India’s Singh Demands Urgent Review of Cotton Export Ban

India’s Prime Minister Manmohan Singh asked a group of ministers to “urgently” review a ban on export of cotton after the farm minister and industry groups said the curbs may harm the nation’s farmers.

“The prime minister has given directions that a group of ministers should review this decision urgently on March 9,” according to an e-mailed statement from Singh’s office today. A delegation of ruling Congress party workers today met Singh and demanded immediate removal of the ban, it said.

India, the second-biggest cotton grower, halted exports on March 5 to ensure domestic supplies after shipments exceeded a government target. A withdrawal of the ban may accelerate a 58 percent slide in futures in New York in the past year and limit contract disputes with buyers from China to Bangladesh.

“Global prices may fall in the short-term if India decides to go back on its decision,” said Ajitesh Mullick, head of agriculture research at Religare Commodities Ltd. “Domestic prices may gain and that may prompt farmers to not cut down planting next year.”

Farm Minister Sharad Pawar said yesterday the ban will lower domestic cotton prices and hurt planting prospects in the next crop season. His ministry wrote to Singh, seeking the removal of the ban. Cotton Association of India President Dhiren Sheth said March 5 “the farmers are going to take the biggest hit.”

Futures Fall

The May-delivery contract fell as much as 1.8 percent to 89.75 cents a pound today on ICE Futures U.S. Futures surged by the most in nine months on March 5 after India announced the ban, prompting the exchange to boost margins by 76 percent.

India banned exports after sales surged to almost 9.5 million bales of 170 kilograms each, more than the surplus of 8.4 million bales estimated by the government. Traders registered to ship 12 million bales and the rush to secure permits with letters of credit being opened between the same buyers and sellers was “indicative of a tendency of hoarding in bonded warehouses abroad,” the textiles ministry said.

The surge in shipments has brought down the stockpiles that may be carried into the 2012-2013 season to 3.6 million bales, less than the minimum 5 million mandated by a group of ministers’ meeting in April 2010, the ministry said yesterday.

The Confederation of Indian Textile Industry backed the ban as exports will lower stockpiles for the next season, the group said in an e-mailed statement today.

‘Speculative Contracts’

“Speculative registration of cotton export contracts in large quantities has been resorted to by some traders and permitting exports against such contracts would have seriously affected the fibre security of the textile value chain,” S.V. Arumugam, chairman of the largest textile group said in the statement. A minimum of two and a half months consumption has to be provided at the beginning of the year, he said.

Cotton Corp. of India, the biggest state-run buyer, has been asked to purchase the fiber from farmers, according to the ministry. The government buys cotton at guaranteed prices to guard farmers against distress sales in the open market.

Futures on the National Commodity & Derivatives Exchange of India Ltd. in Mumbai gained for a second day, rebounding from an 8.5 percent decline in February. The April-delivery contract advanced 2.5 percent to 847 rupees ($16.8) per 20 kilograms in Mumbai.

The ministers will review the ban, supply and demand in the domestic market, Kiran Dhingra, textiles secretary, said yesterday. She ruled out a ban on exports of cotton yarn.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE