Textile industry seeks PM’s intervention to stabilise cotton prices

Textile industry seeks PM’s intervention to stabilise cotton prices


Confederation of Indian Textile Industry (CITI) has sought Prime Minister’s intervention to stabilise the cotton prices, which have soared to the peak in the last 11 cotton seasons. It has also urged for a cotton price stabilisation fund Scheme comprising 5% interest subvention or loan at NABARD rate of interest, reduction in margin money from 25% to 10% and increase in the cotton working capital limit from 3 months to 9 months.

T Rajkumar, chairman, CITI in a representation to PM said that Indian cotton textile Industry has always been at the helm of affairs due to its inherent strength of availability of raw cotton in abundance at competitive prices and the presence of the entire cotton value chain. Due to this inherent strength, the Indian Textile Industry is providing employment to over 10 crores workforce ranging from the skilled workforce working in the technical textile units to illiterate women and poor farmers working in small garment factories and cotton farm fields.

The CITI chairman said that the textile and cotton industry has continuously been facing several challenges since the last ten years due to fluctuations in the raw cotton prices which accounts for 60% cost for the yarn. This makes the downstream industry, especially the spinning sector, vulnerable as it increases the cost of yarn prices and makes them quite unpredictable in the highly cost-competitive international market. He further pointed out that the removal of cotton from the Essential Commodities Act has also led to the industry’s woes as it has paved the way for multinational cotton traders/ hoarders to dominate the Indian cotton economy. They procure cotton in bulk during peak-season at cheaper prices, export and create scarcity and then speculate the prices during off-season. The Cotton Corporation of India Ltd. (CCI) has also been increasing cotton prices very often and offloading bulk volume with attractive discounts which further fuel cotton prices speculation. This leads to chaos in the downstream segments which then pressurizes the Government to bring stability in the yarn prices which is not possible until and unless there is stability in the raw cotton prices.

Rajkumar said that his appeal will help MSME spinning mills to source cotton during peak season (November to March), farmers get better prices and avoid MSP operation. This would also enable the cotton value chain to achieve 2-3% additional growth which would further bring in several thousands of crores of additional revenue when compared to around Rs.1000 crores/ year financial commitment (or extend loan at NABARD rate of interest) and also help in preventing the expenditure borne by the Government on MSP Operations, throughout the year.

Chairman, CITI further stated that the New York Futures Index that used to hover around 70-80 cents per pound is now ruling around 110 cents thus creating a panic situation and uncertainties. He added that 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.62,400/- per candy during the last week of October 2021 (Sankar-6 variety).

Rajkumar cautioned that this year export of cotton may cross 100 lakh bales due to US sanction on Xinjiang Chinese cotton which accounts for 10% of the world cotton production. He further said the cotton season 2021-22 started with an opening stock of over 100 lakh bales and the estimated production of cotton is about 355 lakh bales. There will be a consumption of about 330 lakh bales and the textile industry may import about 10 lakh bales, leaving about 135 lakh bales for export and carry-over stock. This will result in not only having a shortage of cotton in the international market but also abnormal speculation in the cotton prices.

CITI, Chairman stated that the levy of 10% import duty on cotton is only helping multinational traders not the cotton farmers, as the textile industry imports only 2-3% of ELS Cotton, Organic Cotton, Sustainable Cotton, etc., to meet the requirements of nominated businesses of global brands. He stated that the domestic ELS Cotton though inferior in quality viz., DCH 32, its price has increased from Rs.57,500/- per candy from December 2020 to around Rs.1.16 lakhs in the last week of October 2021. He also stated that the textile industry has been cautioning the Government that the cotton textile value chain especially the garments and made-up exports would be severely affected in the absence of a level playing field that has become a reality now.

Rajkumar observed that the analysis of the last ten years’ cotton price data shows that the cotton value chain consumes around 1/3rd of the cotton while 2/3rd of the cotton is procured by multinational traders and CCI and the cotton prices also remain subdued during November to March making Indian cotton farmers to suffer due to market dynamics.



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