Amid the stockpiles and waning demand in textile industry, state-run Cotton Corporation of India (CCI) is set to suffer its steepest loss in six years from sales in the current season. The CCI started selling from its stockpiles last month to make room in its warehouses for the ongoing bumper harvest, but managed to find buyers for less than half of what it auctioned.

The CCI has procured more than 6.5 million bales this season from farmers at prices around 5-6 per cent above current market rates, making the fibre uncompetitive amid world prices that are languishing near more than five-year lows.

As per CCI Chairman and Managing Director, B K Mikshra, the corporation may see a loss of about 20-25 billion rupees ($322-$403 million) under the support price in operation this year as the response to the sale is very sluggish in the absence of Chinese demand. He expected hopes to see some stability in prices by March on the basis of less supply. That would be the biggest loss since at least 2008/09, a government official said. However, this loss will not show up on CCI's books as it will be reimbursed by the government.

China used to buy almost 60 per cent of India’s cotton until last year but it has now cut imports to support its farmers. This will bring down India’s exports to 6-8 million bales this crop year, he said. India’s domestic cotton demand is expected to rise about 3 per cent to 31.1 million bales this crop year. However, Indian firms are delaying purchases on hopes prices will drop further.