The international prices which have been stable till the end of February 2013 (85 to 88 cents per lbs) have increased in the recent weeks and now ruling at 95 cents per candy. The exchange rate has also increased marginally. As a result, the cotton prices have been increasing abnormally in the recent past threatening the competitiveness of the Indian cotton textiles industry.
Mr. S. Dinakaran, Chairman of The Southern India Mills’ Association (SIMA), has stated that the main reason contributing the spurt in the cotton prices is due to the holding of inventory by government procurement agencies (viz., CCI and NAFED, etc) and major cotton traders. He has stated that the cotton export registration also abruptly increased during the month of February 2012 which has been steadily increasing from the beginning of the cotton season, which today seems to have exceeded 80 lakh bales mark, fuelling the situation.
Mr. Dinakaran has stated that the Association had appealed to the Government during the end of February 2013 to direct CCI and other procurement agencies to announce the cotton prices and start selling the cotton only to the actual users to stabilize the cotton prices. However, he felt unfortunate that the government did not heed to the request of the user industry even after 15 days which resulted in increase of another Rs.2500/- per candy in the cotton prices.
SIMA Chief has stated that though the textile mills have the option of importing international cotton, it would take 45 days time for the mills to receive the cotton and therefore, all of a sudden artificial scarcity has been created by the traders and the government procurement agencies by holding the stocks and speculating the prices. He has added that this sudden volatility in cotton prices would seriously affect the downstream sectors such as handlooms, power looms and garments, who normally quote the prices for three months’ period for their exports.
Mr. Dinakaran has pointed out that such an increase would seriously affect the viability of the entire textile manufacturing units in the textile value chain and feared that the industry might face yet another crisis if the government does not act upon and instruct the cotton procurement agencies to sell the cotton to the actual industry users immediately. He has further pointed out by creating artificially scarcity in India, the multinational cotton traders are trying to jack up the prices globally, which has contributed to the increase in the international prices recently.
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