Piyush Goyal meets industry stakeholders amid call for cotton export ban

With cotton and yarn prices on the rise, textiles minister Piyush Goyal met all industry stakeholders on Tuesday.

The minister said that import of cotton will be permitted duty free till the bill of lading is dated September 30 this year and not based on the bill of entry at Indian Ports. The government will also form a cotton council that will study all the matters relating to cotton and will start functioning with the membership of all stakeholders and will provide its report to the government on the measures to be initiated immediately. The minister also announced formation of a cotton advisory board with representation from textiles ministry, agriculture, agricultural research, commerce, finance along with industry representatives.

This comes amid speculation that the government may ban export of both commodities as a temporary measure to calm down the prices.

Among the major suggestions that the industry came out with include a short-term ban on cotton exports, as no farmer is going to get affected. This is because cotton is now left with the traders only.

On the other hand, ban on yarn exports, removal of cotton from commodities traded at Commodity Exchanges and declaration of cotton as an essential commodity were other key suggestions that the industry gave.

Looking at the prices, Indian cotton has increased the most and Chinese the least in the last one year.

Based on industry estimates, Shankar-6 cotton, a benchmark for exports, more than doubled in the last one year.

China Cotton Index saw only 38 per cent increase in May 2022 compared to the same time last financial year.

The price of cotton has more than doubled to around Rs 95,000 per candy (356 kg) from Rs 48,000 during the beginning of this season in October 2021. Farm gate raw cotton prices have risen by a sizeable amount.

“Around 18 months back, a unit could buy 1 kg of yarn for Rs 200, whereas now, with the same amount, a unit can buy only 400 grams.

 

This apparently reveals how much knitwear exporting small and medium units are undergoing financial stress on the operational front. The major concern is that liquidity has been drained off from its sanctioned limits,” said Raja M Shanmugam, president of Tirupur Exporters’ Association. 

The association called for a specified scheme for micro, small and medium enterprises (MSMEs) under the Emergency Credit Line Guarantee Scheme (ECLGS).

It sought 10-20 per cent of the existing credit immediately, mainly to bail out knitwear garment players, comprising 95 per cent of MSMEs.

According to Tamil Nadu Spinning Mills Association (Tasma), due to the alarming increase in the cost of cotton, many spinning mills have been forced to switch over to blended yarn. This comes as they are unable to manage their working capital requirements.

“Around 90-95 per cent of the spinning mills do not have cotton stock of more than 15-30 days during this entire season. They fear that cotton stock kept for more than their instant requirements may result in losses. This is something they experienced during 2010,” a Tasma official informed the government during Tuesday’s meeting.

Among the long-term solutions suggested include mandating Cotton Corporation of India (CCI) to keep a minimum stock of 100 lakh bales.

At present, CCI is mandated to purchase cotton whenever prices go below the minimum supporting price (MSP) fixed by the government. This is to protect cotton-producing farmers.