Cotton Body Faces High Price Hiccups

The Maharashtra State Co-operative Cotton Marketing Federation is likely to face a tough time trying to sell its export quota of cotton following higher prices quoted by it compared with the prevailing international rates.

The federation had been allotted a cotton export quota of 1,00,000 bales very recently, which it is trying to peddle to exporters through a global tender.

According to sources, the federation is offering LRA-5166 (A) quality at Rs 19,400 plus Rs 1,500 (expenses up to port) per candy -- totalling Rs 20,900 (US cents 74.11/lb) per candy. Another quality, LRA-5166 (B), is being offered at Rs 18,700 plus 1,500 (Rs 20,200 per candy or US cents 71.63/lb), while LRA-5166 (C) is being offered at Rs 18,300 plus 1,500 (Rs 19,800 per candy or US cents 70.21/lb).

 

Against this, the international prices of the same quality quoted are quite lower at US cents 67.25, 65.25 and 64.50 f.o.b. per lb, respectively.

"In such situation, how can one buy cotton from the federation and export the same at lower prices?" asked an exporter in the metropolis.

Market sources said that the federation is adopting dual policy: On the one hand, it is asking for cotton export quota, while on the other it is also increasing the commodity's prices. This will have a severe, negative impact on handloom and powerloom weavers, according to the sources.

The federation has increased cotton prices by Rs 2,500 per candy during last three months.

According to the players, the federation adopts a wrong sales policy which results in heavy financial losses every year. "The right time to increase cotton prices is during the peak season -- around February and March --and not the rainy season," a dealer said.

According to another dealer, the federation should bring down the prices of cotton and at the same time increase sales in the local market. "The entire stock with the cooperative should be disposed of by the end of June," he said.

Sources reveal that a huge pileup of about 7 lakh bales, awaiting ginning and pressing; and about 11 lakh bales sold but not delivered, are lying at the various open premises of the federation at a time when the monsoon has already arrived the state.

This can lead to may stock damage. Wet/damaged cotton cannot be exported and the prices of such qualities are 50 per cent lower than the original prices.