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Suresh P. Iyengar

Mumbai, Jan. 10 Cotton Corporation of India (CCI) has tied up Rs 15,000 crore through a consortium of 19 banks led by Bank of Baroda and State Bank of India for procuring cotton at minimum support price.

Mr S.C. Grover, Chairman, CCI, said “We have managed to tie up the fund without any government guarantee. SBI will lend the maximum followed by other banks.”

The corporation has procured 52 lakh bales of cotton as on Friday worth Rs 7,280 crore at the MSP. “If the prices continue to remain depressed, we may end up procuring about 100 lakh to 105 lakh bales this year. Fortunately, we are seeing some demand propping up of late,” said Mr Grover.

With the realisation falling below the purchase prices, CCI is now staring at a loss of Rs 500 crore in the financial year 2008-09, while it may touch Rs 2,000 crore in FY’10.

Constrained by storage availability, CCI offloaded 2-3 lakh bales at a price below the MSP. The popular variety Shankar-6 was sold at Rs 22,000 a candy, bunny at Rs 23,000, Haryana cotton at Rs 21,200 and the Punjab variety at Rs 21,700 a candy, he said.

The corporation’s purchase in Maharashtra, Madhya Pradesh, Punjab and Andhra Pradesh has increased to 60-65 per cent of the total arrival against 25 per cent logged in last year.

Traders are buying about 60-70 per cent of the total arrivals in Haryana and Gujarat reducing the burden on CCI, while it has procured a small quantity of one lakh bales in Orissa. In Tamil Nadu, it is sold above MSP to small mills, he said.

The government decision to increase cotton MSP by 40 per cent across varieties was opposed by the industry, which was reeling under a financial crunch.

Mr P.D. Patodia, former President, Cotton Association of India, said, “Raw cotton is in short supply and ginners have become incapacitated to function as they are not able to market the cotton at the present MSPs.”

Given the recession in the global markets, CCI has managed to export only 5 lakh bales till the first week of January against shipment of 30-35 lakh bales in the same period last year.

Cotton exports were at 2 million tonnes valued at Rs 15,000 crore last financial year. CCI exported a small quantity of 11,000 bales to Bangladesh last week.

“We are exporting at about 2 to 3 cents lower than the purchase price. We expect the price parity to reduce by January 20 as the demand starts picking up.”

More Stories on : Cotton | Credit Market | State Bank of India

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