High cotton prices worry textile industry

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COIMBATORE: The price of the widely-used Shankar-6 variety of cotton crossed Rs. 56,000 a candy (356 kg) on Wednesday, creating concerns among the domestic textile industry.

“There is no valid reason behind such an increase in prices. This is a worrying situation,” says K. N. Viswanathan, Secretary of the South India Cotton Association.

Total arrivals so far, since the beginning of the cotton season (October 2010), are 205 lakh bales and this is about 5 per cent more than the arrivals in the same period in the previous year. Daily arrivals now are about 1.30 lakh bales. “The crop is not likely to be big this year. Though the Cotton Advisory Board estimated the total production this year to be 329 lakh bales, it may be just 308 lakh bales. We will face a tough situation in one month if the production is low,” he says.

S. Ramanathan, Chief Executive Officer of Muthukumarasamy Textiles and S & M Kids Wear, says mills that had purchased cotton for more than Rs.52,000 a candy are incurring losses at the current yarn prices. “Cotton was the strength of the Indian textile industry. However, very few mills can survive at these prices of cotton,” he says. Working capital availability at 7 per cent interest and with nine months limit even for small and medium-scale mills will help the units plan and purchase larger quantities of cotton and thus achieve stability of prices. The mills increased hosiery yarn prices by Rs.20 a kg on Tuesday, and if cotton prices continue to increase, yarn prices will only go up further, affecting the downstream units, according to the Southern India Mills’ Association.

D. K. Nair, Secretary General of the Confederation of Indian Textile Industry, says the reason for the cotton prices shooting up this year is that the market is aware of the actual production trend as against the forecast.

From the beginning of the cotton season, international prices were going up. Since India is also exporting cotton, prices are moving in tandem. Though the Government has restricted cotton exports to 55 lakh bales for this season, prices are increasing because production is likely to be low. Further, frequent statements from different government sources that further exports may take place are also pushing up domestic prices, he says.

(Source: http://www.hindu.com/2011/02/10/stories/2011021066292100.htm)

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