Suspension of cotton exports till new crop arrivals in December 2008, canalisation of all future cotton exports through Cotton Corporation of India (CCI) and other State Federations and levy of five per cent duty on cotton exports are some of the proposals made by the Southern India Mills Association (SIMA) to resolve the continuing cotton crisis despite the recent fiscal adjustments.
J Thulasidharan, deputy chairman, SIMA, said from Coimbatore that “the recent removal of import duty of 10% and special CVD of 4% on cotton has given only a marginal relief to the Indian spinners by creating a level playing field in the globalised environment”.
He said the steps taken by the government were in the right direction, but they have eased out the local cotton price only marginally i.e, to the extent of Rs 500-750 per candy (355 kg). Indian cotton was still costlier than the imported cotton.
?The Indian cotton prices have been speculated very abnormally during the current cotton season, from Rs19,000 to Rs 30,000, a candy. Therefore, the woes of the Indian cotton textile industry have not been fully addressed,? Thulasidharan said.
Portraying the cotton price increase during the current cotton season for S-6 cotton variety, he pointed out that the increase was over 58% mainly due to the huge exports of cotton. At its meeting held on January 11, 2008, the Cotton Advisory Board (CAB), earmarked 65 lakh bales for exports against 58 lakh bales in the previous season on estimates that the total production would be up to 310 lakh bales.
SIMA sources have found that over 100 lakh bales have been exported as against 65 lakh bales of CAB estimate depleting the cotton stock-to-use ratio to less than 18% as against 42% level maintained by the competing countries like China.
SIMA wants that at least 40% stock -to-use ratio, should be ensured since all the competing countries maintain the same around 42%, and only the balance should be earmarked for export in a staggered manner by implementing monthly quota for exports.
Thulasidharan has felt that it was unfortunate that the multinationals cotton traders commanding the Indian cotton business, covered large volume of cotton as they could get unlimited finance at less than 3% interest rate as against 15% for the Indian spinners and buyers.
He further cited that the escalated cotton prices, though pushed the Indian spinners into heavy cash losses, considering the recessionary trends prevailing in the industry, they could not pass on fully the escalated cotton prices. Thulasidharan said besides the cotton, the various other input costs like transport, fuel, labour, high bank interest rates, etc., also shot up substantially. Tamil Nadu, which accounts for more than 47% of country’s spinning capacity, was plagued with acute power shortage during the cotton season.