By admin       2016-09-15

Sep 13, 2016 - CHENNAI: As the cotton season nears its end this year, small spinning mills churning out yarn in large volumes from factories in Tamil Nadu, are winding up the year on a disappointing note with cotton prices remaining at higher levels dashing hopes of any relief. Cotton prices had zoomed close to Rs 50,000 a candy over the last few months after reports of short supply coupled with frenzied speculation by traders. With the arrival of global crop priced around Rs 45,000 a candy and the centre's announcement restricting cotton with the government procurer Cotton Corporation of India for small mills, prices nominally dropped. The Gujarat Cotton, Shankar-6, now trades around Rs 43,400 and is expected to slide some more but industry representatives rule out the possibility of normalisation. While the government banks on monsoon to offset the 10 per cent reduction in cotton acreage, entrepreneurs believe pre-emptive action by the government can insulate the industry against price shocks. "We exported cotton in the middle of the season at Rs 94 a kg and within one quarter, we are importing the same type of cotton at an average Rs 124 a kg," said Prabhu Damodharan, a mill owner who heads entrepreneur forum ITF in Coimbatore. Entrepreneurs in Tamil Nadu had reduced manufacturing time when cotton prices raged recently. After prices zoomed, Tamil Nadu mills shortened work weeks in a production cut to not hurt operating margins. Peers in neighbouring Andhra Pradesh had even announced weekly holidays till the price rise passed over. The trend had emerged even as a brightening market recovery in European nations offered hope to Indian millers. Over the last year, yarn manufacturers have been calling for the government to create a cotton reserve which can be sold in market during times of supply shortfall to regulate prices. After the inflation this year, mill associations have begun lobbying the centre for procuring 70-80 lakh bales every year. "Many associations across the country have been individually petitioning the government. Now, there is a plan for a combined representation," said K Selvaraju, Secretary-General of South Indian Mills Association, adding there is also an effort to meet with Textiles Minister Smriti Irani on the strategic reserve. While the idea of buffer stocks has not yet been considered by the government, the CCI will extend its scheme to prioritise small mills over traders into the next year. "The government is seriously considering keeping the arrangement for the next year too," Kavita Gupta, textile commissioner, told ET. holding their ground and sustained elevated rates for cotton domestically, a trend the industry has been reconciling with over the last few months. "The global cotton price outlook appears to be firm in the backdrop of lower global production forecasts, lower global inventories and decreasing Chinese stocks. Indian cotton production forecast is also weaker with lower cotton acreage," said Tanu Sharma, a cotton analyst and Associate Director with India Ratings & Research.

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