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CCI to sell 24,000 bales of cotton to small and medium scale mills

Following directions by the Textile Ministry, the Cotton Corporation of India (CCI) has decided to sell its remaining stock of about 24,000 bales of cotton to small and medium scale mills, informs B K Mishra, CMD, CCI. He claimed that as prices had shot up, these mills were finding it difficult to purchase cotton, so much so that they were mulling to shut down. The mills approached the ministry. It has now been decided that CCI would now sell the bales only to these mills, Mishra remarked.

Significantly, the spot price of the benchmark cotton variety, Sankar-6, was around Rs 33,000 per candy of 355 kg during the first week of April this year and it increased to Rs 42,700 by the end of June. Currently, it is selling at Rs 48,000 per candy. Thus, the price has increased by 45 per cent resulting in an increase of Rs 60 per kg of clean cotton cost used for combed count yarns.

The sudden rise in cotton prices could not be absorbed by the textile industry and spinning mills that were suffering due to surplus spinning capacity due to the reduced demand for yarn exports. High fixed costs make production cuts difficult.

As a result, non-performing assets (NPAs) are increasing and mills are partially or fully closing down. Old and new mills have a cost differential of 10 per cent in an industry which doesn’t even have a consistent net profit margin of 5 per cent.

Interestingly, CCI had purchased 8.4 lakh bales of cotton at minimum support price this year. The Corporation has supplied nearly two lakh bales to the National Textile Corporation and state co-operative mills. It also sold about 1.5 lakh bales a month over the last four months through e-auction. It now has some 24,000 bales which will be sold to small and medium scale mills.

 
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