The Directorate-General of Foreign Trade (DGFT) issued a notification on Monday prohibiting export of cotton with immediate effect.

According to an official in the Union Ministry of Textiles, about 130 lakh bales were registered for exports so far this season. Of this, nearly 95 lakh bales were shipped already against the estimated export surplus of 84 lakh bales for this season (October 2011 to September 2012). According to the notification, exports against registration certificates already issued will not be allowed too.

Cotton exports were placed on open general licence this season with the requirement of registration for monitoring.

The Cotton Advisory Board, which met in January this year, estimated cotton exports this season at 84 lakh bales and total production at 345 lakh bales.

According to official sources, production this year was expected to be almost the same as last year. The decision to ban further exports was taken after taking into account the trend of domestic consumption and depletion of domestic availability. Of the estimated 345 lakh bales, 240 lakh bales had come into the market so far.

Following the announcement, cotton prices declined on Monday. According to the Indian Cotton Federation, price of Shankar 6 variety of cotton dropped from Rs.34,000 two days ago to about Rs.32,200 a candy (355 kg).

The price of J-34 variety dropped from Rs.35,100 to Rs.33,100 a candy.

The Tirupur Exporters' Association welcomed the ban on cotton exports. Its President A. Sakthivel said the measure was required at this juncture as it would help revive the textile industry.

The Confederation of Indian Textile Industry said it had suggested that the government should not intervene in the cotton market now as the domestic textile mills did not have the financial resources to purchase large quantities and several mills were not operating to their full capacities.