‘Price stabilisation fund can help change cotton scenario’

Amiti Sen Richa Mishra New Delhi | Updated on March 12, 2018

Union Textiles Minister Kavuru Sambasiva Rao

The Prime Minister wants 30 per cent increase in textile exports this fiscal. But, it may not be an easy task, as the textile sector faces multiple challenges including steep fluctuations in raw material pricing, outdated technology, and inflexible labour laws.

However, the newly appointed Minister for Textiles Kavuru Sambasiva Rao is confident of meeting the target and has his task clearly cut out. He shares with Business Line priorities in the coming month. Excerpts:

What is the idea behind the proposed cotton price stabilisation fund?

Unless cotton growers get remunerative prices, there will always be instability in the textile market. Unfortunately, cotton price is internationally dictated leading to caretlisation among multinationals and large-scale businessmen. They also hoard. A price stabilisation fund can help change the situation. Today, delayed action from the Government to allow exports whenever there is surplus production estimated often results in buyers offering less than the minimum support priceIt is then that the Government intervenes with assured MSP through the Cotton Corporation. To avoid such a situation, the opinion is that if there is a surplus, then let there be permission to export without any loss of time. A cotton price stabilisation fund can help to stabilise prices in case there is a shortfall in the domestic market post-exports.

How will the fund work?

Once crop quantity is assessed, say at 400 lakh bales, and domestic requirement is determined, say at 280 lakh bales, then the remaining 120 lakh can be immediately exported to get price stability. But, if the international price is more than the domestic, the exporter can deposit a part of the difference with a Government institution such as the Cotton Corporation. In situations when there is a crop loss or lower-than-estimated crop after exports take place and import at higher prices is required, this fund can be used.

How will it help cotton millers and powerlooms who suffer due to price fluctuation?

The milling units, power looms and spinning units all want cotton supply at stable prices. Their problem could be solved if they could hold stocks for a longer period than the current holding of three months. In fact, we proposed that if they could assure that they would purchase cotton from the grower at the support price before the stock comes into the market, we (the Ministry) will arrange finance for storing another six months requirement. This they were willing for.

What will be this amount?

The industry requires about Rs 20,000 crore additional capital for this. We will talk to the Finance Minister for extra working capital through banks. This would lead to price stability, as units will not need to make fresh purchases and restrict hoarding by traders.

But can the units afford the increased interest burden?

Some interest subvention has to be given by the Government.

Suppose the interest subvention is four per cent, the burden on the exchequer, according to my calculations would be Rs 400 crore.

So, by paying Rs 400 crore, if the Government can bring stability, the Cotton Corporation also will not have to lose money through its interventions.

A Government body would be required to monitor the entire operation.

Also, the textile industry has to be included in the priority sector for Rs 20,000 crore to be lent through banks.

Published on July 16, 2013

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