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The Centre on Monday formally withdrew the ban on cotton exports imposed on March 5 but it has suspended issuing new export registration certificates (RC) “until further orders”.
The suspension led to further crash in prices that seemed to rise early in the morning after the Directorate-General of Foreign Trade issued the notification revoking the ban.
A Group of Ministers will meet within the next fortnight to assess the supply-balance situation afresh and take a view on whether to allow fresh registrations for exports.
The notification said that contracts already registered with it so far, but not yet shipped, will be expeditiously scrutinised to ensure that their papers are in order and revalidated. An RC is valid for 30 days from the date of issue.
Priority will be given to those consignments which have been handed over to the Customs Department, the statement said.
Earlier in the day, the Union Commerce Secretary, Dr Rahul Khullar, told reporters that the RCs issued during January and February will be scrutinised to find out whether there are any ‘fictitious' export transactions.
“It has been decided that due to huge bunching of RCs in January and February, those RCs will be subject to scrutiny and revalidation,” Dr Khullar said, adding that there are doubts if there were instances of speculative trading.
“No new RCs will be issued until this is sorted out,” Dr Khullar said.
The RCs issued in January and February were for exports of 2.8 million bales (mb) and 4.4 mb respectively against those in October 2011 (1.3 mb), November (2.3mb) and December (1.5 mb).
Of the RCs issued in January and February, it is estimated that 3-3.5 mb are yet to be exported.
Before the ban was imposed, a total of around 12.5 mb was registered for exports, of which 9.5 mb were already exported.
Also, the exports were of the order of 2.5 mb in January and 2.3 mb in February (in just 20 working days) compared with 0.69 mb in October 2011, 2 mb in November and 1.6 mb in December.
Over 85 per cent of cotton exports go to China and there is evidence of stockpiling there, Dr Khullar said. Meanwhile, the price situation in the mandis is being closely monitored, the Government said.
The Cotton Corporation of India has been authorised to intervene for both commercial operations and to make procurements in all mandis, where the prices fall below the MSP to ensure that farmers' interests are protected, it said.
The Textiles Secretary, Ms Kiran Dhingra, said prices have gone up by Rs 400-800 a quintal of late.
On the price front, Dr Khullar said international cotton prices have always been higher than the domestic prices as India is one of the cheapest sources of the item.
The price differential ranges from 8 cents to 25 cents a pound, translating to $220 a tonne. This is roughly Rs 11,000 a tonne (or Rs 1,800 a bale of 170 kg; 6 bales make up a tonne).
WHAT WENT WRONG
Giving details of the price situation, the Commerce Secretary said the Cotton Advisory Board (CAB) had on January 21 recommended that the exportable surplus is 8.4 mb, when till that day 6.1 mb were exported.
Market ‘madness' started on the CAB recommendation and everyone lined up for getting RCs to ship the item overseas and stockpile it there, he said. “Once it is abroad, it is out of the Government's jurisdiction,” he said.
The Committee of Secretaries (of Agriculture, Commerce and Textiles Ministries) had met in February to take stock of the situation. “Therefore, it is unfair to say we did not know what was going on,” Dr Khullar said.
The decision to lift the ban follows a GoM meeting on March 9. The GoM was necessitated following a direction from the Prime Minister, Dr Manmohan Singh, after protests against the move including by the Agriculture Minister Mr Sharad Pawar, and Chief Ministers of the key cotton producing States including Gujarat and Maharashtra.
Spot prices of cotton ended lower at Rs 33,600-33,800 for a candy of 356 kg from Rs 33,500-34,000 during the weekend.
Prices in the futures market ended in the red after gaining in the morning following the notification.
On the Multi-Commodity Exchange, cotton for delivery this month was quoted at Rs 16,580 a bale (170 kg) against previous close of Rs 16,670. April contracts slipped to Rs 16,930 (17,100) and May to Rs 17,340 (17,420).
In New York, cotton futures for May delivery fell 0.3 per cent to 88.48 cents a pound on ICE Futures, after touching 88 cents, the lowest since March 2. Futures had increased to over 91 cents last week after the ban.
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