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Textile sector reacts strongly against climb in cotton MSP
Aug '08
The Central Government of India has proposed to increase the minimum support price (MSP) of cotton by 40 percent for cotton year 2008-09. The entrepreneurs related to textile industry have expressed their worry over this matter as this hike will automatically take the cost up.

The price for medium staple cotton is expected to go up from Rs1800 to Rs2500 per quintal and, from Rs2030 to Rs3000 per quintal for long staple cotton resulting in a significant boost of 38 and 47 percent in 2008-09.

In an exclusive interview with Fibre2fashion, Mr DPS Kohli, Chairman, Koutons stated,"This increase will affect the textile sector drastically, as cotton is the basic raw material. The only support we require from the Government is that they should cut down prices from other duties for stabilizing the situation.”

Mr Manubhai, Director, Textile Association of India, divulged, “Hike in cotton prices will have negative influence on textile industry but at this point of time it is tough to calculate up to what extent it will affect.”

However, Mr Sunil Khandelwal, CFO, Alok Industries differs in opinion and says,“This rise by the Government will not affect the industry much, as already the prices of cotton has gone up. Only advantage by this would be, previously traders were benefited but now farmers will also have the benefit."

While discussing about the withdrawl of SOP (4 percent subvention), Mr Khandelwal said,"This will surely disturb textile exporters as interest and borrowing cost would increase; so it would have been a help if it was extended.”

Dr K V Srinivasan, Chairman, The Southern India Mills' Association (SIMA) believes, “The proposed hike in MSP for cotton has come as a rude shock to the predominantly cotton based textile industry. The textile industry has been engulfed with various problems like increase in cotton prices, doubling of bank interest rates, power shortage to the tune of 25 to 40 percent and was hoping for revival from the recession during the next cotton season.

“The proposed hike in MSP seems to be attractive for the farmers in the short run, but it would seriously affect the farmers in the long run due to drop in consumption of cotton in the domestic market. “

In this regard Shri P D Patodia, Chairman, Confederation of Indian Textile Industry (CITI) said, “Move will not only push the textile industry further down, but will also be counter productive even for farmers. During the last financial year and the first quarter of this year, most textile companies have made losses and many others have made substantially lower profits compared to the earlier years. These MSPs have eroded whatever hope the industry had of reviving in the near future.

According to International Cotton Advisory Committee, the global supply of cotton in 2008-09 will be slightly lower than what it is in the present year. It also suggests that the production of cotton in the US will see a drop of more than 12 percent to 21.3 million bales (1 bale = 170 kilograms) in 2008-09 when compared to 24.3 million bales in 2007-08.

Fibre2fashion News Desk - India

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