CCI forays into storage building

The Cotton Corporation of India (CCI) is foraying into the construction of godowns in a joint venture with state warehousing corporations (SWCs). Faced with an uphill task of procuring over 10 million bales of cotton, the government marketing agency is leaving no stones unturned in dealing with the problem of shortage of godowns.

In 2004-05, the agency bought 2.75 million bales, its highest procurement. This figure is almost one-fourth of what it is estimated to procure in the current cotton season. The cotton season stretches from October to September.

Subhash Grover, managing director of CCI, told Business Standard, “Given the shortage of space, we are going to construct our own godowns. For this, we are going to sign MoUs with state warehousing corporations of Maharashtra and Andhra Pradesh to add new godowns.”

This will be for the first time that CCI would go ahead with constructing its own godowns.

“If there are no minimum support price (MSP) operations next year and our godowns remain vacant, the agreement will allow the SWCs to utilise the space and we will pay them management charges,” added Grover.

At the same time, the corporation has kept its options open to go for similar joint ventures with other SWCs throughout the country if it faces the storage space shortage.

Till February, CCI had procured 8.2 million bales. Of this, it could sell only 3.4 million bales (40 per cent of the total procurement against the normal 60-70 per cent by this period). “Irrespective of our best efforts, we are falling short of godowns in some states. Fortunately, with the recent sales of 3.4 million bales, the problem of storage will be sorted out to some extent and the procurement process will remain smooth,” said Grover.

Presently, CCI has taken the godowns of Central Warehousing Corporation (CWC), various SWCs, co-operative factories, APMC and even those of the now-shut spinning mills in the country. However, despite these efforts, the required space could not be met given the massive MSP operations. As a result of which, CCI is now forced to take the risk of keeping stocks at the ginning and pressing units (factories where raw cotton is processed into bales) for as long as a fortnight. In normal circumstances, the processed cotton is lifted from ginning and pressing units within 48 hours.

“ The only risk in keeping the cotton in the ginning and pressing factories is fire. So it is our endeavour that the bales should be shifted to godowns as soon as the space is available,” added Grover.

“We do not have expertise in storage of the produce,” admitted the CCI head.

 

 

He further said, “We have appraised CWC and SWCs that in the coming years, government procurement will be of a similar or slightly lesser size and more godown space will be needed.” In a global slowdown scenario with textile mills facing financial crunch, the sale of cotton is considerably hampered this season. Last year, the country physically exported 6 million bales by February, whereas this season’s figure stands at a meagre 0.7 million bales. This is adding to the woes of CCI as an extra 5.3 million bales is taking up additional space at the existing godowns. “We have to assure that by 30 September, we sell at least 80 per cent of our procurement, otherwise we will not be able to do the MSP operations next year,” said Grover.