Indian textile industry has appealed to the Prime Minister Narendra Modi to intervene immediately to stabilise the cotton prices, as the cotton prices have surged to the peak level in the last 11 cotton seasons especially in the international market.
As the current market price is ruling very high, Cotton Corporation of India (CCI) will not be able to procure any cotton under MSP during the current season.
The industry is heading towards a severe crisis on cotton front as the trade is likely to procure bulk volume of cotton during the season.
Ravi Sam, Chairman, The Southern India Mills’ Association (SIMA) said that though CCI has been offloading bulk volume to the trade, some price stability could be observed as the Government had directed the CCI to adopt industry-friendly trading policies during the last few years whenever CCI exercised MSP operations that yielded some benefits for the MSME textile units.
SIMA Chairman has appealed to the Prime Minister to introduce an innovative Cotton Procurement and Trading Scheme for CCI by providing Government funding to procure 10 to 15 per cent of the cotton that arrives at the market during the season and create a strategic stock for price stability, sell the cotton only to the actual users in a staggered manner till the end of the season and maintain some buffer stock for the next season.
It is worth mentioning here that the New York Futures (NYF) Index that used to hover around 70 to 80 cents per pound is now ruling around 110 cents thus creating a panic situation and uncertainties in the business of cotton textiles and clothing products. The NYF has increased around 25 per cent in the last 15 days.
The Indian cotton price, though currently attractive due to comfortable closing stock position, has also increased from Rs. 41,900/- per candy during December 2020 to Rs. 57,000/- per candy during the first week of October 2021 (Sankar-6 variety).
SIMA Chairman stated that the Indian cotton season 2021-22 started with over 100 lakh bales opening stock, is likely to produce around 355 lakh bales, consume around 330 lakh bales, import around 10 lakh bales and thereby leave around 135 lakh bales for export and the carry over stock.
He fears that the export might exceed 100 lakh bales in the current season due to US sanction on Xinjiang Chinese cotton that accounts 10 per cent of the world cotton production resulting in not only shortage of cotton but also abnormal speculation in the cotton market.
The multinational private trade has already made huge profit out of Indian cotton during the season 2020-21 taking advantage of 10 per cent import duty levied during February 2021. The import duty has not benefited the farmers, as India mostly imports only 2 to 3 per cent of the requirement especially the speciality cotton like ELS cotton, organic cotton, sustainable cotton, etc., to meet the requirements of nominated businesses of global brands.
For the domestic ELS cotton, though inferior in quality, namely, DCH 32, the price has increased from Rs. 57,500/- per candy during December 2020 to around Rs.1.2 lakhs during the first week of October 2021.
The industry has been cautioning that the cotton textile value chain especially the garments and made-up exports would be affected in the absence of a level playing field that has become a reality.
According to him, an analysis of last 10 years’ cotton price data reveals that as the industry procures only around 1/3rd of the cotton and 2/3rd of the cotton is procured by trade/CCI, the cotton price rules low from November to March, making the farmers to suffer. He has pointed out that often the industry had to import cotton to meet the shortage.
He further pointed out that around 10 to 15 per cent of the cotton produced in the country is inferior in quality and cannot be used for producing export quality or high-quality yarns and therefore the industry is forced to import cotton.