State-run Cotton Corporation of India (CCI) has resorted to commercial purchase of cotton at market rates from various parts of the country to ensure supplies for its customers in the textiles industry.
The corporation has issued notices reaching out to buyers informing them that the Corporation will shortly commence e-auction of FP bales for the cotton season 2016-17.
Those buyers who are not yet registered may register themselves with the Corporation for participating in e-auction of FP bales. M M Chockalingam, CMD (in-charge) said that after a gap of almost four years, they have made a small beginning and have purchased about 1,000 bales (of 170 kg each) so far, at commercial rates, from various centres even as cotton trades firm on lower arrivals due to the impact of the currency crunch.
The Corporation expects to purchase around 15 lakh bales for the season of 2016-17. “Cotton prices are ruling between R5,000 and R5,200 per quintal in various markets while Minimum Support Price (MSP) is at R4,160 per quintal and therefore procurement at MSP seems unlikely,” he said.
However, apart from MSP operations, CCI also has to perform commercial operations at times in the interests of the farmers and to keep the market stable.
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“If CCI does not have stocks then traders can control markets and bring out cotton during lean season,”he explained. “The intent of the CCI is to ensure that this does not happen and keep prices uniform. Instead, CCI will purchase some 15-20 lakh bales of kapas and make it available to the industry in times of need,” he said.
CCI has been purchasing kapas or raw cotton from markets wherever the prices are lower, Chockalingam said, adding that the commercial purchase of up to 15 lakh bales would be mainly from the West, Central and Southern parts of the country as prices in the Northern markets are ruling much higher.
Kapas prices are ruling between R5,000 to R5,200 per quintal in various markets. While prices are expected to soften a bit from next month, most experts have ruled out a drastic fall.
Further, they see a very slim possibility of the CCI taking up procurement operations at the MSP this year as prices were unlikely to drop below the support price levels on account of the tight demand-supply scenario.
The Centre had declared an MSP of R4,160 per quintal for the current season for the long staple fibre and R3,860 for the medium staple length. Besides protecting cotton growers’ interests, CCI caters to the needs of its customers, such as the National
Textiles Corporation and several co-operative mills. It also meets the demand of private sector mills, mainly during the lean season, by releasing the fibre from its stocks. Over the last three-four years, CCI has stepped into the markets to protect farmers when prices fell below the minimum support price (MSP) levels.
But this year, cotton prices have been firm at the start of the season on account of lower arrivals. In fact, in the immediate aftermath of demonetisation, cotton prices spiked, even surpassing the global prices, as farmers temporarily held back their produce.
Although Indian cotton acreage had dropped by close to a tenth this year to around 110 lakh hectares higher yields, on account of widespread rains in key producing states, it is expected to help maintain output.