The Southern India Mills? Association (SIMA) has demanded immediate offloading of cotton held by the Cotton Corporation of India (CCI), Nafed and cotton traders to arrest the rising price of the commodity over the last few days. It said that domestic cotton prices for the major variety of cotton i.e, Sankar-6, have been stable since the beginning of the current cotton season (from October 2012), ruling at R33,500 per candy of 355 kg till the middle of February 2013. Prices abruptly increased to R35,000 per candy from the second fortnight of February 2013, and are currently at R38,500 per candy now. International prices, which have been stable till the end of February 2013 (85-88 cents per lbs), have increased in the recent weeks and now ruling at 95 cents per candy. The exchange rate has also increased marginally. As a result, cotton prices have been increasing abnormally, threatening the competitiveness of the Indian cotton textiles industry.
According to S Dinakaran, chairman, SIMA, ?The main reason behind the spurt in the cotton prices is the holding of inventory by government procurement agencies such as CCI and NAFED and major cotton traders. Cotton export registration also abruptly increased during February 2012, which has been increasing steadily since the beginning of the cotton season and today seems to have exceeded the 80-lakh-bales mark, fuelling the situation.?
He added that CCI and other procurement agencies have bought over 20 lakh bales of cotton from farmers in Andhra Pradesh,with the purchase mainly of long, stable varieties at minimum support prices. Even if procurement agencies sell the cotton at today’s price, it would fetch them good profit. The primary role of government procurement agencies is to support farmers whenever prices go below the MSP, sell cotton to the domestic industry and maintain stability in cotton prices.
?The association does not want farmers or government agencies to incur losses, but at the same time the government should direct the procurement agencies to come out with transparent and consistent policies that create a win-win situation for the farmers and the end-user industry,? he said.
The association had earlier appealed to the government in February-end to direct CCI and other procurement agencies to announce cotton prices and start selling the crop only to the actual users to stabilise prices. However, he association says the government did not heed to the request of the industry even after 15 days, which resulted in an increase of another R2,500 per candy in cotton prices.
?Though textile mills have the option to import international cotton, it would take 45 days for the mills to receive the cotton and, therefore, all of a sudden, an artificial scarcity has been created by traders and the government procurement agencies by holding stocks and speculating on prices. This sudden volatility in cotton prices would seriously affect the downstream sectors such as handlooms, power looms and garments, which normally quote prices for a three-month period for their exports,? he said.
