Imported cotton offers a benefit of Rs 2,000 per bale.
With the international cotton prices getting attractive, textile companies have begun importing the commodity heavily from overseas markets, especially Pakistan. Apart from the neighbouring country, India has also begun importing from Argentina, Brazil and the US on account of lower prices. As compared to domestic rates, the imported cotton offers a benefit of Rs 2,000 per bale to these textile companies.
Thanks to a 40 per cent rise in minimum support prices (MSP) for cotton, the domestic prices seem far fetched compared to international prices, thereby tempting textile firms to import rather than source from domestic market. For instance, Ahmedabad-based Aarvee Denim & Exports Ltd. recently imported around 15,000 to 20,000 bales of cotton from Latin America. “The international prices have been so attractive that in our recent import we earned a profit of Rs 2,000 per bale. Apart from high MSP, the recent cut in import duty has worked in our favour,” said Ashish Shah, managing director of the denim major.
Shah added that countries like Pakistan, Argentina and Brazil have been offering cotton at some attractive prices and luring cotton importers across the world.
According to Abhinava Shukla, general secretary of Ahmedabad Textile Mills Association (ATMA), the recent suggestion by textile ministry for farmers to hoard cotton and not jump immediately into sales has also resulted in lower supply of cotton. “With the farmers now hoarding cotton in expectation of better prices, the textile firms seem to have been prompted to import cotton. The benefit from importing cotton rather than buying from domestic market is, however, shortlived since cotton prices may settle down in India soon,” said Shukla.
Many mills from North India have started procuring cotton from Pakistan due to lower prices. Pakistani cotton at present is cheaper by around Rs 4,200 as compared to Sankar-6 variety of cotton in India. Inaddition to this, there is no import duty on cotton, which has lured the Indian mills to go for cotton imports, said Arun Dalal, owner of an Ahmedabad-based leading cotton trading firm Arun Dalal and Co.
Cotton prices have remained firm from the beginning of the season. Though cotton prices in Gujarat had tanked to a low of Rs. 21,000 per candy but the prices rose after Cotton Corporation of India (CCI) had started purchasing cotton at Minimum Support Price (MSP). On Tuesday, cotton prices were quoted at Rs. 22,200 to Rs. 22,400 per candy in various markets of Gujarat.
