India has the scope to export 2-2.5 mn bales of cotton: Agriculture ministry.

The agriculture ministry has said the country still has the scope to export another 2-2.5 million bales of cotton if fresh registrations for export are allowed in the coming weeks.

The ministry, which has been strongly opposed to the current cap on exports at 12.5 million bales, is of the opinion that if exports are re-opened at this juncture, only 2-2.5 million bales can be exported. The remaining cotton, from the total production of around 35 million bales in 2011-2012, has either been consumed domestically, exported or stored for the next year. One bale equals 170 kg.

“We feel that exports should be opened as it will help the growers get better price for their produce, else the area under cotton can shrunk in the next crop year that will start from October 2012," a senior agriculture ministry official said.

Cotton has this year turned into a big issue of dispute between agriculture department and textiles ministry, with textiles ministry demanding a stop on exports on the grounds that it was harming the domestic textiles industry. The agriculture department favoured unrestricted exports in the interest of farmers. In March, the government banned export of cotton after 9.4 million bales were shipped out of the country.

The ban was imposed over fears that any additional export of cotton would severely harm the domestic textile makers. However, the curb was eased within a week following strong opposition from agriculture ministry and political parties on the grounds that the move was harming the growers who were already reeling from the impact of a sharp drop in domestic cotton prices this year.

Domestic cotton prices had fallen below the state-determined minimum support price (MSP) of Rs 3,300 per quintal in some places as output increased by around two million bales than last year.

The commerce department, while easing the ban on exports, allowed export of only those quantities that has been already registered with the Directorate General of Foreign Trade (DGFT). The blanket ban, nevertheless, remained. Last week, a group of ministers called to further allow exports decided against taking such a decision. Another meeting of the same group is scheduled to be held once the latest demand and supply position of cotton is ascertained for this year.

In the interim, the government has directed the state-run Cotton Corporation of India to purchase around 2.5 million bales of cotton from May to build a strategic reserve for domestic millers.

Source : smartinvestor.business-standard.com