The Hindu Business Line : Cotton consumption seen to go up: SIMA chief

Cotton textile mills in South have started entering the market to procure cotton and the mills' consumption is likely to go up this year by 5-10 per cent due to new spindle additions made in the last one year, according to Mr S.V. Arumugam, Chairman of the Southern India Mills Association (SIMA).

The SIMA chief, who discounted the possibility of any drastic fall in prices due to the projected `bumper' crop this year, maintained that any sharp decline in raw cotton prices appeared far fetched. He said the availability of quality fibre might be restricted to between November and March, by which time the mills with an eye on continuity in quality fibre are expected to cover the cotton.

Further, unlike in the case of imports, mills generally do not go for forward cover when procuring cotton from the local market. These factors along with the increased consumption, according to Mr Arumugam, would act as a price stabilising factor for the domestic cotton market.

The initial price erosion seen in the past few days in the market cannot be taken seriously because the crop size and the arrival patterns can be ascertained only by middle of next month. The perception of importers of Indian cotton might also change as they too have taken their time off now to update the current market figures so that they may get into the market later considering the fact that China and Pakistan too may need to consume higher cotton to cater to their enhanced production capacities. "This being a transition time, I do not think there is any scope for the cotton prices to go down drastically," Mr Arumugam told Business Line.

The higher cotton output this year would even out the per acre price realisation for the growers too, he added.

"There is nothing much to grudge," said Mr Arumugam with regard to cotton yarn both in domestic market sale and in exports. With increased weaving and knitting operations being reported, the mills look forward to a higher volume of yarn offtake from the market this year and the SIMA chief also anticipates the yarn prices this year to keep the last year's tempo.