The textiles ministry is planning a Rs 2,000-crore package for Cotton Corporation of India (CCI) to offset part of losses on the sale of cotton at discounted rate during the current season. However, the package will be extended only by the next government, which is likely to assume office in June 2009.

?The package will be given in the form of non-plan budgetary support. We will move a Cabinet note when the new cabinet comes into existence,? a top official in the ministry said.

CCI has to purchase cotton at minimum support price (MSP), which was raised by 40% in 2008, to ensure minimum return to cotton farmers in the country. Also, the government has asked the trading agency to sell the commodity lower than the buying price to improve sales in the domestic market and make up for the likely reduction in the commodity?s exports.

The economic slowdown around the globe has reduced demand for goods. India?s exports declined 13% in February 2009, the fifth consecutive month of falling sales abroad, mainly due to lower orders from the United States and Europe that account for 70% of Indian textile exports. Firms have reduced production by 0.5% in January, second month in a row.

With CCI expected to sell 10 million bale of cotton in 2008-09 season (October 2008-September 2009) and the loss per bale is estimated at Rs 2,500, the corporation will suffer a loss of Rs 2,500 crore till September this year.

?We hope that the support would be enough for the agency to meet its requirement for this season. However, if it needs more money, we would work on it,? the official said. The present government has already granted Rs-500 crore to the corporation to provide for the losses on sales. ?This money will be released by the end of this month,? he said.

?The loss of Rs 2,500-crore that we are expected to suffer on account of selling cotton at lower prices would be offset by the government assistance. We would also save on storage cost,? a CCI official said. However, he added ?the amount is based on preliminary estimation and the actual figure may turn out to be higher. We will definitely approach the government for further assistance.?

In its latest estimation, Cotton Advisory Board (CAB) has said the cotton production during the season would be 290 lakh bale. The total stock becomes 340 lakh bale if 43 lakh bale of carry forward and seven lakh bales of expected imports are added to the total crop produced during the season.

According to CAB, total consumption of cotton by domestic textile mills and traders would be 230 lakh bales and exports 50 lakh bales, leaving 60 lakh bales unutilised at the end of the year. Last year, domestic utilisation was 241 lakh bale while 85 lakh bale were sold overseas. CCI is giving a discount of Rs 400 per candy on the purchase of at least 10,000 bales but not more than 25,000 bales. A discount of Rs 450 per candy is given if the order is between 25,000 and 50,000 bales.

A buyer can save Rs 500 per candy on the purchase of cotton between 50,000 bales and 2,00,000 bales and Rs 650 per candy on 2,00,000 bales or more. A candy is equal to 356 kg while 170 kg makes up for a bale.

The industry feels that the discounted rates are mostly benefiting traders and large enterprises. ?Bulk purchase is feasible only for traders and for large mills. Ninety-five percent of the textiles industry is made up of small and medium mills,? Confederation of Indian Textiles Industries secretary general D K Nair said.

?The cotton should be sold at discount on first-come-first-served basis and no quantity should be attached to the discount. That will make it uniformly applicable,? he added.