The domestic cotton prices for the major variety of cotton viz., Sankar-6 has been stable from the beginning of the current cotton season (from October 2012) ruling at Rs.33, 500/- per candy of 355 kgs till the middle of February 2013. The cotton prices suddenly and abruptly increased to Rs.35, 000 per candy from the second fortnight of February 2013 raising it to Rs.38, 500/- per candy now.
The international prices which have been stable till the end of February 2013 (85 to 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, the cotton prices have been increasing abnormally in the recent past threatening the competitiveness of the Indian cotton textiles industry.
Mr. S. Dinakaran, Chairman of The Southern India Mills’ Association (SIMA), has stated that the main reason contributing the spurt in the cotton prices is due to the holding of inventory by government procurement agencies (viz., CCI and NAFED, etc) and major cotton traders. He has stated that the cotton export registration also abruptly increased during the month of February 2012 which has been steadily increasing from the beginning of the cotton season, which today seems to have exceeded 80 lakh bales mark, fuelling the situation.
Mr. Dinakaran has stated that the Association had appealed to the Government during the end of February 2013 to direct CCI and other procurement agencies to announce the cotton prices and start selling the cotton only to the actual users to stabilize the cotton prices. However, he felt unfortunate that the government did not heed to the request of the user industry even after 15 days which resulted in increase of another Rs.2500/- per candy in the cotton prices.
SIMA Chief has stated that though the textile mills have the option of importing international cotton, it would take 45 days time for the mills to receive the cotton and therefore, all of a sudden artificial scarcity has been created by the traders and the government procurement agencies by holding the stocks and speculating the prices. He has added that this sudden volatility in cotton prices would seriously affect the downstream sectors such as handlooms, power looms and garments, who normally quote the prices for three months’ period for their exports.
Mr. Dinakaran has pointed out that such an increase would seriously affect the viability of the entire textile manufacturing units in the textile value chain and feared that the industry might face yet another crisis if the government does not act upon and instruct the cotton procurement agencies to sell the cotton to the actual industry users immediately. He has further pointed out by creating artificially scarcity in India, the multinational cotton traders are trying to jack up the prices globally, which has contributed to the increase in the international prices recently.
SIMA chief has also criticized that it has been the practice of cotton traders in the last five cotton seasons that they manipulate the trade in such a way that the prices shoot up abnormally during February to April by crating artificial scarcity and again speculate the prices during the end of the cotton season.
SIMA Chairman has opined that CCI and other procurement agencies have over 20 lakh bales of cotton procured from the farmers of Andhra Pradesh which are of long stable varieties at the minimum support prices and even if the procurement agencies sell the cotton at today’s price, it would fetch good profit to them. He has pointed out that the primary role of government procurement agencies is to support the farmers whenever the prices go below the MSP operations and also sell the cotton to the domestic industry and constantly maintain the stability in the cotton prices.
He has clearly indicated that the Association does not want the farmers or government agencies to incur loss, but at the same time the government should direct the procurement agencies to come out with transparent and consistent policies which would create win-win situation both for the farmers and the end user industry to sustain their global competitiveness.
SIMA Chairman has opined that the present upward trend in cotton price would subsidize soon which has been created artificially and therefore advised the textile mills not to be panic about the present price trend.