As per textile minister Santosh Kumar Gangwar, the government may have to sustain heavy losses of around Rs 2,500 crores on its cotton procurement operations, which were supposed to prevent distress sales by farmers, during the current marketing year through September. But the losses are said to be still lower than Rs 4,000 crores estimated earlier. And if cotton prices witness positive improvement then these could be even lower than Rs 2,500 crores.
The state-run Cotton Corporation Of India (CCI) procures the fibre from farmers at minimum support prices (MSPs) and sells the stocks later in the market and losses suffered out of the procurement operation is then reimbursed by the government. Gangwar said that the losses by CCI would mount this marketing year, as the agency has procured 8.7 million bales of cotton so far in 2014-15, little lower than the record procurement of 8.9 million bales in 2008-09. Owing to low demand for fibre and yarn from China against surplus production led to decline in cotton prices.
Though the industry is facing an oversupply situation at the moment, Indian spinners are focusing on building capacities expecting pick-up in demand from both the domestic and export markets for cotton yarn. Currently, it has an overall installed capacity of 50 million spindles, to which 10-15 per cent more is expected to be added in the next one year. Of the the yarn spinning capacity of 50 million spindles, about 45 million are functional. Capacity utilisation is estimated at 75 per cent, due to oversupply.
In an analysis on the yarn industry, the Center for Monitoring Indian Economy said, “We expect the growth in yarn production to increase in 2015-16 by 4.8 per cent to 4.3 million tonnes.” The capacity addition will majorly take places in the states of Gujarat, Maharashtra and Telangana.
While industry bodies like Texprocil were asking the government to direct Cotton Corporation of India (CCI) to release of almost 50,000 cotton bales a day to bring down shortage in the domestic market, the CCI Chairman BK Mishra has said that the shortage claimed that there is no shortage of cotton bales in the domestic market.
Cotcorp.gov.in
