Government frees up cotton exports

The government has allowed fresh registration of cotton exports with immediate effect, setting no caps on overseas trade of the commodity. It will assess cotton availability every two-three weeks. The suspension on fresh registrations for exports had been lifted and the directorate general of foreign trade will take the necessary steps, commerce and textiles minister Anand Sharma said.

The textile sector, which uses cotton as an input, provides employment to 105 million Indians.

While India is expected to produce nearly 34.7 million bales of cotton in the current season, consumption is likely to be around 25 million bales, according to the Cotton Advisory Board, which is overseen by the textiles ministry. A bale weighs 170 kilograms.

India is the second largest producer of cotton in the world after China. The US is the largest exporter of the commodity.

After the opening of exports, prices are likely to go up by 10-15%, according to Dhiren N. Sheth, president, Cotton Association of India, an industry lobby group. “We hope there are no further flip-flops on the question of exports," he said.

D.R. Mehta, president of lobby group Textile Association of India, declined to comment.

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Mint’s Aman Malik says that while the government allowed further exports of cotton, a decision to deregulate sugar prices is still awaited

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The decision to open up cotton exports was unlikely to help a majority of the cotton farmers in the state, said K.T. Bheel, a cotton farmer from Vadodara district in Gujarat. “Almost 70-80% of the produce has already been sold off," he said over the phone. “Only those farmers would benefit who have actually kept some stock with them, but their numbers would be few."

The impact on prices would be minimal, according to Badruddin Khan, an analyst with Mumbai-based Angel Broking Ltd.

“At best, there will be a 2-3% uptake in prices. Moreover, stockists, and not the farmer, would gain, since most farmers have already sold their produce to stockists," Khan said.

This decision comes even as agriculture minister Sharad Pawar is likely to meet Prime Minister Manmohan Singh in a few days to decide on opening up of sugar exports.

A decision on exporting the sweetener could have a bearing on the government’s stance on freeing sugar prices. On 3 May, a panel led by C. Rangarajan, chairman of the Prime Minister’s economic advisory council, is likely to take a decision on this.

India is the biggest consumer and second biggest producer of sugar and controls the industry through procurement prices set by both Centre and state governments, besides a monthly release mechanism for sugar traders that keeps prices stable.

Ten per cent of sugar is routed to the poor through the public distribution system at lower prices, the cost of which is borne by the industry.

PTI contributed to the story.

aman.m@livemint.com