DECEMBER 23, 2010, 8:35 A.M. ET
By DILIPP S NAG
MUMBAI –India has tightened the rules for issuing permits to export cotton yarn in a bid to control prices and ensure better supplies for local textile mills and apparel makers.
The Directorate General of Foreign Trade said in a statement late Wednesday that the commodity has been included on a list of restricted export items. That means exporters seeking new permits will now have to approach the foreign trade office instead of the textile ministry, which was issuing export certificates until now.
The foreign trade office said it will work out the modalities for the grant of new export permits at a later date.
Local cotton yarn prices in November rose 5%-7% as exporters sought to take advantage of a global shortage, although prices came down this month after the government imposed a cap of 720 million kilograms on cotton yarn exports in the fiscal year through March.
"Prices of cotton yarn have already softened slightly this month and we may see a further fall in the coming days," said an executive with the South India Cotton Association who declined to be named.
Trade Secretary Rahul Khullar said Wednesday a panel of top bureaucrats will review the export cap on Jan. 15.
India is estimated to produce around 3,550 million kilograms of cotton yarn in 2010-11. Demand for Indian cotton and yarn has soared over the past few months because of crop damage in China and Pakistan. India is one of the world's top cotton yarn exporters and its key buyers include China, Pakistan and Bangladesh.
India usually exports around 600 million kilograms of cotton yarn annually, according to industry estimates. It exported around 460 million kilograms of yarn between April 1 and Oct. 31.
As shipments are still going on, the new rule will help improve local supplies only if some exporters fail to export their approved quantities within a stipulated period.
Write to Dilipp S Nag at dilipp.nag@dowjones.com
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