India: South Mills body urges sale of CCI cotton in smaller lots

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The Southern India Mills’ Association (SIMA) has requested minister of state for textile Santhosh Kumar Gangwar to look into the e-auction policy of Cotton Corporation of India (CCI) and instruct the latter to offer at least 50,000 bales – in flexible lot sizes and in multiples of 100 bales- in each centre and in each variety of cotton to help the small industry.

The association also urged the government to give priority to SMEs and to see there is least difference in the cost of cotton procured by SMEs and large industry players.

The association said the spinning mills in south India, especially those in Tamil Nadu, were facing a crisis due to factors, including continuous fall in yarn exports during the last 13 months, glut in the domestic market, announcement of attractive industrial polices by various states enabling them to have cost advantage to the tune of Rs 20 per kg of yarn, when compared with the mills in Tamil Nadu; also there has been undue delay in disbursing TUF subsidies.

It said investments worth Rs 70,000 crore were under severe stress. Therefore, all textile mills, particularly spinning mills, were maintaining a stock inventory of up to 30 days of co In this scenario, the e-auction policy of CCI was affecting the small and medium spinning mills very seriously, said the association.

T Rajkumar, chairman, SIMA, said the association had been receiving complaints from small and medium size, and added, they were finding it difficult to procure cotton from CCI.

He requested the Minister to instruct CCI to maintain adequate stocks till the onset of new season to maintain stability in cotton prices and also enable the SMEs to get continuous supply of cotton as they do not have access for imported cotton.

He stated during Jun 24-Jul 1, 2015, of the 1.02 million bales offered by CCI, around 20,000 bales of 62 smaller lots ( lot size 500 and below)  were offered amounting to less than two per cent of the total quantity offered. He pointed out that in many varieties and centres only bulk volumes have been offered preventing the small and medium mills from participating in the e-auction.

He also requested the Minister to instruct CCI to keep adequate stocks till the beginning of the new season to maintain price stability and also enable the SMEs to get continuous supply of cotton as they do not have access for imported cotton.  During the cotton season 2008-09, a similar situation occurred and CCI fully sold out its MSP cotton to the traders who increased the price by over Rs 3,000 per candy even after getting substantial bulk discount and free credit period up to six months.

He also requested the government to ensure that such a situation is not repeated again and protect the interests of small and medium spinning mills and thereby the livelihoods of several lakhs of employees working in the spinning mills.

This season, CCI has covered all the good quality cotton grown in Telangana, Andhra Pradesh and Maharashtra and today several hundreds of mills badly need this cotton to meet their customer requirements.

Out of 3,100 spinning mills in the country, 1,325 spinning mills are under SSI category and even in the non-SSI category, the average number of spindles per mill is only 25,000.  A 25,000 spindle mill would normally need less than 75 bales per day.  Therefore, it is essential for CCI to offer more number of lots in smaller size, give priority for the SMEs, who are starving for funds and badly need cotton.  He has further stated that there are reports that mills had to pay higher premium (upto Rs.1000 per candy) to the traders to purchase CCI cotton in smaller lots.  It may also be noted that as only limited number of lots are offered, even in the CCI e-auction procurement, the SMEs compete with each other and pay more.  The price is higher upto Rs 500 per candy for smaller lots when compared to the bigger lots.

– Business Standard

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