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Sitting on a record-high inventory of around 25 per cent of India’s total annual output, government-owned Cotton Corporation of India (CCI) plans a global tender to invite buyers.
Initially, to test the market, tenders will be for 5,000-10,000 bales (a bale = 170 kg) by this month-end. If it goes through, it could float another, with an overall target to sell 30,000 bales this cotton year (October 2014–September 2015).
CCI has procured 9.1 million bales this year so far at the government's minimum support price, surpassing the previous record of 8.9 mn in 2008-09. Almost the entire procurement operation for this year is done.
“We have spoken with a number of buyers in Bangladesh who were keen on purchase of Indian cotton,” said B K Mishra, chairman and managing director.
CCI is also in talks with buyers in Vietnam. Our usual buyer, China, has slowed its purchase of cotton and yarn, to discourage its power and labour-intensive textile industry. A recent Edelweiss Financial Services report estimates China’s cotton import at a five-year low of 1.6 million tonnes (mt) so far this season, against 3.08 mt the previous year.
Bangladesh’s cotton import has hit a five-year high of 0.99 mt in 2014-15, compared to 0.89 mt last year. Vietnam has imported 28 per cent more fibre this year at 0.89 mt, as compared to 0.69 mt last year.
Despite China’s absence from active buying, prices in both the domestic and international markets have shot up, with the benchmark No 2 cotton for near-month delivery on the InterContinental Exchange quoted at US cents 66.22/lb, compared to 59.89/lb in early February. Similarly, the benchmark Shankar-6 variety was sold at Rs 9,420 a quintal in the spot market here on Friday, as against Rs 8,548 a qtl on February 1.
The textile industry has urged CCI to start releasing cotton into the market, to ease supply. “The industry is passing through a serious situation due to non-availability of cotton in abundant quantity, on account of the stop-go policy of CCI, in spite of holding a high level of stock. Of its total procurement, CCI has only released 0.3 million bales. It is releasing a negligible quantity of between 3,000 and 5,000 bales a day. This is only resulting in a steep rise in prices, beside creating a shortage of good-quality cotton for the textile sector, which in turn is adversely affecting the export of yarn, fabrics and made-ups. CCI should start releasing at least 50,000 bales a day for 100 days, through e-auction,” said R K Dalmia, chairman of the Cotton Textiles Export Promotion Council.
Added Prem Malik, chairman of the Confederation of Indian Textile Industry, “Our spinning industry is suffering due to weak demand for cotton yarn from both domestic and international markets. Unless immediate measures are taken to avoid a speculative increase in cotton prices, the spinning industry will suffer irreparable damage.”
For disposal of procured cotton in the home markets, however, CCI is waiting for directions from the Union textiles ministry.
