Demand for cotton in the domestic market is finally looking up after witnessing a sluggish trend in the current cotton season (2008-09) following a steep hike in minimum support price (MSP).
The rise in demand from domestic mills, merchants as well as from ginners over the past month seems to have helped Cotton Corporation of India (CCI) clear a sizeable chunk of the massive cotton stock, which it has procured in the current year.
The government has raised MSP from Rs 2,055 per quintal in 2007-08 to Rs 2,850 in the current season.
“The demand from cotton mills has been on the rise in the past six weeks,” Subhash Grover, managing director, CCI, told Business Standard. “The corporation had offloaded 70 per cent of its total procurement last year. The government agency has sold 70 per cent of its stock by March-end,” he added.
The agency had purchased a record 8.8 million bales from the farmers in 2008-09, of which 6.1 million bales have already been sold in the domestic market. As on date, CCI has an unsold stock of 2.7 million bales only.
“Of late, big cotton merchants have entered the market and they are purchasing cotton from CCI. These cotton merchants are booking cotton for domestic mills,” said Kishor Shah of the Central Gujarat Cotton Dealers Association.
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Apart from this, cotton ginners, who largely remained inactive this year, have started buying. This has further boosted the demand of the commodity.
Considering the rise in demand, CCI, too, has increased the selling price of cotton. The government agency has recently increased the price by Rs 100 per candy in Gujarat and Punjab. The selling price for Sankar-6 variety is now Rs 23,000 per candy.
According the cotton traders, CCI had raised the cotton price by Rs 500 per bale in a single day a couple of weeks back. As a result, the spot price of cotton moved up over Rs 1,800 per candy to Rs 23,000 one week back.
CCI’s success in clearing 6.1 million bales is also seen as an achievement by some of the industry players. The agency has introduced bulk discount scheme for cotton mills, exporters and traders. The agency offers discounts in the range of Rs 400-650 a candy.