The Hindu Business Line : Sustained demand keeps raw cotton prices stable

Coimbatore April 12 Despite a marginally higher output of winter cotton hitting regulated growers' cooperative marketing yards this year, prices of kapas or raw cotton grown within Tamil Nadu rules stable, thanks to the sustained interest shown by the mills.

The prices of kapas of extra long staple DCH-32 (of 34 mm fibre length) in the band of Rs 2,500-Rs 3,300 a quintal and the medium staple variety RCH at Rs 1,800-Rs 2,350 proved attractive for the growers, sources at the principal regulated cotton market yards in Western Tamil Nadu said.

The growers cooperative market yards at Konganapuram, Vazhapaddi, Authur in Salem district and those in Namakkal, Rasipuram and Tiruchengodu in Namakkal district managed to draw slightly higher volume of kapasharvested between January-March this year. Prices quoted for these crops this time were higher by Rs 150 to Rs 300 per quintal. The winter cotton output in these centres this time is said to be higher by 20 per cent over last year's production.

The agricultural producers cooperative marketing yard at Namakkal, for example, managed to get a total of 41,000 bags of kapas between January and March, some 10,000 higher compared to last year. The prominent varieties included the DCH-32 and RCH-2 besides some quantity of the MCU-7 variety.

Similarly, the regulated marketing yard at Tiruchengodu had reported a transaction of 25,000 bags (26 kg) at a value of Rs 9.57 crore during January-March 2007, up by 20 per cent compared to last year.

The officials of these yards, on condition of anonymity, however maintained that for want of water and shift in the crop preference by farmers in these areas, the summer cotton crop would fall short.

Sources in Namakkal, Tiruchengodu and Konganapuram conceded that the summer cotton would be lower by some 30 per cent and in some centres it will go down by 50 per cent.

VAT effect

The textile spinning mills in the State, keen on cost reduction, have taken a new look at procuring cotton within Tamil Nadu of late. These spinners have taken to this route partly due to the Tamil Nadu Government implementing the State value-added tax from January this year.

The mills procuring local cotton by paying the VAT rate of 4 per cent could take credit for this tax at the yarn stage in the event of the yarn produced by them also being sold locally. "The mills in the State, for the first time, will be able to adjust the VAT paid on their raw material against the tax liability in their production value-chain and to that extent, its operation would become cost competitive," said a textile mill promoter, preferring not to be quoted.

The regulated cotton market committee sources said many textile mills have of late begun to make direct procurement of kapas.

More Stories on : Cotton | Co-operatives | Tamil Nadu

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