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Textile ministry under pressure to rollback MSP of cotton

07
Jan '09
The textiles ministry and in turn the government of India is under tremendous pressure to rollback the hike in MSP of cotton prices. The reasons for which, are not far away to seek. The industry as a whole is going through a depressing phase since the unfolding of the economic turmoil across the globe.

At a time when quoting competitive prices is the mantra for survival, the Indian manufacturers are not able to do so because of the high cotton prices prevailing in the country vis-à-vis international prices which are ruling at four year lows. Under the circumstances, it is becoming more and more difficult for exporters to compete in global markets.

Comparative quality of American cotton is available at 5-10 percent lower prices in the international markets. The major purchaser of cotton since the beginning of the new cotton season has been the government owned Cotton Corporation of India (CCI) which is procuring around 70,000 bales (1 bale = 170 kg) daily.

But the rest of the real consumers, the textile mills are buying cotton on a hand to mouth basis only. In normal circumstances, these textile mills purchase their annual requirement of cotton within the first 5-6 months of the new cotton season, but this year they are adopting a wait and watch attitude in anticipation of a drop in cotton prices.

Exports of cotton have also been affected due to this disparity in domestic and international prices. India which exported a record figure of cotton in the last year will see shipments of the white gold falling sharply in the current year. There is also a likelihood of an artificial scarcity being created of cotton in India.

The reason being that CCI is the only major purchaser of cotton in India in the new season. And it has not yet begun selling the procured cotton, since its purchase price is at a disparity to the prevailing international prices and if it does so, will have to incur a loss. The CCI has till date purchased around 47 lakh bales from the open market.

Fibre2fashion News Desk - India


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