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CCI sitting on large stocks of high priced cotton
Mar '09
The Cotton Corporation of India (CCI), a government owned buying and selling trading house for cotton in India, has in the new cotton season purchased cotton amounting to 10 million bales (1 bale =170 kg) against just 1 million bales purchased in the previous cotton season.

This has invariably pushed up its borrowings and will touch Rs 90 billion in the new cotton season against just Rs 5 billion in the last season. The outgo in comparison to the increase in volumes is high due to the new Minimum Support Prices (MSP) introduced in the new cotton season.

These new MSP had been increased by nearly 25-40 percent, dependent on the cotton variety and this in turn has increased the borrowings of CCI. But the real problem for CCI is getting remunerative prices for the cotton it has purchased amounting to 10 million bales.

Cotton prices, since the new season began late last year had been ruling at four year lows for quite a period of time. But since the procurement price of CCI is very much higher, it is not able to dispose off the high stocks of cotton lying in it's various warehouses.

Experts aver that incase the slowdown does not do a complete 'U' and trade as a well as prices in the white gold do not improve, the financial position of CCI could turn very precarious and there are chances of the entire procurement process getting disrupted due to the same.

Fibre2fashion News Desk - India

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