The Cotton Corporation of India (CCI) is all set to borrow Rs 9,000 crore for the procurement of cotton this season. This amount is five times of the government agency’s highest-ever borrowing of Rs 1,800 crore in 2004-05.
Since CCI has been asked to procure cotton under the minimum support price operations, the monetary requirement has scaled up dramatically. Last season, the corporation borrowed only Rs 500 crore for procuring 1 million bales (1 bale = 170 kg), whereas this cotton year (October-September) CCI will procure more than 10 million bales — becoming the world’s first agency to do so.
The current procurement size is four times that of the highest procurement of 2.75 million bales the agency made in 2004-05. Never in its history has the agency undertaken procurement on such a massive scale.
According to CCI Managing Director Subhash Grover, “We have estimated that we will require Rs 15,000 crore for procuring 10-12.5 million bales this year. A cash flow statement was submitted to the banks and in return we got a sanction for the same amount as cash credit limit. We can avail the entire amount at any point of time.”
With the slowdown severely impacting the textiles industry, CCI is of the view that in case the procured cotton is not sold quickly then there will be cash flow problems. This will later impact the procurement process itself.
“We deal in cash and do not sell anything in credit. Due to the sale of cotton, the money started pouring in from Day One. Already, we have borrowed Rs 8,500 crore and we may need another Rs 500 crore in the coming days. So, I believe our total borrowing will go up to Rs 9,000 crore against the cash credit limit of Rs 15,000 crore,” Grover says.