By Our Special Correspondent MUMBAI, MAR. 18
The Southern India Mills Association (SIMA) today in an urgent telegram communication to Prime Minister, Dr. Manmohan Singh, sought his immediate intervention to direct Cotton Corporation of India and NAFED to off-load its stock only to the mill industry.
In its communication to PM, SIMA noted that CCI and NAFED had purchased over 25 lakh bales of cotton as a part of MSP operation at prices 15 to 20 lower than today’s prices. A total of 50 to 60 lakh bales is being held by large traders and CCI/NAFED. This has created an artificial shortage and lead to an increase of cotton prices by 15 per cent in a month eroding export competitiveness of the Indian cotton spinning industry.
The export growth has started turning negative. Therefore, SIMA has appealed to PM for his immediate intervention, directing CCI to offload its stock to spinning mills and not to cotton traders, the communication said. The communication has also been sent to Mr. Anand Sharma, Minister of Textiles, Mr. P. Chidambaram, Minister of Finance and Mr. V. Narayanasamy, Minister of State for Parliamentary Affairs.
It may be noted here that last week, SIMA had called upon the authorities to resolve the cotton availability issue. Mr. S. Dinakaran, Chairman, SIMA, had informed that the cotton export registration has also abruptly increased during the month of February 2012 which has been steadily increasing from the beginning of the cotton season, which today seems to have exceeded 80 lakh bales mark, fuelling the situation.
He said that SIMA had appealed to the Government during the end of February 2013 to direct CCI and other procurement agencies to announce the cotton prices and start selling the cotton only to the actual users to stabilize the cotton prices.
However, it was unfortunate that the government did not heed to the request of the user industry even after 15 days which resulted in increase of another Rs.2500 per candy in the cotton prices, he stressed. SIMA Chief stated that though the textile mills have the option of importing international cotton, it would take 45 days time for the mills to receive the cotton and therefore, all of a sudden artificial scarcity has been created by the traders and the government procurement agencies by holding the stocks and speculating the prices.
This sudden volatility in cotton prices would seriously affect the downstream sectors such as handlooms, power looms and garments, who normally quote the prices for three months’ period for their exports, he added. Mr. Dinakaran pointed out that such an increase would seriously affect the viability of the entire textile manufacturing units in the textile value chain and feared that the industry might face yet another crisis if the government does not act upon and instruct the cotton procurement agencies to sell the cotton to the actual industry users immediately.
SIMA Chief further pointed out by creating artificially scarcity in India, the multinational cotton traders are trying to jack up the prices globally, which has contributed to the increase in the international prices recently. Mr. Dinakaran criticized that it has been the practice of cotton traders in the last five cotton seasons that they manipulate the trade in such a way that the prices shoot up abnormally during February to April by crating artificial scarcity and again speculate the prices during the end of the cotton season.
SIMA Chairman opined that CCI and other procurement agencies have over 20 lakh bales of cotton procured from the farmers of Andhra Pradesh which are of long stable varieties at the minimum support prices and even if the procurement agencies sell the cotton at today’s price, it would fetch good profit to them. He pointed out that the primary role of government procurement agencies is to support the farmers whenever the prices go below the MSP operations and also sell the cotton to the domestic industry and constantly maintain the stability in the cotton prices.
Mr. Dinakaran indicated that the Association does not want the farmers or government agencies to incur loss, but at the same time the government should direct the procurement agencies to come out with transparent and consistent policies which would create win-win situation both for the farmers and the end user industry to sustain their global competitiveness.
SIMA Chairman opined that the present upward trend in cotton price would subsidize soon which has been created artificially and therefore advised the textile mills not to be panic about the present price trend. (Source: Tecoya Trend)