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India: Cotton purchases are unprofitable as prices remain high despite duty cut


India Cotton purchases are unprofitable as prices remain high despite duty cut

Removal of the 11 per cent duty on cotton imports has failed to benefit spinning and composite textile mills as cotton prices continue to hover around Rs 90,000 per candy. As predicted, duty removal has not boosted India’s cotton imports as international prices continue to remain high. The industry could have benefitted if the decision was taken before February, opines Cotton Association of India.

Limit cotton hoarding and futures trading

Current cotton rates are unaffordable for spinning mills as they do not get such high prices from weavers, says Saurin Parikh, President, Spinners Association of Gujarat (SAG). The surge in prices can be attributed to hoarding of 60 lakh bales of stock by a handful of multinational companies and cotton futures on platforms like MCX and NCDEX. The government needs to limit cotton storage and future cotton trading to protect the entire textile value chain, he adds. If prices do not decline quickly, the spinning industry will have to wait for fresh stocks to arrive, says Parikh. Buying at current rate may prove unprofitable and impact bottom lines over the next six months, he adds.

By the time, import duty was suspended, a lot of foreign trading and funding firms had already cracked deals, explains Chintan Thaker, President Welspun Group. The deals would be finalized by April by then, cotton rates may decline. In case, they don’t, the government will have to suspend cotton exports and crackdown traders engaged in cotton hoarding.

Cotton production to remain low

This season, farmers may have to carry forward nearly 40 lakh bales of cotton stocks, opines Atul Ganatra, President of CAI. They are still holding 15 per cent crop with 7 to 10 lakh bales still expected to arrive in the market from June to August from Tamil Nadu and Karnataka. This will ease cotton supply in the next two to three months, he adds.

From Rs 48,000 per candy in the beginning of current season, cotton prices have almost touched a high of Rs 98,000 per candy. Cotton production in the country may remain low at 335 lakh bales, says Ganatra. Exports are likely to touch 45 lakh bales while imports will total 15 lakh bales, he adds. Spinning mills may consume 340 lakh bales this year, Ganatra believes. According to him, cotton sowing will increase by 15-25 per cent with farmers in states like Gujarat, Maharashtra, Tamil Nadu, Andhra Pradesh, Madhya Pradesh and Punjab shifting from other crops to cotton.


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