The Centre on Monday banned with immediate effect exports of raw cotton, catching shippers, industry and growers by surprise.
In a notification issued early in the morning, the Directorate General of Foreign Trade said even exports of cotton for which registration certificates have been issued will not be allowed.
The ban follows registration of over 12 million bales (of 170 kg each) of cotton for exports.
At a meeting last week, when the issue cropped up, the textile industry said that it had no problem in such large exports since it was facing recession.
Textile mills in the South, particularly Tamil Nadu, have been affected badly by power shortage. Cotton production this season ending September is projected to be a record 35.5 million bales against 32.5 million bales last year.
The export ban comes at a time when cotton prices are ruling low. During the weekend, prices of Shankar 6, mainly in demand for exports, ruled at 34800-35000 a candy of 356 kg.
The ban is likely to lead to crash in prices. "Too much of cotton will now be chasing too little demand," said Mr A. Ramani, cotton analyst. Export of at least 3 million bales will now be affected, according to trade sources.
Cotton futures price in New York are likely to gain.