UPDATE 1-India relaxes limits on state firm's cotton exports

Fri Aug 2, 2013 10:54am EDT

* Government order silent on volume of extra exports

* Aims to clear out stocks before start of new season

By Meenakshi Sharma

MUMBAI, Aug 2 (Reuters) - India has relaxed restrictions on the export of cotton by the state-run Cotton Corporation of India (CCI) in the current season to end-September as the world's second-biggest cotton grower expects a better crop in 2013/2014.

Hefty monsoon rains have encouraged farmers to plant more, and the area sown with cotton has risen to 10.85 million hectares as of Aug. 1 from 10.11 million a year earlier.

CCI has exported 3,000 bales so far this season, the maximum allowed under current rules. It sought permission to ship more to reduce its stocks ahead of the start of the new-season harvest from Oct. 1, Chairman B. K. Mishra said.

"This season CCI has sold its stocks mostly into the local market, and if they are exporting, it means they are expecting a huge crop next season and want to clear the old stock," Prerana Desai, vice-president of research at Kotak Commodities, said.

The government earlier on Friday issued a notification allowing CCI to export cotton under relaxed norms. It did not relax the restrictions for private traders.

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Mishra said CCI had not received any official confirmation about the quantity to be exported in the current and the coming seasons.

"We had in the past sought permission from the government to export 50,000 bales of cotton in the current season with relaxed norms," he said.

The Indian government, through the CCI and farmers' cooperative NAFED, has bought 2.5-3.0 million bales of cotton in the current crop year. CCI has a stockpile of around 900,000 bales. India's production is estimated to be 34 million bales in 2012/13.

In April, the government allowed the state agencies to sell cotton into the domestic market from state reserves.

"We will see the market conditions and the international price and then decide on exports. As of now it does not look viable because domestic prices are higher," Mishra said.

CCI is selling cotton into the domestic market at an average price of 43,000 rupees per candy of 356 kg, equivalent to 90.65 U.S. cents per lb. Overseas it will get around 87-89 cents for the same variety, two traders said.

In New York, the December cotton contract on the Intercontinental Exchange was at 85.16 cents per lb at 1436 GMT.

($1 = 60.2650 Indian rupees) (Editing by Nidhi Verma and Jane Baird)

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