Indian cotton ginning units running below capacity due to less demand and low price

The ginning industry of India is staring at slowdown, on account of subdued demand and disparity in price. According to industry sources, ginning units are running below 65-70 per cent capacity. India’s substantial cotton production this year has not translated into good days for ginning sector.

Moreover, farmers are reluctant to sell kapas (raw cotton) at the current prices in expectation of higher price for their produce, bringing down the commodity’s arrival by 50 percent from last year.

Dilip Patel, president, All Gujarat Cotton Ginners’ Association (AGCGA) said that there is no export demand currently and price disparity is ranging from Rs 1,000-Rs 1,200 per candy at the current price level as a result most of the ginning units are running below their capacity by 65 to 70 percent.

Price of cotton is ruling between Rs 33,000-Rs 33,500 per candy (a candy is 355 kg) in Gujarat while raw cotton is trading at Rs 800-Rs 850 per 20 kg. Daily arrival in Gujarat is reported to be around 30,000-32,000 bales (a bale of 170 kg), considerably down from last year’s 65,000 bales.

AGCGA met Union minister of state for agriculture Mohan Kundariya last week and submitted a memorandum seeking five percent incentive to boost exports.

According to Patel , once export increases from India, it will improve market demand and price will also go up. In that scenario, Cotton Corporation of India (CCI), a government-owned agency under the Union ministry of textiles, which is purchasing cotton from farmers at minimum support price (MSP) of Rs 4,000 per quintal, a price level not viable for ginners won’t need to buy cotton as farmers will get better price for their commodity.

CCI, according to Patel, is losing nearly Rs 5,000 per candy, thereby burdening the government exchequer. But, if five percent export incentive is given, government will have to pay only Rs 1,250 per candy to exporters.

Arvind Raichura of Rajkot-based Balkrishna Ginning said that at present, domestic yarn mills are buying based on their requirements. Export purchase in market is very nominal and the principal reason behind slowdown in ginning activity.