India will now prohibit fresh cotton exports and permit only quantities already registered but not shipped, the trade secretary said on Monday, fuelling uncertainties as the world's second-biggest producer continues to flip-flop with its trade policy.
The trade ministry unexpectedly banned cotton exports on March 5 and announced lifting of the restriction on Sunday after influential Farm Minister Sharad Pawar opposed the move and requested Prime Minister Manmohan Singh to revoke the ban.
China, India's biggest customer, also criticised the move.
"No new registration certificates will be issued," Rahul Khullar told reporters a day after the government announced the lifting of the controversial ban on cotton exports at a time when the global market is already over-supplied.
Khullar said a panel of ministers is likely to review the ban on exports - which had already hit record levels of 9.5 million bales - in two weeks.
Trade and analysts said the confusion would further damage the reputation of India as a credible, long-term supplier of commodities.
"The agricultural market remains very much at the mercy of government policies ... the ban was a surprise and as a result of that prices rose significantly on that particular day," said Luke Mathews, commodities strategist at Commonwealth Bank of Australia.
The latest decisions mean exporters can ship out 2.5 million bales committed to overseas sales before the government ban and avoid any defaults.
Traders were dismissive of this, however.
"It's as good as banning cotton exports. It will not benefit anyone," said Arvind Patel, vice-president of the Saurashtra Ginners Association.
The moves prompted calls for India to be more reliable.
"Consistent policy helps create increased reliability and we wish that a very consistent policy is followed and free and unrestricted flow of cotton export is allowed," said Dhiren N. Sheth, president of Cotton Association of India.
The benchmark May contract on ICE Futures U.S. fell as low as 88 cents a cents a pound on Monday, its weakest since March 2, on the prospect of higher global production and confusion over India's decision to ban exports.
The U.S. Agriculture Department has raised the world's 2011/12 cotton output estimates to 123.64 million (480-lb) bales, from 123.34 million.
Cotton ended 2011 as the worst-performing commodity of the year, falling 37 per cent from 2010 after record prices had boosted output and decimated demand, while a shaky global economy scared off investors.
If India's ban persists, major cotton exporter Australia is poised to benefit the most, analysts said.
India's domestic cotton futures were little changed as traders digested the moves, with the April cotton contract on India's Multi Commodity Exchange up 0.06 per cent to 17,110 rupees per bale of 170 kg.
Copyright @ Thomson Reuters 2012
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