The Textile Ministry is in no mood to release cotton stocks held by the Cotton Corporation of India (CCI) in the market till it is reimbursed by the Finance Ministry for the losses suffered in selling cotton below the procurement price so far.

Seeks compensation

“The Ministry is working on a Cabinet note seeking more funds as compensation for losses suffered by the CCI in off-loading stocks at prices lower than the procurement price (MSP) given to farmers,” a Textile Ministry official told Business Line .

The CCI may wait for domestic prices to strengthen further before it decides to sell. When the CCI does decide to off-load its stock in the market, it will only sell a portion of it at one time.

“The CCI is, at the end of the day, a commercial entity that does not want to suffer losses. Its objective is to support farmers through its minimum support price (MSP) operations when domestic prices fall and not (to support) the industry,” the official said.

reimbursement money

The Union Budget did have a provision for reimbursing the CCI for the difference between the MSP it paid to farmers and the price at which it has been selling its stock in the market, but the amount has fallen short.

“We will soon forward the note seeking more reimbursement money to the Cabinet,” the official said.

Textile and yarn producers have been petitioning the Government for the release of over 20 lakh bales (170 kg each) of cotton held as stock by the CCI to check rising prices in the market.

The Government, however, does not see any need for intervention as it believes that the market is functioning in an orderly manner and cotton is easily available.

“The supply side position is comfortable. There is no disruption in the market. So, we are not going to come under any pressure and may wait for better prices,” the official said.

According to Government figures, about 34 lakh bales of cotton are coming to the market every month while the demand is only for 24 lakh bales.

Earlier this year, the Cotton Advisory Board had estimated production in the country at 334 lakh bales, consumption at 260 lakh bales and an exportable surplus at 70 lakh bales.

Textile producers’ body Texprocil has alleged that the Government has sold just 2-3 lakh bales in the last few months resulting in an artificial shortage of cotton supply and domestic prices have in turn risen.

On price rise

Prices of the most popular varieties of cotton have risen to about Rs 37,200 a candy (355 kg) compared to Rs 34,000 a candy in February this year.

The Textile Ministry is, however, not worried about the price rise in the domestic market as it says that it was in no way exorbitant. In fact, it wants to wait for the prices to rise.

“International prices have been going up because of China’s decision to buy cotton. It is normal for domestic prices, too, to increase. The price rise is in no way abnormal and we are not worried,” the official said.

>amiti.sen@thehindu.co.in