You are here: Home » Markets » Commodities » Other Commodities
Business Standard

Cotton needlessly costly, complain textile mills

Dilip Kumar Jha  |  Mumbai 

Textile mills are complaining of an acute cotton shortage and consequent losses due to having to import it to meet the domestic scarcity and export commitments.

The two public sector agencies, Cotton Corporation of India (CCI) and the National Agricultural Cooperative Marketing Federation of India (Nafed) procured around three million bales (170 kg each) of cotton through market intervention about four months earlier. The quantity is equivalent to a little over a month of mill consumption.

But the agencies have released hardly 20,000 bales since the procurement started in October last year. In these four months, however, the fundamentals have changed significantly, resulting in the domestic price rising higher than the global price. Yet, the ministry of textiles has not directed CCI and NAFED to release the quantity they procured.

"Textile mills, today, are facing around five mn bales of shortage, which is artificially created. Consequently, textile mills are forced to import, largely from West Africa," said Manikam Ramaswami, chairman of The Cotton Textiles Export Promotion Council (Texprocil).

Various industry bodies, including the Confederation of Indian Textile Industry and the Apparel Export Promotion Council have urged the ministry to release the bought cotton. According to trade sources, multinational corporations have also cornered a huge quantity of around three million bales.

The shortage has reflected on cotton prices in the domestic market. The benchmark Shankar-6 in the spot market here has risen 8.4 per cent from Rs 34,600 a candy (356 kg each) on February 15 to Rs 37,500 a candy today.

Ramaswami says the rising prices are increasing the cost of textile manufacturing unnecessarily, hitting profitability due to the thin two-three per cent margins the mills operate on.

Meanwhile, domestic textile mills have intensified import of cotton from West Africa and contracted for around 20,000 bales in the past three-odd weeks. As a result, import is expected to rise to two mn bales this year as compared to 1.2 mn bales last year.

Indian textile mills have been paying a premium of at least five cents a pound premium for West African cotton over what could have been bought at home if CCI and Nafed released their stock. Exporters are also relying on import to meet the export commitment.

The Cotton Advisory Board (CAB) under the ministry has estimated 3.46 mn bales of carryover cotton stock in the 2012-13 season, substantially higher from the 2.86 mn bales the previous year.

CAB forecast India's output at 33.4 mn bales in the current season, substantially lower than 35.3 mn bales in the previous one. Mill consumption of cotton has also been estimated higher at 23 mn bales this year from 21.7 mn last year.

On yarn, Ramaswami said export registration of the raw material had stopped due to the cotton shortage. He hoped the situation would normalise after the West African cotton import gets over, expected in about 40 days. By then, there would be an unrecoverable loss of around $1 bn, he said.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Sat, March 09 2013. 21:30 IST