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Highlights Of The Virtual Meeting Of National & Regional Level Cotton Textile Supply Value Chain Stakeholders’ Virtual Meeting

Published: December 30, 2020
Author: Manali bhanushali

Highlights of the National level and Regional level Cotton Textile Supply Value Chain Stakeholders’ virtual meetings held at 11.30 am and 3.30 pm respectively on 25th December 2020

The knitwear sector and certain fabric segments have been requesting the cotton industry and the Government to ensure uninterrupted supply and stable prices of cotton yarn during the last two weeks owing to sudden spurt in the market causing supply-demand mismatch.  At the initiative of CITI and SIMA, national level organisations’ video conference meeting involving AEPC, CCI, CAI, CITI, CMAI, Texprocil, FOHMA, PDEXCIL and TEXPROCIL was held at 11.30 am and again another VC meeting of all regional level stakeholders across the country was held at 3.30 pm on 25th December 2020.  SIMA, NITMA, SISPA, Andhra Textile Mills Association, Telangana Textile Mills’ Association, Bhiwandi, Ichalkaranji and Tamil Nadu Power Loom Association, Tirupur Exporters Association, ITF, etc., were some of the major regional associations participated in the deliberations. The meeting was chaired by Shri T Rajkumar, Chairman, CITI.

The highlights of the meetings are given below:

Cotton scenario

  • India will continue to have a closing stock of over 100 lakh bales in the current cotton season also (a historic stock).
  • The production for the season 2020-21 might be around 360 lakh bales.  The consumption might be 320-330 lakh bales.  India has been exporting a large volume of organic cotton especially to Bangladesh; owing to stringent compliance norms imposed by the certifying agency, the availability of organic cotton has drastically come down.  Hence, the export might drop to 40 lakh bales as against the CAI estimate of 60 lakh bales.
  • The global cotton position though comfortable, the demand has increased owing to the sanctions imposed by US on the Xinjiang cotton that account 42% of the Chinese total cotton textile products.  Hence, the global cotton price is increasing steeply.
  • The domestic price though has increased in tandem with the global cotton price, still Indian cotton is cheaper by around Rs.3000 per candy.
  • CCI has sold sizeable volume of cotton procured under MSP with liberal terms and conditions to the multinationals resulting in speculation.  CCI increases the price whenever the global price increases, but does not reduce the price whenever the international price drops.
  • CCI is carrying good quality of cotton while the private ginners are having slightly inferior quality; CCI has so far procured around 45% of the cotton.
  • The farmers are panic owing to the Covid pandemic and fear that yet another Covid lockdown might become a disaster and therefore the arrival rate is over 3 lakh bales per day and around 185 lakh bales might arrive by 31st December 2020 (over 50% of the production).
  • The Government has already incurred over Rs.12,000 crores loss on account of MSP procurement during the last cotton season and likely to incur huge loss in the current year as there is a huge gap between the selling price and the cost price of CCI procured under MSP.
  • This is best time for the spinning mills to procure cotton from CCI.  CCI is extending additional facilities for MSMEs based on the MSME certificate issued by the Ministry of MSME duly endorsed by the Office of the Textile Commissioner.
  • Industry may represent to the Government for further relaxation in the free period and the volume of cotton purchased.
  • CCI increases the prices gradually while the international price increases steeply
  • The market has to sail with the international price and absorb the increase in cotton yarn price as the Government has already incurred huge losses and the prices are much lower than the pre-COVID cotton prices and the international prices.
  • Industry should purchase cotton during the peak season and support the farmers and also help the government to reduce the losses.
  • CCI extends three months free period for the mills purchasing more than 25,000 bales of cotton.  CCI has over 65 lakh bales stock and for the first time, they continue to sell MSP procured cotton regularly which they normally do after March.
  • Since the arrival rate is over three lakh bales, the mills should purchase at least 50,000 bales every day.  If the mills commit volume, CCI can address the issue of price volatility.  CCI is willing to stock the bales in the mills’ godown or common warehouse.
  • CCI has represented to waive the 1% market committee fee in Tamilnadu and planning to commence depot sales.  CCI would also extend depot sales facility in Andhra Pradesh.
  • CCI stopped bulk discount sales to MNC’s, restricted volume  and gives preference for the spinning mills.

The downstream sectors from fabric onwards raised the following issues and requested the following measures by the cotton yarn sector to mitigate the current supply-demand:

  • Certain mills have stopped yarn supply
  • The cotton yarn price has increased steeply in the last two months.  The exporters have confirmed the export orders for a period of 5 to 6 months when the yarn prices were low. This is affecting the garment exporters.
  • There is a short supply and spinning mills refuse to book orders
  • There is delay in the delivery of yarn
  • The garment units especially the knitwear sector is not able to meet the increasing export and domestic demand.
  • The weaving yarn prices change daily that affects the powerloom sector.
  • Domestic retail market has just reached 70% of the pre-COVID period sales and therefore, stability in cotton price is very essential for the retails to revive from the crisis

They suggested the following measures to mitigate the crisis:

  • Spinning mills should ensure uninterrupted supply of yarn to meet the delivery schedule.
  • The yarn price should be stable for two months so that they do not incur loss in exports that are booked two to three months in advance.
  • Weaving yarn prices also could be fixed on a monthly basis on part with hosiery yarn prices
  • Knitted garment exporters are looking for longer period orders and therefore they need regular supply of cotton yarn to meet the export commitments.

Regarding prices and supply, the following justifications were given by the cotton and yarn stakeholders:

  • Owing to the unprecedented Covid-19 pandemic, the international and domestic cotton prices crashed steeply making cotton and yarn stakeholders to erode their working capital significantly and making them to incur huge losses.
  • Though there is a record closing stock of cotton in India (105 lakh bales) and good cotton production, the cotton prices started nose diving when the industry started.
  • The recent US sanctions against Xinjiang cotton and its textile products that account 10% of world cotton production and 42% of Chinese cotton textile production has created panic and made the international cotton prices to increase over 10 cents per pound in a short span
  • When the lockdown restrictions were relaxed, the yarn sector started working only from August onwards as the spinning mills predominantly employ migrant workers and women workers from various districts / States, who had returned to their hometowns immediately after lockdown and started returning gradually.
  • The spinning mills are yet to reach normal capacity utilisation of 95% and currently work at around 80% due to shortage of workers.  The production also suffers due to high attrition and intermittent COVID-19 quarantine stoppages.
  • As the downstream sectors started working from May, there is no yarn inventory in the mills; normally spinning mills used to carry 30 to 45 days inventory and used to meet the demand.
  • Monthly allotments/commitments are met by all the spinning mills; they are not in a position to commit for additional quantity owing to lower capacity utilisation and drained yarn inventory.
  • The cotton yarn export is yet to reach normalcy which is only around 85 million kgs per month as against the normal export level of 100 to 130 million kgs / month.
  • In fact, several spinning mills have diverted their export volume to the domestic market.
  • Good quality cotton is available only with CCI for which the mills have to pay and take delivery; takes longer duration due to formal procedures to be complied with CCI when compared to private ginners.  Hence, the spinning mills are not in a position to extend the credit facilities as they have been doing so far.
  • Indian cotton yarn is the cheapest in the world;
  • Stability in cotton price is a pre-requisite to ensure stability in yarn prices.  Therefore, CCI’s role is very important when they are procuring over 50% of the cotton.
  • CCI’s role should be of a price stabiliser and not a trader.  While selling the MSP procured cotton they should give always priority for the actual users.
  • Presuming that CCI is increasing the cotton price only based on the carrying charges, the recent increase is abnormal.
  • The supply-demand mismatch is expected to stabilise within two months.
  • Since CCI procures over 75% of the cotton arrivals in Telangana State, that are mainly consumed by  Andhra Pradesh and Tamilnadu, CCI should commence depot sales facility in the State of Andhra Pradesh.
  • CCI should extend 30 days credit facilities for 5,000 bales, 60 days credit facility for 10,000 bales and 90 days credit facilities beyond 10,000 bales.  This would help CCI to liquidate the stock and create win-win strategy both for the Government and the cotton textile value chain
  • Remove over 100 MSME spinning mills blacklisted by CCI owing to 2011 cotton contract dispute, enable them to purchase CCI cotton to sustain their financial viability as CCI has become a major trader during the current season.
  • CCI’s selling policy is the root cause for cotton price volatility; government needs to revamp CCI selling policy and ensure price stability as already announced by the Government two years back while increasing the MSP for cotton from 26% to 28% (introduced price stabilization scheme).
  • Since cotton accounts 60  to 65% of the yarn price and all other costs are more or less fixed, increase in cotton price directly reflects in the yarn price.
  • Spinning mills are highly fragmented.  With over 3500 spinning mills across the country, the yarn prices are market driven.
  • The irregular supply of yarn and disputes are there only between very few spinning mills and knitted garment manufacturers.  In fact, there is no such issue in Kolkatta or Ludhiana clusters while this problem exist only in Tirupur.  TEA and AEPC may indicate specific issues to CITI so that the same could be amicably resolved by CITI through the regional Associations.
  • When the Indian cotton textile industry is getting enormous market opportunities owing to China factor and continuing COVID pandemic restrictions in several countries, all the stakeholders in the cotton value chain including the government need to compliment each other rather than conflicting and adopt win-win strategy.


  • Since the cotton price volatility is the root cause for the increase in yarn prices, NCTC will make representation to the HMOT appealing to advise CCI to
  • Extend 30 days free period for upto 5,000 bales, 60 days free period for upto 10,000 bales and 90 days free period for above 10,000 bales so that the spinning mills (actual users) that are predominantly in the MSME category can directly purchase cotton from CCI; this would help MSME units to purchase the cotton directly from CCI and help liquidating the stock.  This will facilitate to stabilise the yarn prices
  • Change the price only on a monthly basis and ensure stability in prices.
  • Increase the monthly price only based on the monthly carrying charges.
  • Not to hoard the cotton and facilitate the multinational traders to speculate the prices.
  • Avoid selling the MSP procured cotton to multinationals (the current price increase has been caused by the trade).
  • As the cotton contract dispute between over 100 MSME spinning mills and CCI is pending before the judicial forum, CCI may remove such mills from the black list and supply cotton to sustain their financial viability under the prolonged Covid pandemic period.  This is essential as CCI covers over 50% of the cotton under MSP.
  • When the Indian cotton textile industry is getting enormous market opportunities owing to China factor and continuing COVID 19 pandemic restrictions in several countries, all the stakeholders in the cotton value chain including the government need to compliment each other rather than conflicting and adopt win-win strategy.
  • CITI would advise all the regional spinning mills Association to ensure uninterrupted supply of cotton yarn to the domestic industry and also ensure price stability for a reasonable period and support the downstream sectors.

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