CAI against strategic reserve of cotton

Even as the central government has started cotton procurement through Cotton Corporation of India (CCI) so as to create cotton reserve and arrest a fall in cotton prices, the Cotton Association of India (CAI) on Wednesday urged the government not to go ahead with its plans to set up a strategic reserve for textile mills in the country.

"It is disturbing to note that our country is moving back to the pre-liberalised era of late 1980s and early 1990s. The idea of creating a strategic reserve in India for ensuring supply of cotton to the domestic textile mills on the lines of a similar reserve in China is wrong, since the situations in India and China are not comparable," said Dhiren Sheth, president, CAI said in a statement issued on April 25.

 

Textile ministry had decided to create a buffer stock for country's textile industry and mandated CCI to procure cotton at rate of Rs 900 per maund (20 kg) for top quality cotton.

The ministry had planned to procure 2.5 million bales through CCI.

"We are creating a buffer stock of cotton for domestic textile industry and CCI has decided to procure one million bales of cotton from Gujarat particularly from Saurashtra," V Srinivas, joint secretary - cotton division and TUFS, ministry of textiles, Government of India had said during his visit to Rajkot on April 13.

"If this reserve is created, total investment required for procuring 2.5 million bales would be around Rs 5,000 crores, which would, in-turn, involve a total carrying cost including interest and warehousing cost of over Rs 500 crores a year. In addition, CCI will have to bear the loss that may arise due to fluctuation in prices," stated Sheth, urging the government not to go ahead with setting up of strategic reserve for cotton.

He further mentioned that if government wanted to address the problem of non-availability of funds with the textile mills to buy and stock cotton, "it would be appropriate to address the same through banking channels like Reserve Bank of India and the Finance Ministry rather than creating a scheme which distorts the market and unsettles other sectors of cotton value chain."

CCI is likely to procure around one million bales of cotton every month from growers for the next two months at market prices instead of minimum support prices.

Cotton prices in India hovered around Rs 33,800 per candy (each weighing 356 kg), while internationally the prices stood at 100.30 cents per pound.