Spiralling cotton prices worry textile sector

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The new cotton season beginning October every year is an important phase for the Indian textile industry, which is nearly 60 per cent cotton-based.

This year looks challenging for the sector as prices of raw cotton are spiralling despite expectations of a bumper crop of 325 lakh bales (295 lakh bales in 2009-10). Price stabilisation has emerged an area of concern for the entire textile value chain.

Textile mills make most of their cotton purchases for the year during April-May when the new crop arrives.

Low stock-to-mill use ratio (16 per cent as on September 30 as against about 30 per cent in China), depressed carryover stock (4 million bales as against 18 million bales in China), and surge in international and domestic textile consumption this year have all led to heavy demand for cotton. Price is an important factor for a sector that has a competing value chain and is largely unorganised. Besides, almost 40 per cent of production would be exported. Textile prices have gone up from 10 per cent in January this year to 14.8 per cent in August based on the Wholesale Price Index. The price of Shankar-6 variety of cotton, which was Rs.30,800 a candy in August, is now about Rs.40,500. The price of 40s carded warp yarn has spiralled from Rs.187 in August to Rs.213 a kg now.

The government had announced that only surplus cotton would be allowed for exports. The textile industry is urging the government to calibrate cotton exports and permit shipments from January 2011. The value-adding apparel sector is asking the government to take measures to bring down cotton yarn prices.

According to Apparel Export Promotion Council Chairman Premal Udani, the government should take a balanced approach and incentivise export of value-added products. It should declare cotton as an essential commodity, he says.

The industry seeks a stable, long-term and balanced policy that promotes growth of each segment of the textile sector. Potential investors in each segment, such as spinning or weaving, should feel encouraged to invest and increase production. “The potential at each stage should be exploited,” said Secretary General of the Confederation of Indian Textile Industry D. K. Nair. India should, as other countries do, encourage internal use of cotton. “We need a long-term policy so that the domestic and international markets know India's position and there is no speculation,” he said.




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