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Trade Talk | September 2015

India to carry comfortable cotton closing stock

The predominantly cotton based textile industry has been producing almost 75 per cent of the spun yarn from cotton and therefore, this industry has been subjected to crisis due to volatility in the prices. But during the current cotton season, the cotton prices have been comparatively staple due to reduced imports by China and the oversupply position in the global market.

As the international cotton prices were ruling lower than Indian prices, CCI had to venture into MSP operations and procured around 87 lakh bales during the cotton season 2014-15. However, the selling policy of CCI not only affected the domestic market to a certain extent, but also made the mills using certain varieties of cotton grown in Telangana and Andhra Pradesh to face shortage of quality cotton as CCI did not release the cotton on time.

With the bleak export demand, the carryover is likely to be around 70 lakh bales which is the highest cotton stock ever carried by India after 2008--09. Though the world cotton area is expected to reduce by 7 per cent to 31.3 million hectares in 2015-16 and consequently the world cotton production is projected down 9 per cent to 23.9 mt, world cotton supply position is expected to be comfortable during next season as Chine would continue to reduce its imports and downsize its reserves.

T Rajkumar, Chairman, The Southern India Mills´ Association (SIMA) has stated that India would have a comfortable closing stock ranging between 60 and 70 lakh bales of cotton by the end of the season 2014-15 which would ensure better stability in the cotton prices during the current calendar year. He has said that the country is also expected to have a comfortable cotton supply position during the cotton season 2015-16 and the cotton market is expected to be stable. Rajkumar further stated that this would greatly help the Indian cotton textile industry to leverage export performance particularly, the garment and made-up segments. He has stated that the textile mills used to carry three to six months cotton stock and having suffered due to price volatility, the mills have reduced the inventory level to one to two months. He has stated that as there was an undue delay in getting the subsidy of Technology Upgradation Fund (TUF) scheme and also export subsidies during the season 2014-15, mills could not procure more cotton.

Rajkumar has stated that spinning sector has been reeling under recession due to poor off take for cotton yarn in the international market. He said that the country has to increase its yarn exports at least by 20 to 30 million kg per month to have stability in the market to improve profitability. He has added that the industry has been pleading the government to extend necessary assistance under MEIS scheme and also interest subvention to have a level playing field in the international market as the Indian textile goods suffer higher rates of duties in all the major importing countries.

SIMA chief has stated that Cotton Corporation of India (CCI) has always been quoting higher prices and therefore could sell only 12 lakh bales as against 25 lakh bales offered during the last couple of months. He said that CCI did not sell the cotton till the end of April which made cotton prices to flare up and also the mills to suffer for want of quality cotton grown particularly from Andhra Pradesh and Telangana Regions. He has stated that the industry has been pleading the Centre to restructure Cotton Advisory Board by inducting industry representatives so that better strategy and policy could be adopted by CCI to have win-win strategy for the cotton farmers, CCI and the industry. Rajkumar has appealed to the Prime Minister to consider the long pending and genuine demand of the industry and restructure the CCI Board by inducting major stakeholders of cotton.

Rajkumar has stated that though the CAB has estimated 70 lakhs as expected export level of cotton during current season, so far o

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