The Southern India Mills’ Association (SIMA) has expressed its concern over rapidly rising cotton prices that have been increasing since January 2021 and have skyrocketed during July. The downstream export sectors and garments and made-ups segments, which are already hit by lockdown-induced disruptions, shortage of workers and high logistics costs, have been further affected by this price hike, making them uncompetitive, SIMA said.
The recent hike in price of Rs.3800 per candy (355 kg) of cotton in a span of 15 days by the Cotton Corporation of India (CCI) and the 10 per cent import duty levied in the last budget on cotton has resulted in the trade raising prices abnormally and this trend is continuing.
Such steep increases are a severe blow for the entire cotton textile value chain, SIMA said in a press release.
The market price of Gujarat’s Sankar-6 cotton, which was Rs.43,300 in January, has increased to Rs.56,600 now—an increase of over 30 per cent, SIMA chairman Ashwin Chandran said .
Such a rise will lead to higher prices of apparel and textile goods for domestic consumers as well, he said.
There is no parity between the current cotton prices and yarn prices, he lamented. This will in turn force spinning mills to increase yarn prices in the coming period to avoid incurring losses, he said.
Though CCI offered a three-month lock-in period for bulk purchase, most of the spinning mills could not gain from that due to liquidity crunch and uncertainties in prices while multinational cotton traders took full advantage with hedging facilities and cheaper funds and have purchased the major volume of CCI cotton at lower prices, he said.
Earlier, the industry had an option of importing cotton and maintaining stability in yarn prices during the off season (July to September). This option is now unviable due to the 10 per cent import duty, he said.
As the country is poised to record a very high closing stock figure of 110-120 lakh bales, such a steep increase in cotton prices was never anticipated, he said.
The speculative market has encouraged ginners and traders to mix inferior cotton and waste with virgin cotton, resulting in high trash content, short fibre content and high contamination, which affect the performance of spinning mills, power looms and handlooms, he cautioned.
The SIMA chairman appealed to the central government to immediately withdraw the 10 per cent import duty on cotton to change the market sentiment and avoid further damage to the cotton textile value chain.
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