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  3. CAI demands revocation of ban on cotton exports

CAI demands revocation of ban on cotton exports

09 Apr 2012 Evaluate

The Cotton Association of India (CAI) has demanded revocation of ban on cotton exports as the move will benefit farmers. CAI has argued that a sizeable quantity of cotton is still in the hands of the farmers who are not willing to let go due to the fall in prices, post the ban.

On March 5, the government banned exports of cotton as they had surpassed government estimates fuelling fears of low domestic supply. However the ban was severely criticized and the government lifted it partially on March 12. It was decided that the already approved export orders would be executed but no fresh permits for exports would be entertained. Before the ban, the Commerce Ministry had issued registration certificates for 130 lakh bales (of 170 kg each), of which 95 lakh bales had already been exported.

The ban led to a fall in the domestic price of cotton. Although Indian mills could enter the market and take advantage of the low prices, they did not do so in a big way, thereby providing no support to the prices. Hence, CAI has written to Prime Minister requesting him to lift the ban.

CAI has further argued that in case a need does arrive later on in the season, the spinning mills have the option of importing duty free cotton as they have been doing so in the past. It is also extremely unlikely that the import figures will be large as Australian, Brazilian and East African cotton is expected to be abundant in the international market. It  has further reasoned that even during the years when India was a net cotton deficit country, cotton exports were always kept under Open General Licence (OGL). However, it is ironical that in the years of surplus availability of cotton, export is meted out with restrictive policies now.

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