Govt eases cotton export controls.

India, the world's second-largest cotton producer, has relaxed export controls on the fibre as good monsoon rains have raised prospects of higher local output and stable prices, government and trade officials said.

This will help India export about 8 million bales of cotton, mostly to China and Pakistan, in the year to September 2011, up from earlier estimates of about 3 million bales when exporters needed a government license to ship cotton, trade officials said.

India's 2009/10 exports are estimated at 8.3 million bales.

Indian supplies are expected to calm cotton futures, which had risen to a 3.5-month high last week, although domestic prices are likely to remain firm.

India clamped down on exports on April 19 and then allowed limited exports under license on May 19 after domestic prices rose 54 percent in a year, provoking protests from local textile makers.

Free exports will be allowed from Oct. 1, the director general for foreign trade said in a statement late on Tuesday.

"We welcome this step. This move will facilitate the marketing of Indian cotton abroad," said Dhiren N. Sheth, president of the Cotton Association of India, India's biggest association of cotton traders and exporters.

A senior official in the textile ministry, who did not want to be identified, said the government eased export controls as the country's cotton output was likely to rise.

India is likely to produce 31-33 million bales of the fibre in 2010/11, up from 29.5 million bales in 2009/10, trade officials said..

The officials said Pakistan, where devastating floods have damaged the cotton crop, is likely to import about 3 million bales (of 170 kg each) of cotton this year, against average annual imports of 1.5-2 million bales.

"If it (cotton export) is free now, Pakistan will seek most of its cotton imports from us, but China still will be the major buyer," said a senior official with Sekhsaria & Co, a Mumbai-based exporter.

India is the second-biggest producer, consumer and exporter of cotton, and about 60 percent of the current season shipments have gone to China, the biggest consumer.

Indian farmers have planted cotton in a record 10.5 million hectares as of Aug. 12, more than last year's 10.33 million hectares, government data showed on Friday.

"Sentiment will be bullish in the domestic market. Despite higher production, prices will not fall much as we can export without restrictions," said Mehul Agrawal, an analyst with Mumbai-based Sharekhan Commodities.

Cotton prices rose about 7 percent in the past week, with the most common Shankar-6 variety quoted at 31,700 rupees per candy of 356 kg, Cotton Association of India data showed.

Source : in.reuters.com