CCI likely to incur loss of Rs2.5k-cr on cotton procurement operation

The state-run Cotton Corporation Of India (CCI) that procures the fibre from farmers at minimum support prices (MSPs) to prevent distress sales by farmers and sells the stocks later in the market. Any loss incurred out of the procurement operation is reimbursed by the government. In the current marketing year through September, the government will likely incur record losses of around Rs2,500 crore on its cotton procurement operations.

According to textile minister, Santosh Kumar Gangwar, record losses of Rs.2,500 crore is much lower than those of Rs.4,000 crore as estimated earlier. There are chances that losses would be even lower than Rs.2,500 crore if market price of cotton shows improvement.

CCI has procured 8.7 million bales of cotton so far in 2014-15, just a tad lower than the record procurement of 8.9 million bales in 2008-09. Moreover, cotton prices had remained subdued for a long time this year, thanks to poor demand for both the fibre and yarn from China and plentiful supplies.

Out of the procured stocks, the CCI has sold almost 1.2 million bales of cotton so far, textile secretary Sanjay Kumar Panda said. The CCI is offloading stocks from its inventory to cater to domestic need. However, there is no shortage of cotton seen in the market.

CCI is selling 70,000-75,000 bales of cotton on a daily basis. One bale equals 170 kg, said government official.

CCI started offloading substantial stocks since April after the industry had complained to the textile ministry of an “artificial shortage” in the market created by the state-run procurement agency. Refuting the allegations, CCI chairman BK Mishra earlier said that the country was expecting a bumper harvest of 39 million bales in 2014-15, way above the requirements by textile mills, especially when export demand remained moderate.

Although the state-run Cotton Advisory Board recently revised down the country’s cotton production forecast to 39 million bales for 2014-15 from the previous estimate of 40 million bales, citing unseasonal rains, output would still far exceed domestic consumption. The CAB has projected cotton exports to 7 million bales this year, compared with 11.79 million bales in 2013-14.

The textile ministry has circulated a Cabinet note on textile vision policy for inter-ministerial consultations, factoring in the recommendations of the Ajay Shankar panel. The policy will then be placed before the Cabinet for approval, which is expected soon, said Gangwar.

The committee had submitted its report with the textile ministry in late July last year, envisaged annual outbound shipments worth $300 billion by 2024-25.Higher textile exports augur well for the economy.