Indian Cotton Association Opposes Buffer Stockpiling Scheme

Cotton Association of India opposes the creation of buffer cotton stock system.

 

Yesterday, Mumbai-based Cotton Association of India (CAI) made its position known on the buffer stock in India. It is against Cotton Corporation of India stockpiling 7 to 8 million bales (170 Kgs. each) by procuring during peak arrival season to sell to user mills during May to September time frame.

 

According to CAI, this scenario will need huge investment by the public sector Cotton Corporation of India and also it will incur losses due to price fluctuations. CAI in citing the China reserve policy, India should learn from China and should not venture into the reserve situation for cotton surplus country like India.

 

In speaking with this scribe, a source, active in cotton trade stated that with the new season showing good promise in terms of arrival now and production estimate, stockpiling is not necessary. Rather, textile mills should take advantage of the prevailing low prices and procure cotton and stockpile themselves. Textile mills should approach banking sectors for financial options.

 

In the recent past two months, prices have come down by about 20-25 percent as much as Rupees 12,000 per candy (356 Kgs.). Among other factors, no new commitment from Pakistan due to uncertainties there is aiding the price decline.

 

The cotton market source stated that the recent positive estimate by India’s Cotton Advisory Board for the new season should be taken into account. In this situation, creating buffer stock is unnecessary. However, when the prices decline further, to support farmers, Minimum Support Price scheme should be used, as India is currently doing for pulses.

 

CAI has urged the Indian government not create the buffer stock scheme for cotton. However, this may lead to a difference of opinion among textile mills.