Southern India Mills Association (SIMA) has requested the government to reconsider its decision to enhance the cotton export ceiling to 65 lakh bales from 55 lakh bales for the season 2010-11. The decision is going to push the spinning sector to further crisis, points out J Thulasidharan, chairman of the association.
He said that the announcement has come as rude shock to the ailing spinning sector, which has been forced to cut down its production by 35% to adjust the supply-demand mismatch.
The mismatch was caused due to lopsided policies announced by the government particularly the premature announcement made on cotton export and also the suspension of cotton yarn export between January and March 2011 resulting in huge accumulation of yarn stocks, he complained.
The Cotton Advisory Board has already estimated a closing stock of 27.5 lakh bales after earmarking 55 lakh bales for export and very conservative domestic cotton consumption, he said.
The agriculture ministry has estimated the cotton production as 339 lakh bales as against the CAB estimate of 312 lakh bales.
Thulasidharan said, the Indian spinning sector was doing very well during the period 2003-2007 when there was a stability and parity between the cotton and yarn prices. However from 2008 onwards, the various trader-friendly policies announced by the government, has seriously affected not only the spinning sector, but also the livelihood of over 25 million people directly employed in the cotton textile industry. He further pointed out that since the all the farmers have already sold their produce by March end, the recent announcement of the government to enhance the cotton export ceiling to 65 lakh bales would benefit only few traders who are holding huge stock.
This situation would force closure of hundreds of mills at least for two to three months for want of cotton during August to October 2011. Shortage of cotton for the domestic industry would shoot up the cotton prices resulting in further glut in the market and abnormal losses not only to the spinning mills but also to all the sectors across the value chain. So the government should take a relook at the decision to sustain the employment of several millions and also functioning of the mills.