Agri Business

Spinning mills join hands to form firm for sourcing cheaper cotton

Coimbatore | Updated on October 09, 2012 Published on October 09, 2012

A little over 50 spinning mills have come together here to form Cotton Sourcing Company (COSCO) in an effort to streamline procurement of cotton in the Coimbatore region and safeguard them from price vagaries.

At a conservative estimate, the procurement by COSCO might touch Rs 3,000 crore in the current season that began this month.

The company is also forming a joint venture with Aries Logistics Ventures Ltd styled Transco for transportation of cotton.

The prime reason for the formation of COSCO is that though Tamil Nadu accounts for nearly 40 per cent of cotton consumption, it produces much less. This has necessitated procurement of cotton from States such as Gujarat, incurring huge transportation costs and supply delays.

COSCO is a newly formed public limited company that will function as a one-stop shop to meet the entire cotton sourcing requirements of its member companies. Currently, it has 51 members.

According to M.S. Rajarathinam, CEO, COSCO, the company will aim at sourcing quality cotton at a cheaper price. Collective bargaining will also help it.

Farmers will benefit from timely payment for the cotton procured ‘within five working days’ as COSCO has tied up with bankers.

The member mills will periodically inform COSCO about their requirement. COSCO has opened branches in cotton growing States such as Gujarat, Maharashtra, Andhra and Karnataka for sourcing.

Rajarathinam said that with the procurement set to commence from November, it would not be possible to quantify the cotton to be purchased for the current season. But keeping in view the capacity and requirements of its members, COSCO might procure cotton valued at Rs. 3,000 crore. COSCO has begun trial procurement and full fledged operations will commence next month.

Rajarathinam said the procured cotton would be directly delivered to the mills with the logistics partner taking care of lifting goods from the ginners and delivering them to the mills. Currently, the transportation cost amounted to Rs 4.80-5 a kg.

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Published on October 09, 2012
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