Cotton market. As cotton prices spiral, textile industry urges government to probe limited arrivals in market

The textile industry has urged the government to probe cotton arrivals in the market amid an unprecedented increase in raw material prices. They have also sought long-term policy measures.  

On Monday and Tuesday, 29-30 mm cotton was quoted at ₹1,15,000–1,17,000 a candy for mill delivery, a ₹7,000–9,000 spike from last Friday’s prices.

Source: Tamilnadu Spinning Mills Association

“The prices do not factor in moisture and trash conditions. Excessive moisture could result in an additional 1 per cent loss and a minimum of 3 per cent in excessive trash (i.e instead of the normal 3 per cent). Nowadays, trash is between 6 to 8 per cent.  Put together, the cost works out to ₹1,19,600–1,21,680,” said K Venkatachalam, Chief Advisor, Tamilnadu Spinning Mills’ Association.

Speculative trade

Industry representatives said although a large quantity of cotton is yet to enter the market, vested interests were releasing the raw material in calibrated quantities.

“We have been monitoring cotton arrivals since the beginning of the season so the immediate solution would be to identify where the cotton is being stopped or hoarded. About 90 lakh bales of cotton is yet to come. This is highly alarming.

“Government departments and their regional offices should look into this issue. Cotton traders are holding on to the raw material and are not allowing mills to purchase it. Instead, it is being released in small quantities — about 20,000 bales everyday. Neither the farmers nor the end-users have the cotton, it is now managed by some cotton traders, including global players,” said Venkatachalam   

Commodity trading

The industry has urged the government to remove cotton from the list of commodities traded on the exchanges and make it available to farmers and mills, who are the only stakeholders.  

“Trading of cotton should be dispensed with as a short- and long-term solution. We have been suggesting this for a long time. People not connected with the industry are indulging in speculative trade, which is harming the industry,” he said.  

In the ensuing season, the industry wants CCI (Cotton Corporation of India) to purchase in bulk from farmers at a price slightly above the MSP, and then supply it to mills whenever needed. It should be advised to not sell the cotton to traders and multinationals.  

“CCI was set up to buy cotton from farmers, store it and supply it to the mills with holding charges. But it appears to be selling all the cotton to traders. Union Minister Piyush Goel also objected to CCI’s purchase of cotton. In FY22, no cotton was purchased by CCI. This is also one of the reasons why the entire quantity of cotton is available with traders,” he said.  

Two-day strike

Meanwhile, a section of textile units in Tirupur, Erode and Salem districts has stopped production as part of a two-day strike against the prevailing high prices of cotton and cotton yarn.  

“Buying cotton at this price and selling yarn at a matching price is not possible, as most spinning mills incur 10 to 15 per cent cash loss on the same; many mills are closing down their operations,” said a representative.  

A manifold increase in all costs has also resulted in an increase in yarn prices. Due to the increase in cotton prices, the working capital of all the mills is reported to have eroded, which has resulted in a severe financial crunch for mills in buying and stocking cotton, he added.  

Textile manufacturers, who were part of the strike, said the increase in prices of cotton yarn was affecting their businesses and margins.  

Yarn price rise

It was understood that a particular group of mills in Tamil Nadu had announced a ₹40 per kg upward revision in price of yarn of all counts, with effect from May 1, 2022.  

But many mills in Tamil Nadu and other States have maintained the price as of April 1, 2022, or have only increased prices minimally. “The upward price revision of ₹40 per kg was not implemented by all the other mills universally, either in Tamil Nadu or in other States. Hence, this increase is not a universal price rise,” said another representative.   

Meanwhile, Textiles Minister Piyush Goyal has called a meeting with all stakeholders on Tuesday evening.

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