The predominantly cotton based Indian textile industry often faces crisis due to volatility in cotton prices. Apart from the multinational cotton traders, who cover cotton in large volume during peak season, hoard the cotton and speculate the prices, the cotton trading policy of Cotton Corporation of India (CCI) also often aggravates the market. Soon after assuming charge, the Union Textile Minister, Smriti Zubin Irani revamped the CCI cotton trading policy and brought uniformity in the benefits extended by CCI irrespective of volume to protect the interests of MSME spinning units. However, the CCI continues the practice of holding the cotton in large volume and quoting higher price than the actual market price that affects the competitiveness of the actual user industry.
The Minimum Support Price (MSP) was steeply increased by 26% to 28%, CCI had to exercise MSP operation during the current season. The Government allotted Rs. 2,017 crores in the Union Budget 2019-20 to exercise MSP operation. As the kapas price per quintal varies between Rs. 4,700 and Rs. 5,250 per quintal depending upon the quality and MSP is fixed at Rs. 5,550 per quintal, CCI is covering around 50% of the cotton that arrives the market under MSP operation. Though CCI started the procurement during November, it has started the offer only during the last week after accumulating over 35 lakh bales of cotton and quoting very high price than the actual market price.
In a press release, Ashwin Chandran, Chairman, the Southern India Mills’ Association (SIMA), has urged the Union Textile Minister to intervene in the CCI cotton trading policies and direct CCI to avoid holding the cotton and sell the cotton at market price on a regular basis to arrest price escalation. Ashwin has stated that as China-US trade war is likely to end and also China had depleted its cotton reserves significantly during the last few years, China has geared up to import huge volume of cotton from the US and India (largest cotton producing countries in the world). He has added that as per the market information, over 20 lakh bales of cotton have already been exported from the current cotton crop and export might reach the level of 60 lakh bales as against 50 lakh bales estimated by CAB. If the same trend continues, it may result in panic situation in the Indian cotton market.
SIMA chief has urged the Union Textile Minister to instruct CCI to sell the cotton at market price so that the spinning mills could procure the cotton at a competitive price. He has added that mills are not able to source cotton from CCI as the price quoted by CCI is exorbitantly high when compared to the market price quoting Rs. 46,000 as the base price as against the market price of Rs. 40,000 per candy of 355 kgs. Ashwin has pointed out that industry friendly cotton trading policy by CCI would not only facilitate to mitigate the current challenges, but also would enable the industry to grab the market opportunities in the aftermath of US-China holding talks to end the trade war shortly.