India’s lifting cotton export ban

International Centre for Trade and Sustainable Development

India’s recent blockade of cotton exports formally ended last week, according to an announcement by India’s trade minister.

“We have lifted the suspension of fresh registrations for exports,” Commerce and Industry Minister Anand Sharma said on 30 April. Following the news, new export permits immediately began to be issued; however, the possibility of future restrictions remains open. The export situation will be reviewed every two weeks.

The decision followed an escalation of Agriculture Minister Sharad Pawar’s campaign to reform the country’s export policies with regard to cotton, sugar, and milk. This included a letter of complaint sent from Pawar to Prime Minister Manmohan Singh.

The reversal came directly out of a meeting between top Indian government ministers, including Finance Minister Pranab Mukherjee, Sharma, and Pawar. After announcing a repeal of the ban, Sharma told reporters that “we have to see that demand of domestic industry for cotton is met” and that the ministers will undertake a new assessment of the situation in three weeks.

Indian cotton exporters will now only be allowed to apply for one permit at a time, for a maximum of either 10,000 bales or the actual amount shipped during the current season, depending on which number is lower.

Exporters must also use at least half of their allocated quota before applying for a new permit. The new restrictions are designed to put a cap on the quantity that can be exported at one time, and undercut the advantages of large exporters.

Shifting policy

The reversal of the ban comes two months after India originally announced the export prohibition. The ban, enacted on 5 March, was followed by a series of abrupt changes in India’s cotton export policy. This included a partial repeal days after the ban was announced, followed by a full repeal, before the government decided to instead instate only a partial reversal of the prohibition. (See Bridges Weekly, 14 March 2012)

India had previously introduced full bans of cotton exports both in 2010 and 2012.

Analysts predict that the re-entry of India, the world’s second largest cotton exporter, into the world market means that the current global cotton glut could be exacerbated. “The opening of exports of cotton from India will add to the already ample supplies in the cotton market and push down prices on the international market,” Chen Jing of CITICS Futures Company commented, according to the Global Times, a China-based newspaper.

Some have speculated, however, that frequent alterations in Indian export policies may have already prompted international buyers to seek alternative sources. Referring to potential purchases made by China, agricultural expert Hu Biliang of the Chinese Academy of Social Sciences told the Global Times that “the US and Bangladesh are likely to be priority suppliers due to their steady supply and stable policies”.

“India Lifts Ban on Cotton Exports,” BBC, 30 April 2012; “India Lifts Cotton Export Ban,” GLOBAL TIMES, 2 May 2012; “Centre Sews up Loose Ends in Cotton Export Permits,” THE HINDU BUSINESS LINE, 7 May 2012; “Govt Lifts Curbs on Export Registrations for Cotton,” THE HINDU BUSINESS LINE, 30 April 2012; “Removal of Export Ban Weighs on Cotton Futures,” LUBBOCK AVALANCHE-JOURNAL, 6 May 2012.