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CCI bid to check slide in cotton prices
Within days of the Textile Ministry’s decision
in the first week of March to lift the ban on cotton
exports and the Director-General of Foreign Trade
issuing a notification to this effect, the Govern-
ment seemed set to launch a probe into the sud-
den spurt in exports in the recent past, mostly to
China. This virtually meant a reversal of its stand
and restricting further export of the commodity.
The Government claims that as against the export-
able surplus of 84 lakh bales of cotton, 95 lakh
bales have already been exported. With booming
exports, there is gradual slowdown in the domestic
market, with the stock-in-use position estimated at
29 lakh bales against the required 62 lakh bales.
Hence the Government justification to scrutinize
the export receipt certificates already issued in view of the fear that a handful of
traders must have siphoned cotton off to a certain firm in China in anticipation of
an escalation in prices to make quick profits on a future date.
The situation has further deteriorated with the reported declining trend in major
cotton growing States of Andhra Pradesh and Maharashtra and fears of farmers
getting poor prices once again. This has led to ‘commercial intervention’ by the
Cotton Corporation of India (CCI) in markets all over the country to pep up do-
mestic prices. The Government decision to check further cotton export and allow
only ‘conditional’ export, as also not to allow fresh registrations, have added to
market uncertainties. CCI would utilize the special funds provided for commercial
intervention to check a further fall in cotton prices and restore the confidence of
cotton growers. Meanwhile, market arrivals are already on the rise, and nearly 40
lakh bales of cotton are expected in March and another 30 lakh bales in April.
The wayward and uncertain cotton policy is to blame for the growers not get-
ting a reasonably high price for their produce. What happened this time last year
is a typical example of how farmers are helpless even if the Government comes
to their rescue by announcing export of an additional 10 lakh bales of cotton,
besides the exportable surplus of 55 lakh bales allowed earlier during the season.
Though intended to ensure a fair price for farmers, the situation was taken undue
advantage of by a group of international traders with huge resources to buy cotton
at throwaway prices from farmers and sell them later to make much higher profits
in a situation of artificial shortage. As of now, cotton worth Rs. 25,000 crores re-
mains unsold. Even a 10 per cent fall in prices would hurt farmers to the extent of
Rs. 2,000 crores. Mills all over the country refrain from buying cotton because of
the liquidity problem. Southern mills are reeling under severe power shortage and
their operations are almost at a standstill. The solution for the current impasse lies
in the opening up of the export market that offers a more remunerative price for
cotton growers. The earlier the export curbs are removed, the better.
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The Textile Magazine
MARCH 2012
R. Natarajan,
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