“We urge the Government to not go ahead with setting up of the strategic reserve for cotton,” CAI said in a statement.
The association added that as per media reports, Ministry of Textiles and Industry would use the services of Cotton Corporation of India (CCI) to procure 25 lakh bales of cotton for creating a strategic reserve for exclusive sale to mills.
“The idea of creating a strategic reserve in India for ensuring supply of cotton to the domestic textile mills on the lines of a similar reserve in China is wrong since the situations in India and China are not comparable,” it said.
China is a huge cotton deficit country, while India is a huge surplus cotton economy and the natural fibre is available to the Indian mills easily, the industry body explained.
CAI pointed out that the move could led to losses to the government on account of fluctuation in the prices of cotton.
“If this reserve is created, total investment required for procuring 25 lakh bales would be around Rs 5,000 crore which would in turn involve a total carrying cost including interest and warehousing cost of over Rs 500 crore a year,” it added.
That apart, CCI will have to bear the loss that may arise due to fluctuation in prices, it said.
The association suggested that if the problem is non-availability of funds with the textile industry to buy cotton, this can be addressed through banking channels.
“… it would be appropriate to address the same through banking channels, Reserve Bank of India and the Finance Ministry rather than creating a scheme which distorts the market and unsettles other sectors of the cotton value chain,” it added.