Cotton Corporation of India (CCI), the nodal government agency for procuring cotton in the country, has procured a record 4 million bales so far this year. CCI’s cotton procurement in 2008-09 is four times higher than that seen last year. The aggressive buying by CCI has already sent shivers down the spines of exporters, ginners and textile industry players.
The increased buying of cotton by CCI at the Minimum Support Price, raised by 40 per cent this year, has ensured cotton prices did not fall. The industry, already resisting high support prices, are now feeling the heat as CCI’s aggressive buying is affecting their plans to procure cotton from the market.
Farmers are not offloading their holding in the markets as they expect the prices to surge further. This has further added to the woes of textile, ginning and other allied industries.
Around 11.8 million cotton bales (1 bale=170 kg) have arrived in various markets across the country as on December 24. “CCI has bought 4 million bales so far, which is the highest-ever procurement by the government agency. In 2004-05 CCI procured 2.7 million bales,” CCI CMD Subhas Grower told Business Standard. It has spent around Rs 5,700 crore to Rs 6,000 crore for purchasing cotton at the MSP from farmers.
Union textile minister Shankarsinh Vaghela has sought an additional Rs 565 crore for cotton procurement by the CCI. In addition to this, the minister has also demanded Rs 1,500 crore for procuring cotton next fiscal.
“CCI have no problems as far as funds are concerned. The government is ready to provide the right amount of funds if required,” Grower added.
With CCI on a buying spree, exports of cotton, yarn, apparel and textiles are likely to take a big hit. “If CCI had not intervened in a big way, cotton prices would have come down to Rs 20,000 per candy level.
However, considering the present price level Rs 21,800 to Rs 22,000 per candy, the domestic cotton prices are 6-7 cents higher than the prevailing rates in the international market. We are not competitive in the international market,” said Kishor Shah, president, Central Gujarat Cotton Dealers’ Association.
The plight of cotton exporters could be gauged from the fact that only 625,000 bales have been contracted for exports, of which 457,000 bales have been dispatched.
