The Hindu Business Line : Cotton support price

The Government has done well to increase the support price for cotton at the right time. India is fast emerging as the largest exporter of cotton. But for our exports, there would be a huge shortage of cotton in the world.

Cotton production, given its low relative profitability, has, however, started dropping in other parts of the world.

Low prices of the fibre in India have been the real reason for the world prices of cotton to drop; which, in turn, has had an impact on cotton production in the rest of the world.

The Government, by increasing the minimum support prices steeply, has ensured that cotton farmers in India get an additional Rs 8,000-9,000 crore and, at the same time, that the minimum prices increase across the globe.

We need not fear that our prices will become dearer than the international market for, as soon as we start importing and stop exporting, the supply-demand equation will force international prices to rise steeply.

If the textile industry in India is suffering, it is because of higher than international prices until recently, thanks to the Customs duty, which has since been removed, and the non-refund of VAT and infrastructure disabilities, which account for 12 per cent on exported textiles.

In Tamil Nadu, the lack of power to take capacity utilisation above break-even levels is a key reason why mills are making losses.

The textile industry would do well to focus on the real issues affecting its profitability rather than get needlessly concerned about something that will do a great deal of good to our farmers and ensure that Indian cotton remains the cheapest in the world.

The industry must focus on getting VAT refunds and infrastructure disabilities refunded to remain competitive in exports.

If world cotton production grows substantially in the future, and our exports become insignificant, only then need we worry about the impact of minimum support prices, which may be minimal.

Manikam Ramaswami, Chairman, Loyal Textile Mills, Chennai