The International Cotton Association has expressed its ‘dismay' at the Indian Government's decision to bring in a ban on all cotton exports. It has urged the Ministry of Commerce and Industry to revoke it with immediate effect.

The association, which speaks on behalf of more than 400 members globally, warned that the action would have ‘serious consequences and a major, detrimental impact' on world cotton trade, similar to what happened during the previous ban. ‘The 2010 announcement led to numerous arbitrations at the ICA, as many firms, including a large number of Indian firms, were unable to perform their contracts. This time round, the impact could be more acute because it extended to contracts with open Letters of Credit and prepayments, and cotton in the process of being shipped. Customers in many importing countries who are counting on this cotton to run their spinning mills will suffer irreparable loss and damages.”

India is the second largest exporter and producer of cotton after the US. The government took the decision as cotton shipped exceeded its target for the current fiscal year of 84 lakh bales.

“We just didn't expect it,” said a spokesperson for Germany's Bremen Cotton Exchange. India's reputation as a cotton exporting country will suffer incredibly.

“We were caught completely unawares,” says Mr Terry Townsend, Executive Director of Washington DC-based International Cotton Advisory Committee. He warned that because of the retroactive nature of the ban, it would cause 100s of millions of dollars in expenses to the industry. Beyond the short-term spike in prices caused by the 2010 ban, the decision was partly responsible for cotton's falling share of the world fibre market, he contends. Cotton's share fell to 33 per cent in 2011 from 35 per cent in 2010. The ban is highly damaging to the industry. No country intervenes in the polyester trade, he said.

(This article was published on March 7, 2012)
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