Cotton has been a matter of concern for the textile mills after it was taken out of the Essential Commodities Act, and with the 40% increase in the minimum support price (MSP) and the incentivisation of exports by Nafed.
?The government policies in 2008-09 on cotton have not benefited either the cotton growers or the textile industry. The policies have benefited only the cotton traders, exporters and indirectly the competing countries like Pakistan, China, Thailand, and Bangladesh,? K V Srinivasan, chairman, Southern India Mills’ Association (SIMA), said.
He said the textile industry, reeling under the global economic melt-down, acute power shortage, hardening interest rates, and poor export incentives, has been made to suffer by the recent government policies.
Srinivasan has appealed to the government to make Nafed extend uniform discount to traders as well as the small and medium mills, effect necessary changes in the MSP, withdraw the 5% export incentive and the bulk discount offered for cotton to enable the ailing textile industry to have a healthy competition. He has asked for a special package for working capital at the interest rate of 7% and margin money at 10% with a nine-month credit period.
He said the removal of cotton from the Essential Commodities Act, during February 2007, enabled the multi-national cotton traders to make huge purchases during the cotton season 2007-08, hoard and speculate the cotton price over 45% in India. ?This affected the performance of the textile industry in the country,? he added.
The SIMA chief said the MSP for the current cotton season has been increased by over 40% as against a normal increase of 5% to 8%. Prices were up to Rs 3,000 per quintal from Rs 2,050 per quintal for long staple cotton used for making super fine fabric and tto Rs 2,500 from Rs 1,800-Rs1,850 per quintal for medium staple cottonused for denim and coarse cloths. This made the Indian cotton prices dearer in the global market and export of cotton declined drastically.
The domestic consumption also declined due to poor financial performances and also acute power shortage in States like Tamil Nadu which accounts for almost half of the country’s cotton consumption.
?Owing to the very high MSP, Cotton Corporation of India (CCI) and Nafed had to enter the market and purchase almost 50% of the cotton during the current cotton season and started selling at a lower price incurring huge losses. To arrest these losses incentives were offered for exports and discounts to big traders for bulk purchases. The industry could not procure adequate cotton due to high prices and also owing to the financial crunch. It has been pleading for a special financial assistance for procurement of cotton”, Srinivasan said.