The Indian textile industry has asked the government to provide a support mechanism to counter high volatility in cotton prices.
A group of 26 textile associations representing spinners and exporters such as Tirupur Exporters’’ Association is insisting the government help support the industry by providing a safety net aimed at maintaining price stability.
A 19-member delegation of the industry met recently with the Union Textile Minister Mrs. Smriti Irani in New Delhi and requested the government’s intervention to control the volatility and maintain supply stability.
According to Coimbatore-based Southern India Mills’ Association (SIMA), the crisis occurs during the off season, from May to September. As the Indian cotton year begins on October 1, 80% of the crop arrives during November to March, which puts a strain on the spinning mills to procure cotton at high cost, as financial institutions offer only three-month credit facility.
Mr. Senthilkumar, chairman of SIMA, has stated that the Indian textile industry is in a recession due to tariff barriers and weak demand for cotton yarn in domestic and foreign markets.
The industry has demanded that the government direct the Cotton Corporation of India (CCI), a state-supported cotton marketing agency, to procure 7-8 million bales during the peak season, as Indian cotton prices are lower than those of international markets during this period. According to the plea by the textile associations, CCI should then sell the stock to actual end-users during the high volatile crisis period from May to September. In addition to CCI procuring cotton during high arrival period and selling during volatile season, the industry has insisted the government help maintain a 25% stock-to-use ratio. The industry claims the current ratio in India is only 12-15%, which is far less than the world’s ratio.
The cotton end-user industry insists that as 80% of textile manufacturing units are small to medium scale, a support mechanism is necessary. There is no parity between the increase of cotton price and yarn price, and so the spinning mills incur losses due to price variations, according to SIMA.
There has been a counter argument prevailing for a while, as to why the government should stockpile and then sell at a later date. The textile industry has to come up with a workable solution on their own. The new Indian cotton season now beginning will be keenly watched, as there are a lot of uncertainties both from production and marketing aspects.