Cotton Association of India decries Centre's move to set cotton reserves for textile mills

AHMEDABAD: The Cotton Association of India ( CAI) has asked the Centre to not go ahead with setting up of the strategic reserve for cotton. As per a proposal mooted by the Ministry of Textiles and textile industry, the Cotton Corporation of India (CCI) is to procure 25 lakh bales of cotton for exclusive sales to mills.

"The idea of creating a strategic reserve in India for ensuring supply of cotton to the domestic textile mills on the lines of a similar reserve in China is wrong since the situations in India and China are not comparable. China is a huge cotton deficit country whereas India is a huge surplus cotton economy and the cotton is available to the Indian mills at their doorstep,"said CAI president Dhiren Sheth.

He said that .the country was moving back to the pre-liberalized era of late 1980s and early 1990s. "If this reserve is created, total investment required for procuring 25 lakh bales will be around Rs 5,000 crores which will in turn involve a total carrying cost including interest and warehousing cost of over Rs 500 crores a year. In addition to this, CCI will have to bear the loss that may arise due to fluctuation in prices,"said Mr Sheth.

Banking channels, Reserve Bank of India and the Finance Ministry should address the problem of non-availability of funds with the textile mills who are unable to buy and stock cotton rather than creating a scheme which distorts the market and unsettles other sectors of the cotton value chain said Mr Sheth.