It will be applicable to both domestic and international trade
South India Cotton Association, to be known as Indian Cotton Federation from next month, will draft a common cotton contract for domestic and international trade in Indian cotton.
Speaking at the annual general meeting of the association here on Sunday, its president C. Soundara Raj said the year 2010-2011 saw large-scale defaults in contracts in domestic and international markets. Cotton was sold at about Rs.30,000 a candy on forward basis for delivery in December 2010. When the prices went up to Rs.62,000 a candy in April 2011, huge loss forced many sellers to default. In the second half of the season, some of the buyers defaulted when the prices slumped to Rs.30,000 a candy from Rs.62,000.
“These unavoidable situations created the necessity to work for a common contract for Indian cotton. We are working on a common contract, applicable to both domestic and international trade. We are also working on the basis of arbitration under the purview of Indian Council of Arbitration, for which the association has qualified arbitrators,” he said.
J. Thulasidharan, the newly-elected president of the association, K.N. Viswanathan, its vice-president and secretary A. Ramani told presspersons later that nearly 15 lakh bales were booked on forward contract basis between March and May last year and many of these had defaulted when the prices shot up. Exact data was not available on the number of defaults. Many were in the process of settlement through negotiation or under arbitration now. Price volatility was the main reason for the defaults, they said.
Some of the regional cotton bodies had approached the association for suggestions on trading systems to be adopted under such circumstances. Inputs would be taken from all stakeholders and the association would try to come out with a common contract. Some of the systems adopted in China could be incorporated in the contract, which would have the approval of the trade and textile industry.
Mr. Viswanathan said the association was part of the steering committee for textiles formed by the State Planning Commission for the XII Five Year Plan. “We need efforts to increase cotton production in Tamil Nadu from the existing five lakh bales a year,” he said.
Mr. Thulasidharan said the Union Government should constitute a cotton board on the lines of tea and silk boards.