Cotton Corp plans to float global tender to sell stock procured under MSP

Cotton Corporation of India (CCI) has procured cotton of around 9.1 million bales under the MSP (minimum support price) operation, all time high cotton inventory this year, surpassing previous record level of 8.9 million bales in 2008-09. CCI is planning to float a global tender. Initially to test the market tenders will be for 5000 – 10,000 bales (1 bale = 170 kgs) by the current month end.

The first such tender will be floated to observe the acceptability of buyers for which norms and modalities are currently be worked out. On achieving success in this tender, however, CCI may float another tender with higher quantity with an overall target to sell 30,000 bales of cotton this year (October – September).

B K Mishra, Chairman and Managing Director, CCI said that they have spoken with a number of buyers in Bangladesh and a couple in Vietnam as India’a perennial buyers, who were keen on purchase of Indian cotton and hence they are looking to float a global tender by April – end.

China has gone slow in purchasing cotton and yarn from all across in order to discourage power and labour intensive textile industry. As per recent Edelweiss report estimates China’s cotton import has declined by 47% to five year low of 1.6 million tonnes so far this season as against 3.08 million tonnes in the previous year.

In 2014-15, cotton import into Bangladesh hit five year high at 0.99 million tonnes compared to 0.89 million tonnes last year. Vietnam also imported 28% more fibre this year at 0.89 million bales as compared to 0.69 million bales last year.

Despite China’s absence from active buying, cotton prices in both domestic and international markets shot up with the benchmark No 2 cotton for near month delivery on InterContinental Exchange (ICE) is quoted at US cents 66.22 / lb as of now compared to US cents 59.89 / lb in early February. Similarly, the benchmark Shankar 6 variety of cotton is sold at Rs 9420 a quintal in spot market here today as against Rs 8548 a quintal on February 1.

The Indian textiles industry is currently passing through a serious situation due to non-availability of cotton in abundant quantity on account of the ‘stop-go’ policy of CCI in spite of holding high level of stock. Of its total procurement, CCI has just released 0.3 million bales. CCI is releasing a negligible quantity between 3000 and 5000 bales per day. This is only resulting in steep rise in prices besides creating shortage of good quality cotton for the textiles sector which in turn is adversely affecting the exports of yarn, fabrics and made-ups. Therefore, the textile industry has urged CCI to start releasing at least 50,000 bales per day for 100 days in domestic market to ease its supply through e-auction, said R K Dalmia, Chairman of the Cotton Textiles Export Promotion Council (Texprocil).

Emphasizing the need for higher quantity of cotton release, Prem Malik, chairman of the Confederation of Indian Textile Industry (CITI), said that
their spinning industry is suffering due to weak demand of cotton yarn from both domestic and international markets. Unless immediate measures are taken to avoid speculative increase in cotton prices the spinning industry will suffer an irreparable damage.

Meanwhile, CCI is waiting for directions from the Textile Ministry to dispose of procured cotton in domestic markets.