Government may not allow fresh cotton exports next week.

MUMBAI/NEW DELHI: India is unlikely to allow fresh cotton exports when ministers meet next week and may not lift the ban at least until July, government and trade sources said.

The meeting on April 3 could approve only some of the 2.5 million bales which are in limbo, registered but not yet cleared by customs.

Earlier this month, India halted fresh cotton exports after a record 9.5 million bales were sold overseas, stepping back from a shock total ban, and said it would review 2.5 million bales already registered but not shipped.

Around 1 million bales cleared by customs but not yet shipped at the time of the ban were also allowed.

"Not all of the registrations will get final approval as some of them must have expired by now," one of the government sources said.

"We are examining all pending cases minutely to ascertain their validity and genuineness," another government source said.

Traders said the government is worried some cotton may be going into the overseas warehouses of exporters as stocks.

India, the world's second-biggest producer of cotton, supplies about 13 percent of global exports and its biggest customer is China, which had criticised the initial total ban.

Trade Secretary Rahul Khullar said on Thursday ministers would meet on the matter next week. The government sources said the meeting was likely to be on April 3.

"If India does not export then that will constrain global exportable surpluses at a time when China is looking to rebuild its stocks," said Abah Ofon, analyst with Standard Chartered Bank in Singapore.

The United States, the world's biggest cotton exporter, plans to grow just 89 percent of the cotton it grew last year in 2012, latest figures from the U.S. Department of Agriculture on Friday showed, as prices were unattractive.

Cotton ended 2011 as the worst-performing commodity of the year, falling 37 percent from 2010 after record prices had boosted output and decimated demand, while a shaky global economy scared off investors.

The benchmark New York cotton future on ICE was down 0.19 percent at 93.33 cents per lb by 1411 GMT, while spot prices for Shanker-6 cotton on India's domestic market rose 300 rupees to 34,800 rupees per candy of 356 kg on Friday.

The key March cotton contract on India's Multi Commodity Exchange provisionally closed up 2.57 percent at 17,540 rupees per bale of 170 kg.

The government could delay the decision on cotton exports until July, when details of cotton sowing and the progress of the monsoon will be known, the sources said.

Crucial will be ensuring there is enough cotton available for domestic mills, which use about 25 million bales a year and have lobbied for the export ban as they are worried about supplies and soaring local prices.

Even though India's cotton output is expected to hit a record high of 34 million bales in 2011/12, industry is already estimating opening cotton stocks for 2012/13 year starting in October will be 3.66 million bales.

Cotton exports have put the commerce and agriculture ministries at loggerheads, with influential coalition ally Farm Minister Sharad Pawar asking Prime Minister Manmohan Singh to lift the ban to help farmers.

Analysts said major cotton exporter Australia would gain the most if the ban on overseas sales from India continues.

Source : economictimes.indiatimes.com