Worldwide impact of Indian cotton export ban – Special report

07 May '10

7 min read

In the month of April, the Government of India, on pressure from the stake holders in the textile value-chain imposed a ban on fresh registrations of cotton export contracts, with the Office of the Textile Commissioner in Mumbai along with which it also imposed a punitive export duty of Rs 2,500 per ton, thereafter.

The repercussion of this decision to ban as well as impose export duty was felt across in most of the textile sectors in countries which imported cotton in large volumes from India, like China, Bangladesh, Vietnam and Pakistan. In fact, India was turning out to be the biggest exporter of cotton to China in 2010, and in the process had replaced the US from the pedestal.

Fibre2fashion in its quest to bring up to date information to its readers undertook a survey in each of the countries which imported from India, along with those countries which exported cotton from their shores like the US and Egypt, to understand the impact of the decision taken by India to ban exports of cotton. For cotton importing countries it created a totally negative impact, while cotton exporting countries could not conceal their joy. Read further to know the reasons.

First considering the impact of the decision in India itself, the immediate impact was felt on prices of cotton. Prices of raw cotton of Shankar-6 variety grown in Gujarat, which is also one of the biggest cotton exporting state in India fell by Rs 2,000 per candy (1 candy=356 kg), which was the ultimate aim of the government and in one stroke the government was able to control the flare-up in prices, a decision which was lauded by the spinning and apparel export sector, but came under fire from farmers, ginners and cotton exporters.

However cotton bodies and farmers have not taken this decision lightly. Recently ginners had given a call for strike which they pulled off at the last moment, after they received assurances from the government. According to the Cotton Association of India, “Any change in the policy of allowing free and unhindered exports would prove detrimental to the reputation of the country as a reliable and continuous supplier of cotton”.

The impact on the Pakistan textile sector is expected to be more. According to the All Pakistan Textile Mills Association (APTMA) a few textile mills hold stocks of two to three months, while the majority have stocks which will last them just around 30-40 days, after which the situation will become dire and possibilities of cotton prices increasing in global markets, post the Indian decision, in the near future are also potent, which could put the survival of the spinning units in a jeopardy.

Considering that China is the biggest cotton importer in the world and India was turning out to be the biggest supplier of cotton in 2010, the impact of this decision will be compelling. The State-owned, Assets Supervision and Administration Commission said that, China, the world's largest cotton consumer faces an imminent cotton shortage after India halted exports and demand climbed.

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