Cotton demand that remained dormant during the second pandemic wave is now being released with consumption rising to 360 lakh against normal levels of 290 to 320 lakh bales. The US sanction on cotton imports from Xinjiang province and attractive cotton futures trading are also fuelling cotton prices to record high levels in a short period.
Price rise is also being triggered by a drop in cotton production from 360 to 330 lakh bales, and 11 per cent import duty levied on cotton till April 13, 2022. Benefitting from these, cotton farmers, ginners and traders have started hoarding seed and lint cotton, leading to further rise in prices. Traders are also using the MCX and NCDEX platforms to adopt import parity pricing policy, leading to further 10 per cent rise in cotton prices. Looking at growing demand for cotton, the government abolished import duty on cotton from April 14 to September 30, 2022. Union Minister of Textiles and Secretary, Ministry of Textiles has scheduled May 17, 2022 to review the situation.
Ravi Sam, Chairman, The Southern India Mills’ Association (SIMA) has urged all stakeholders to stop demanding a ban on cotton or yarn exports that tarnishes the country’s image as a reliable supplier in global market, and instead resolve the crisis collectively. The Association has already urged spinning sector to shoulder the rise in cotton prices to maximum possible extent.
Cotton prices to soften on new arrivals
Sam said cotton prices in India might start softening once imported cotton as well as the summer cotton from states like Tamil Nadu arrives in the mills. He noted, that 40 lakh bales contracted by Indian spinners after April 14, 2022 is expected to reach the mills only by the end of June, leading to a considerable drop in cotton consumption.
Sam opines, short-sighted policies by the government might damage the capital-intensive spinning sector in India that currently operates with 15-year-old machines. He urged the government to collect the online statistical returns data to provide details of production, consumption, and stock across the value chain, and take appropriate policy decisions. Sam also appealed to all stakeholders to file the Returns to the Office of the Textile Commissioner.
New cotton scheme may benefit 65 lakh farmers
Sam also underlined the need to launch the Technology Mission on Cotton 2.0 on war footing to restrict the drop in cotton productivity levels from 565 kg per hectare to 460 kg per hectare, and a drop in production from 398 lakh bales to 330 lakh bales.
He believes the scheme would help protect the livelihoods of 65 lakh farmers and over three crore people directly employed in the cotton textile value chain. Absence of latest technologies including high-density planting, drought tolerant, weedicide etc, poor agronomy research and practices, and poor handling of cotton is impacting the entire crop value chain including farmers, he adds.
Urging stakeholders to avoid demanding anything that might benefit one segment but affect another, Sam asked them to come together and work collectively in this moment of crisis. He urged the government to launch TMC 2.0 with adequate funds to resolve the raw material crisis permanently. He said, the industry plans to appeal to the government to extend import duty removal beyond September 30, 2022, to tide over the crisis. This would help the industry change market sentiments without affecting cotton farmers.