SME Times News Bureau | 04 Nov, 2009
Expressing serious concerns over steep hike in cotton prices in the country, Chairman of the Confederation of Indian Textile Industry (CITI) Shishir Jaipuria demanded urgent measure by the government to prevent the impending cotton crisis and announce suspension of cotton exports.

"After two years of an unprecedented crisis, the textile industry is on the verge of a recovery, since the economies in the western countries have started showing some positive trends and demand for textile products have also started improving. However, at the current cotton prices, our textile products are simply not competitive in the global markets," the CITI Chairman Tuesday said in a statement.

Jaipuria stated that the urgent measure required from the government to remedy the impending cotton crisis is to announce the suspension of cotton exports for a period of three months and to review the situation in early February 2010, when the cotton situation will be clearer.

"If large exports take place at this stage, the best of our cotton will go to our competing countries and the domestic industry will suffer both in terms of quantity and quality of cotton during the rest of the year," he added.

In spite of a significant increase in arrival cotton in the market during the last couple of weeks, cotton prices for standard varieties like Shankar 6 has already crossed Rs.25000 a candy on spot basis.  

Jaipuria pointed out that the current increase in cotton prices is not the function of either market trends or MSP.  

He said, "The real driver for the price escalation is speculation by cotton traders, especially a few large international traders who are operating in the Indian market on the strength of highly competitive capital available to them from global sources".

"According to market information, more than 15 lakh bales of the new crop has already been bought by these large traders for export and this has pushed up domestic prices," Jaipuria added.  

The CITI Chairman stated that in the long-term interest of India's cotton economy as a whole, it has to be ensured that our cotton is available to our industry at competitive prices. The only way to achieve this is by curtailing speculation in the market that benefits traders and not either the farmers or the industry.
 
He stressed the need for maintaining a healthy stock-to use ratio to ensure adequate cotton availability to the highly labour intensive and export oriented textile industry.  

"In the context of the slow but steady improvement in the economies of the USA, EU, Japan etc. the industry is hoping to achieve significant increase in cotton consumption. Thus, we may not have any surplus cotton for export at all," Jaipuria added.