Indian cotton was cheaper than international cotton from the beginning of the current year. But the situation has changed significantly and our prices are substantially above the international prices now. The arrival of cotton has dropped considerably in the last few days to 20,000 bales. The mills are largely dependent on Cotton Corporation of India (CCI) for cotton procurement.
The total requirement of mills is close to 85,000 — 90,000 bales per day whereas the company has been offering only 40,000 bales per day, which also has largely remained unsold because of excessively high prices. Till date CCI has sold 10.8 lakh bales of cotton and hence carrying stocks of 75 lakh bales, as CCI has bought 85.8 lakh bales of cotton in the current season.
The role of the company is primarily to ensure MSP operation so that the farmers get a remunerative price for their product. However, at the same time if such procured cotton is not released in time for the industry and is retained as a stock by CCI, it distorts the market and leads to artificial increase in prices thereby making the user segment uncompetitive. Sales of procured cotton, by CCI have so far been extremely low and that too at unreasonably high prices.
In some of the States like Andhra Pradesh, Telangana and Maharashtra, CCI has bought large quantities through MSP operations, creating a shortage of cotton in these States. The local mills are forced to buy cotton from distant places, incurring additional transportation and other costs.
The huge stocks are pushing up cotton prices all over the country. Taking advantage of this situation, private traders are hoarding cotton because of the perception that non-disposal of cotton by the company would push up cotton prices further. If it disposes off procured cotton in large quantities at reasonable prices, hoarding by private traders would also stop and they would be forced to sell the cotton at market prices.
The company’s own operation would be unsustainable as it is also incurring heavy costs through warehousing cost and interest on the stocks which they are holding with them.