The Hindu Business Line : ‘Speculators to blame for high cotton prices’

Coimbatore, May 22 The textile trade body, Southern India Mills Association (SIMA), has blamed the speculators and domination by multi-national trade getting into cotton purchases in the country for the high domestic cotton prices this year.

It has asked the Centre to initiate immediate measures to control cotton prices, and thereby bring down the yarn prices.

Unlike previous years, this year many multi-national cotton traders who entered the Indian market to purchase cotton from the beginning of the season covered all good quality fibre not only for export but also for selling in the domestic market. Though spinners were ready to pay the price, the trade speculating on prices refused to transact with spinners, SIMA said, adding that the trade speculated on international cotton prices in the face of China facing cotton shortage this time.

The SIMA Deputy Chairman, Mr J. Thulasidharan, said the abnormal increase in cotton prices that paralysed the performance of the cotton-based textile industry has denied parity between cotton and yarn prices which made spinners, including the top-ticket mills, to incur heavy cash losses.

Shankar-6 variety

Comparing the cotton and cotton yarn prices that prevailed in 2006-07 seasons with prices in the current year, Mr Thulasidharan said the popular cotton variety from Gujarat, Shankar-6, used to produce 40s count yarn, which was priced at about Rs 19,000 a candy in the previous two years, was being sold this year at Rs 23,500, a 24 per cent increase. Whereas the 40s count hank yarn, which was selling at an average Rs 568 (a bundle of 4.54 kg) in 2006-07, is today sold only at Rs 553, one per cent lower to the 2007 price.

In the case of J-34 cotton (used for spinning 20s count yarn), which was sold at an average Rs 16,500 a candy in 2006 and at Rs 18,000 in 2007, it is currently being quoted at Rs 20,500 with a 14 per cent increase.

Whereas the 20s count hank yarn produced from this cotton, which was sold at an average price of Rs 432 (per bundle) and Rs 431 respectively in 2006-07 season, has seen only a four per cent increase at Rs 447.

As for the waste cotton that goes into making the coarser count yarns of 10s, its price this year soared by 30 per cent compared to last year whereas the yarn spun out of this cotton has gone up only by 11 per cent, Mr Thulasidharan said, adding that severe shortage of short staple cotton in the country, besides the high price of virgin cotton this year and the un-viability for the southern spinners to procure this short staple cotton from far off Punjab due to high transportation cost, added to the spinners price pressures.

The latest meeting of the cotton advisory board has estimated the cotton exports for the current season at 80 lakh bales against 47 lakh bales exported last year and indications are that the export might go up further, resulting in severe cotton shortage for the domestic consumption.

Mr Thulasidharan felt that encouraging raw material export would yield low unit value for the country and export of cotton would be at the cost of value addition and the domestic textile industry which provides direct and indirect employment to over 90 million people.

To control cotton price and thereby bring down the yarn price, the Centre should immediately initiate steps to reduce import duty on cotton from 10 per cent to 5 per cent, withdraw the one per cent incentive offered for cotton export, besides channelising the export through State agencies like Cotton Corporation of India by allowing exports through the LC route and payable in foreign currency.

SIMA wanted all cotton export/import contracts to be registered with the office of the Textile Commissioner within 15 days of finalising the contract and cotton stock declaration to be brought under the cotton control order covering ginners and the trade. It also wanted a ban on the cotton futures.

More Stories on : Cotton | Textiles | Industry Associations | Tamil Nadu

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