The predominantly cotton based Indian textile industry has been facing repeated recessions since 2008 due to high volatility in cotton prices. This was caused by the large traders and multinational cotton traders taking advantage of hedging facility and cheaper funds while the mills could not build adequate inventory and have been paying higher price for the cotton during the off season. More than 75% of the cotton arrives in the market during December to March and around Rs.60,000 crores is required to procure the seed cotton during this period. Since the ginning and spinning mills do not have such funds, the farmers invariably get lower price.
The cotton textile industry has been demanding the government to ensure cotton fibre security and stability in cotton prices so that both the farmers and the industry get benefited and remain competitive in the global market. Almost after eight years, now the new Union Textile Minister has intervened and directed Cotton Corporation of India that normally procures cotton only when the prices crash below the minimum support price level to procure cotton on a commercial basis and supply to the mills. 26 textile associations representing the entire textile value chain in the country joined together and led a delegation under the leadership of Ms. Vanathi Srinivasan, State General Secretary, BJP, Tamil Nadu and submitted a memorandum to the Union Textile Minister on 29th September 2016 at New Delhi making a single demand of cotton fibre security by implementing CCI cotton supply scheme. After several meetings, now the Cotton Corporation of India has announced unique terms & conditions to benefit the MSME textile units.
In a joint letter sent to the Union Textile Minister recently by the 26 textile associations, the industry has thanked the Minister for announcing the unique scheme in the history of Indian textile industry. On behalf of the industry, Mr.M.Senthilkumar, Chairman, The Southern India Mills’ Association (SIMA) has stated that the new terms and conditions of fully pressed bales of CCI facilitates the registered MSME textile units to procure cotton by paying only 10% deposit money as against 20% which is applicable only for the sale quantity of 30,000 bales and above. He has stated that the deposit money upto 2999 bales is only 15%. He has stated that this would greatly help the MSME units that are starving for working capital fund in the post-demonetization regime.
Mr.Senthilkumar has stated that earlier there was a difference in the free period ranging from 30 to 75 days and 75 days free period was available for the procurement of 15000 bales and above and therefore, the MSME textile units could not derive much benefit out of CCI. He has said that now the free period has been made uniform and fixed at 45 days which would again help the actual users and the MSME units.
SIMA chief has stated that CCI might procure around 15 lakh bales and maintain an inventory of 4 to 5 lakh bales so that stability in cotton price is maintained. He has added that CCI would also consider storing the bales in different spinning clusters and supply the same to the mills on a need basis. He has said that the industry has also requested CCI to opt for coastal movement of bales between Gujarat and Tamil Nadu that would again yield considerable saving for the mills. He has said that SIMA has finalized the rates with M/s. Shreyas Relay Systems P Ltd for the entire cotton season 2016-17 that is cheaper by 10 to 25% when compared to lorry freight.