Cotton export ban lifted, but no fresh cotton export allowed

New Delhi, 12 March 2012

Union minister Anand Sharma yesterday announced that ban on cotton export will be lifted, however it was not clear whether the government will lift the ban completely and allow issuance of fresh registration certificates or will only allow exports of the consignments registered with the Directorate General of Foreign Trade(DGFT).

Today the trade secretary brought some clarity on this question.

He today said, India will not allow any fresh exports of cotton and only the quantity permitted before the government imposed a ban on overseas sales will be allowed to be shipped.

“No new registration certificates will be issued,” Rahul Khullar told reporters, a day after the government announced the lifting of a controversial ban on cotton exports at a time when the global market is over-supplied.

Contracts for about 2.5 million bales are already registered and awaiting shipment.

The ban, announced unexpectedly on March 5, after a record 9.5 million bales had been shipped.

Since allowing just the registered consignments to be exported would result in a significant depletion in the already reduced stocks, it was unlikely that fresh registration certificates would be issued.

Textile Secretary Kiran Dhingra had explained earlier that: the ban was imposed after it was noticed that 9.4 million bales of cotton had been shipped against the 8.4 million exportable surplus calculated by the cotton advisory board in January. The surplus exports had brought down carryover stock to 3.6 million bales, against the 5 million bales that a Group of Ministers had recommend in April 2010 to avoid shortage. Dhingra was of opinion that allowing exports of the 12 million bales that have been registered will lower the surplus further, which can get wiped out if fresh registration for export is done.

The Cotton Corporation of India has been advised to make procurements at all mandis where prices fall below the minimum support price fixed by the government.

Notification

To be published in the Gazette of India Extraordinary Part II Section 3, Sub Section (ii)

Government of India

Ministry of Commerce & Industry

Department of Commerce

Udyog Bhawan

Notification No. 106 (RE-2010)/2009-14

New Delhi, Dated 12^th March, 2012

Subject:- Removal of Prohibition on export of cotton (Tariff Codes 5201 and 5203)

S.O. (E) In exercise of the powers conferred by Section 5 of the Foreign Trade (Development & Regulation) Act, 1992 (No.22 of 1992) read with Para 2.1 of the Foreign Trade Policy, 2009-14, the Central Government hereby withdraws the Notification No. 102 (RE-2010)/2009-14 dated 05.03.2012 and makes the following amendments with immediate effect in respect of Sl. No. 161 A {ITC(HS) Classification}.

2. The entries against Sl. No. 161 A in Chapter 52 of ITC(HS) Classification} will be as follows:-

Chapter 52

3. Procedure of obtaining Registration Certificate (RC) was notified in Notification No. 63 (RE-2010)/2009-14 dated 04.08.2011 and modified by Notification No. 74 (RE-2010)/2009-14 dated 12.08.2011. Time to export (validity of RC) was “30 days from issue of RC”. Because of prohibition imposed by Notification No. 102 (RE-2010)/2009-14 dated 05.03.2012, this time limit may require to be extended in respect of those RCs, that were valid as on 05.03.2012 and for which LEOs are yet to be issued & exports completed. All RCs would need to be submitted to DGFT for scrutiny and revalidation. Exports can be effected only after RCs are revalidated.

4. Issue of new RCs stands suspended until further orders.

5. Policy Circular No. 58 dated 09.03.2012 covers those RCs for which LEOs have been issued.

Official press release of central government on Roll Back of Ban on Cotton Exports

The Cotton Budget for the cotton year 2011-12 was prepared by the Cotton Advisory Board. In arriving at a Cotton Export Policy a balanced perspective is taken, carefully addressing the interests of all stakeholders including farmers, traders, yarn producers and the apparel industry.

Last year, raw cotton exports were of the order of 78 lakh bales and in this cotton year within five months, exports have crossed 95 lakh bales highest ever in the last ten years, even though the crop arrival estimates of cotton are the same. The three Secretaries – Agriculture, Commerce and Textiles drew the attention of the Government that the exports had far exceeded the estimated exportable surplus, raising concerns on the adequate availability of cotton for domestic industry. In this backdrop, the Government had taken a decision to suspend the export of cotton given the sudden surge in cotton exports.

The informal Group of Ministers chaired by Finance Minister met on 9th March 2012 to review the situation and a decision was taken to roll back the ban subject to certain conditions. Today, DGFT has issued a notification which clarifies the position that exports orders already registered with DGFT so far but not yet exported will be expeditiously scrutinized to ensure that their papers are in order and revalidated. The first priority will be given to those consignments which have been handed over to Customs. The GoM is scheduled to meet within the next two weeks to assess the cotton budget afresh and take an appropriate policy view in the matter.

Meanwhile, the price situation in the mandis is being closely monitored and the Cotton Corporation of India has been authorized to intervene for both commercial and MSP operations, wherever necessary. The Indian industry has reported that it is also in the market to buy.