Cotton under severe pressure in India

Cotton under severe pressure in India

During the last few weeks towards the end of June and early July,cotton prices had increased by 50% and were skyrocketing as multinational corporations were holding benami stocks with 0% interest funding from their origin countries. Speculators via MCX, NCDEX were playing havoc with the cotton users.


The domestic cotton yarn sector, within the textile value chain has been facing an extravagant amount of pressure and has been sincerely striving hard to maintain a semblance over the last few months. It would be in the interest of the Country that Textile Industry and cotton users, to remove cotton as a commodity permissible for trading on MCX or NCDEX. Actually hedging or delivery contents are hardly 20% of all MCX transactions. Even quality parameters are often upgraded fraudulently by engineered incorrect laboratory report. Some other commodities have been removed from MCX permissible trading list last year on similar grounds, as MCX reports.

In India Cotton under severe pressure

Many other commodities are also facing similar issues as MCX and NCDEX have just become gamblers’ game. India is producing more cotton than China or USA and yet the buffer stock that is supposed to be maintained by CCI and other Government Agencies does not make for even a month's requirement as compared to the 2-3 years buffer stock held by China. This indeed gives rise to the immense pressure and crisis.


On arriving of new crop, India exports good quality cotton at lowest cheap prices and at the fag end of the cotton crop year, India starts importing cotton at higher rates. Even CCI and other government agencies dispose off their cotton stock on profitability basis rather than on the basis of price stabilizing as they are originally supposed to do.


On the other hand, China which would earlier import almost 45 per cent of India’s cotton yarn exports till the last three years, has also reduced its imports considerably bringing it down to a mere 15 per cent. This definitely adds to the worries of the Indian spinning sector, who end up producing export surplus. And this has been possible owing to the better incentive offerings on two arena, one backed by the Centre-sponsored Technology Upgradation Fund (TUF) and the other accounts of the incentives on offer by various state governments like Maharashtra, Gujarat, Rajasthan, Andhra Pradesh  and Madhya Pradesh.


While the demand is reducing, the spinning sector is definitely flourishing. But whom do they supply the yarns to? Is the weaving and the apparel sector equally growing in tandem to match the pace of the spinning sector growth?


No it is certainly not a rosy picture. On the other hand this huge cotton produce is being stocked up and sold on an increased price tag! Industry Associations and Industry leaders are neither aggressive, nor determined to take up such issues with the government appropriately well in time. Owners and Promoters of Spinning Mills owned by big business houses pay little attention towards textile issues.


As per the Government's own admission, about two Spinning Mills are closing down everyday. "We have requested Textile Minister to do whatever possible under present circumstances immediately, otherwise more closures, bankruptcies and NPAs will occur. It may also destroy the strong textile base in India. Let government be realistic and active," comments Sanjay Jain, president, NITMA.


He further adds, "The Textile Industry, particularly spinners and weavers need to increase prices in tandem with presently prevailing cotton prices. At least they can do so to implement voluntarily in order to save the industry. Unfortunately a few cash rich spinners are maliciously and selfishly issuing absolutely untrue statements that cotton yarn prices have moved in tandem with cotton prices. They boast of seven – eight months cotton stock levels held by them. As in earlier crises period should not there be any stock limits prescribed to eliminate artificial shortages? Let us all get concerned and aware of the problems in hand to take up such issues immediately or the Industry will certainly slip out of our hands too soon."

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WWWRosalinaj 24-11-2016 05:24PM
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