High MSP will aggravate current textile crisis - CITI

25 Nov '08

3 min read

Although 40 percent hike in Minimum Support Price (MSP) is of great help to the farmers, it has proved to be a burden to the textile companies.

With the prices falling in the international market drastically and domestic graph moving upward direction, import of cotton has increased substantially in the recent period.

In this context, Mr D K Nair, Secretary General of Confederation of Indian Textile Industry (CITI) told Fibre2fashion, “Cotton production in 2008-09 cotton year is estimated by CAB at 322 lakh bales. Consumption in India has started declining and I expect a decline of at least 10 percent (around 25 lakh bales) during the year, compared to last year. International cotton prices have declined by around 40 percent during the last 4 months.

“In India, the prices should have declined, but the unreasonable MSPs are not allowing the market forces to operate. The result is that our cotton textile products will be substantially out priced in the international markets, aggravating the current textile crisis. Farmers may also not get the benefits of increased MSPs, since Government may not be able to procure or pay on time, given the magnitude of the procurement operations and requirement of funds.”

Further discussing how to cope with the current situation, Mr Nair stated, “Logically, the unreasonable MSPs should be scaled down substantially, in view of the current market situation. But, this may not be very easy for Government to decide on. Therefore, our suggestions are that mills may be enabled to buy cotton during the peak arrival season, by providing them working capital for cotton purchase at 7 percent (PLR now) interest, against margin money of 10 percent (25% now) and for a period of 9 months 3-4 months now). We have also suggested that CCI should be mandated to dispose of the procured cotton promptly, in order to avoid an artificial scarcity in the market.”

The Secretary General went on saying, "Export statistics beyond July 2008 have not been published by DGCI&S so far. Since the international financial sector crisis started after this period, we can see the impact on exports only when export figures from September 2008 onwards become available. US import figures are currently available for them period up to September 2008 and they show a negative growth of about 1 percent in their imports of textile products from India during Jan-Sept.2008 compared to same period of 2007, which itself was a very bad year because of the rupee appreciation problem."

Fibre2fashion News Desk - India

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