Spinning mills in South India, particularly the ones in Tamil Nadu, have urged the Centre to ask the Cotton Corporation of India (CCI) to purchase cotton next season starting October and make it available only to mills than traders.
However, CCI is unlikely to purchase cotton for such purpose, though it is likely to buy the fibre for “commercial operations”, a top corporation official said.
According to mill industry sources, the Tamilnadu Spinning Mills Association (TASMA) has taken up this issue with the Centre since it feels the lack of cotton purchase under the minimum support price (MSP) operations by the CCI had resulted in mills paying prices over ₹75,000 a candy (356 kg) this season.
The sources, who did not wish to be identified, said many private traders and multinationals had cornered cotton stocks this season, resulting in prices topping ₹1 lakh a candy at one point in time in May and against last month.
The mills were not able to get quality fibre at a reasonable price as a result, they said.
Prices of cotton have, however, eased now and are quoted at ₹75,000-76,000. This is mainly since cotton prices on the InterContinental Exchange, New York, have dropped below 100 cents a pound. Currently, the October contracts are ruling at 93.54 cents (₹59,200 a candy) and December contracts at 93.33 cents (₹50,075).
A spinning mills industry official said CCI purchases cotton for them only if they tell it in advance. “They will have to tell CCI in advance but usually mills prefer to buy from traders,” the official said.
This is because CCI quotes ₹500-1,000 a candy higher than private traders in view of its costlier overheads. “Mills can get cotton that is purchased under the MSP programme at a cheaper price but CCI is not making such purchases since last season, cotton prices opened higher and ruled at elevated levels,” the official said.
“Purchase of cotton by CCI to cater to the needs of mills as envisaged by some mills in the South is unlikely,” said Anand Popat, a Rajkot-based trader in cotton, yarn and cotton waste.
When contacted, CCI Chairman-cum-Managing Director PK Agarwal said the corporation will buy cotton for commercial operations. “We will not be making MSP purchases until the Government tells us or the prices fall below MSP,” he said.
Prices unlikely to drop below MSP
For the next season, the Centre has fixed cotton MSP at ₹6,080 (medium staple variety) against ₹5,726 this season. The new cotton crop has begun arriving across the country and currently, the daily weighted modal price (the rate at which most trades take place) of raw cotton ( kapas) is ₹8,434 a quintal. Prices in most markets are ruling above ₹8,000.
“We are facing a shortage of cotton currently. Farmers had got a record ₹12,000 a quintal this season. We don’t see prices dropping below ₹8,000 next season,” the industry official said.
Currently, 15,000 tonnes of cotton would have totally arrived from the new crop, said Popat.
Besides demanding that CCI purchase cotton to meet their needs, spinning mills are also urging the Centre to extend the duty-free import of cotton indefinitely after the current exemption till October 31 expires. The Centre imposed an 11 per cent Customs duty on cotton imports in February 2021 before exempting mills from the duty in June this year to help them tide over the tight cotton supply situation.
The spinning industry is demanding that cotton be delisted from the commodities that are being traded on commodity exchanges as it feels prices are being artificially increased due to speculation.