SIMA Chairman, Ravi Sam appreciated the proactive and bold steps taken by the Union Minister of Textiles, Piyush Goyal to control the speculation in cotton trading by directing SEBI and MCX to bring necessary changes.
Coimbatore: The Indian cotton textile industry has been facing unforeseen crisis from the beginning of the year especially from April 1, 2022 due to abnormal increase in cotton prices that was primarily caused by speculation of cotton trading under MCX and 11 percent import duty levied on cotton.
The MCX cotton price has been costlier by 40 percent to 60 percent till August 31, 2022 when compared to the New York futures. The removal of 11 percent import duty on cotton from April 14, 2022 to October 31, 2022 brought relief but did not last long since the international and domestic cotton prices started sliding down and creating panic in the industry.
When several textile mills were attempting to re-negotiate the contract or seek legal remedy for cancellation of contract, the speculation caused by MCX trading made Indian cotton expensive which enabled trade to protect their contract. However, the international cotton price continues to be lower by 20 percent to 25 percent that had caused production stoppage to the tune of 30 percent to 40 percent across the cotton textile value chain.
Realizing the urgent issues that the cotton industry was facing, the Union Minister of Textiles, Piyush Goyal formed a Textile Advisory Group under the Chairmanship of Suresh.A.Kotak, convened a series of meetings for the first time with the Ministry of Agriculture and SEBI, and taken numerous corrective measures to bring stability in cotton prices. Consequent to the meeting held by SEBI along with MCX and industry stakeholders on August 26, 2022, certain changes were brought in the MCX trading. The MCX cotton price has significantly come down within a week which has softened the domestic cotton price.
In a press release issued by SIMA, Ravi Sam, Chairman, The Southern India Mills’ Association (SIMA) appreciated the proactive and bold steps taken by the Union Minister of Textiles to control the speculation in cotton trading by directing SEBI and MCX to bring necessary changes so as to enable the cotton futures trading to benefit all the stakeholders in the cotton textile value chain, and protect the jobs of 35 million people directly employed in the cotton textile value chain as well as the 6.5 million cotton farmers.
Ravi Sam stated that MCX cotton price per bale (of 170 kgs) that prevailed around Rs.50,000 till the last week of August has now fallen to Rs. 36,480, a reduction of around 27 percent. With the early arrival of new cotton and price pressure, the domestic market cotton price has also reduced from the level of Rs.1,00,000 to Rs.90,000 per cany (355 kgs), a reduction of around 10 percent.
Ravi Sam also stated that the Indian cotton prices are still higher by 15 percent to 20 percent when compared to the international cotton prices, especially countries like Pakistan and China. He has stated that the domestic price must match with the prices prevailing in the competing countries and the international cotton prices, to have a level playing field and enable the Indian cotton textile industry to revive from the unforeseen crisis. The SIMA Chief hoped that with the 8 percent increase in cotton area and numerous steps taken to prevent the infestation of the pink boll worm, white fly and curly leaf cotton diseases, the cotton production for the coming season might be comfortable for the industry to bounce back in a short span of time.
The SIMA Chief stated that the cotton requirement by the industry would surpass the production and with the duty-free export of cotton that might encourage 12 percent to 15 percent good quality raw cotton export from the country during the season resulting in cotton shortage during the off season. He has appealed to the Government to remove 11 percent import duty to enable the industry to achieve its potential growth rate and sustain its financial viability, apart from protecting the jobs of over 35 million people employed in the cotton textile value chain.
Ravi Sam added that the anticipated cotton price, even during the peak cotton season would be much higher than the minimum support price and therefore, the duty removal will not affect the farmers. He also stated that the Government could also consider levying the duty only during the peak arrivals of the season (December - March) to avoid recurrence of crisis during the fag end of cotton season 2022-23.
The SIMA Chairman also appealed to the Government to ensure raw material security and ensure availability of quality cotton at an internationally competitive rate by curbing speculation and removing the import duty on cotton.