Indian textile mills have booked nearly eight lakh bales of cotton for imports, mainly from the African countries.
The import volume is likely to go up as the domestic textile industry expects shortage in cotton availability for the next couple of months and delay in cotton arrivals next season (October 2012-September 2013). Prices of Indian cotton are already shooting up. Cotton is the main raw material of the industry.
Sources in textile mills say the imports can go up to 15 lakh bales or more, and the mills are likely to buy more from other cotton-producing countries, such as the U.S. and Pakistan, too. However, imports will not affect domestic cotton prices as it is being done only to meet shortage in availability of domestic cotton. The Cotton Advisory Board (CAB) estimated consumption by domestic textile mills at 232 lakh bales this season (October 2011 to September 2012). Actual consumption is about 20 lakh bales a month. This means the mills will need nearly 240 lakh bales of cotton a year. Almost 120 lakh bales were exported this season. Since there is likely to be a shortage in availability in September-October, mills have started looking at overseas cotton.
K. Viswanathan, Vice-President, Indian Cotton Federation, says the CAB estimated cotton imports this season to be six lakh bales. “We are moving towards a phase where we may face shortage.” For the Indian textile mills that are importing, price is the main attraction. Prices of Shankar-6 variety went up to Rs.38,800 last week and is hovering around Rs.38,500 a candy now. Domestic sellers are reluctant to sell cotton as they expect that delay in monsoon will push up prices. Buyers are unsure of the yarn market and want to go slow in cotton purchase.
Drop in cotton area
Sowing trends indicate a decline in cotton area. The area is said to have been reduced in Gujarat by almost 15 per cent, in Karnataka by 10-12 per cent, and in Maharashtra by 10 per cent. If the rains pick up in two to three weeks, there is still hope for sowing to cover larger area and the scenario may change, he says.
An official source says arrival of kapas has declined significantly.
The cotton contracted is for 72-80 cents a pound as against nearly 85 cents a pound for the Indian cotton. There is a need for a strong cotton distribution policy, the official says.