traders and China, the country’s biggest customer.

Finance Minister Pranab Mukherjee is scheduled to head the meeting this evening in New Delhi that will also be attended by Commerce and Textiles Minister Anand Sharma and Agriculture Minister Sharad Pawar. Prime Minister Manmohan Singh ordered an “urgent” review of the curbs imposed on March 5, his office said in a statement two days later.

India, the second-largest cotton shipper after the U.S., is under pressure to repeal the ban after Pawar said the curbs will hurt planting prospects and an industry group in China said the step damaged international trade. The South Asian nation was forced to ease a similar ban on exports in May 2010 after protests from traders and buyers.

“The government may allow some shipments to go ahead as up to 2.5 million bales of cotton have been registered for exports,” SMC Investments & Advisors Ltd. said in an e-mailed report today.

India suspended exports to secure local supplies after sales surged to about 9.5 million bales of 170 kilograms each, more than the surplus of 8.4 million bales estimated by the government. Traders had registered to ship 12 million bales, the country’s textiles ministry said.

Backing Ban

The ban drove prices up by the daily limit on March 5, and as much as 2.2 percent the next day to 94.24 cents, the highest level since Feb. 17. The May-delivery contract climbed 0.5 percent to 90 cents on ICE Futures U.S. at 11:55 a.m. in Mumbai.

Cotton Association of India, representing the country’s growers, ginners, traders and exporter, expects the ban to be scrapped, President Dhiren Sheth said in a phone interview. The Confederation of Indian Textile Industry backed the ban, saying continued exports would have lowered the stockpiles for next season to below desirable levels.

The prohibition damages international trade, the China Cotton Association said yesterday. The association, supervised by China’s Ministry of Civil Affairs, “hopes that the Indian government revokes the incorrect policy,” it said. The Liverpool, U.K.-based International Cotton Association, which handles contract arbitration, has said the prohibition will “have a major, detrimental impact” on global trade.

India is set to supply 17 percent of global exports in 2011-2012, the U.S. Department of Agriculture estimates. The Chinese association is the country’s biggest trade group for the fiber and has farmers, cooperatives and users as members, according to its website.

To contact the reporters on this story: Pratik Parija in New Delhi at pparija@bloomberg.net;

To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net;


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