Of the 110 lakh bales that have arrived in the market so far, traders and textile mills are reported to have purchased around 94 lakh bales of cotton so far for the season of 2016-17. Cotton rates have moved up to R5,200-R5,300 per quintal from R4,150 per quintal at the start of the month. MM Chokalingam, CMD in-charge of Cotton Corporation of India (CCI), says that CCI has not done much of kapas (raw cotton) purchase because prices have gone up and the commercial losses may not be compensated by the government.
The corporation, however, is going in for bale purchase to ensure supplies for its customers in the textiles industry. So far, around 15,000 bales have been purchased and the target initially was around 11-12 lakh bales, he said.
CCI had commenced commercial purchase of cotton at the market rate from various parts of the country to ensure supplies for its customers in the textile industry.The corporation had issued notices reaching out to buyers informing them that it will shortly commence e-auction of FP bales for the season 2016-17. CCI has been purchasing kapas 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 the prices in northern markets are ruling much higher.
Kapas prices are ruling between R5,000 to R5,200 per quintal in various markets. While the prices are expected to soften a bit from next month, most experts have ruled out a drastic fall. 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 also 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 the prices fall 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.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.
According to Chokalingam, arrivals are still on the lower side since farmers are holding onto cotton in expectation of better prices. Already rates are in the range of R5200-5300 per quintal and farmers are getting the benefit.
“Majority of the purchases so far have been by textile mills. However, we do not expect rates to go up further since textile mills are already at a break even point and are unlikely to purchase at higher prices,” he explained, adding that once the mills stop purchase, rates are likely to come down. NP Hirani, Chairman, Maharashtra State Cooperative Cotton Growers Federation however believes that rates are likely to cross the R6,000 per quintal mark soon.