n Just 11% of stock to be sold as textile min balances mills? interests with farmers?
The textile ministry is considering offloading 2,50,000 bales of cotton from its reserves to stabilise the fibre’s prices, which have risen by more than 10% since February on a revival in Chinese demand, official and industry sources told FE.
The board of the Cotton Corporation of India (CCI) ? the government’s biggest fibre procurement agency ? has decided to sell a portion of the stocks to textile mills, the sources said. However, the stocks proposed to be offloaded represent just around 11% of the official reserves held by the CCI as the textile ministry seeks to balance the interests of mills with that of farmers, especially after the agriculture ministry had strongly opposed any such move. However, it would be difficult to implement the proposal if the agriculture ministry sticks to its earlier stance, one of the sources said.
Late last month, the agriculture ministry fiercely resisted any move to offload cotton stocks held by state-run agencies, as it feared such a step might potentially drag down open market prices below the state-fixed benchmark rates and hurt farmers’ earnings. Since state-run procurement agencies face infrastructral bottlenecks and don’t have adequate network, driving prices down by selling official stocks could jeopardise the intersts of farmers, it had argued.
Commerce and textiles minister Anand Sharma and Prime Minister’s Economic Advisory Council chairman C Rangarajan had taken stock of the situation last month.
State-run Cotton Corporation of India (CCI) has stacked up nearly 2.2 million bales so far in the marketing year through September to prevent distress sales by farmers as prices in third-largest producer Andhra Pradesh dropped below the benchmark prices. One bale equals 170 kg.
Government agencies usually buy cotton at minimum support prices and sell the stocks later at market rates. The losses on account of the procurement operations are reimbursed by the government.
Confederation Of Indian Textile Industry (CITI) secretary general D K Nair said: ?Any move to offload stocks at this juncture is welcome?, while Southern India Mills? Association chairman S Dinakaran said the CCI stock sales would bring stability to the fibre’s prices. Prices of 29 mm cotton (ICS-105 fine variety) rose to R37,700 per candy of 356 kg each as of Tuesday, compared with R34,100 in the beginning of February.
The stock sales by the CCI have triggered a hot debate this year after some key stakeholders held conflicting views. Some government officials had said the arrivals of the crop were higher than offtake by mills, suggesting adequate availability in the open market. They had apprehended that the government had to incur losses of hundreds of crores if stocks were offloaded then, taking into consideration costs on interest payment against bank loans, staff, insurance and storage.
However, last month, CITI demanded that CCI offload stocks from its reserves to curb a jump in prices, stoked “partly by hoarding of cotton by traders, and partly by non-release of procured cotton by the CCI and other procurement agencies”. A week later, the traders’ body ? the Cotton Association of India ? said the price rise in cotton was triggered by an increase in yarn prices. CAI president Dhiren Sheth said CCI should offload cotton only to the highest bidder and also at a convenient time so that losses to the exchequer on procurement operations can be significantly cut.
The row exacerbated when apparel manufacturers and exporters voiced concern against what they called lack of parity in the price rise in cotton and yarn, and sought a ban on yarn exports, barring a few varieties.
