The Cotton Association of India (CAI) has urged the Government not to go ahead with its plan to create strategic cotton reserve for domestic supply. The Cotton Corporation of India (CCI) has been given a mandate to procure 25 lakh bales (of 170 kg) for building the reserve.
Mr Dhiren N. Sheth, President of CAI, said it is disturbing to note that our country is moving back to the pre-liberalised era of late 1980s and early 1990s.
The idea of creating a strategic reserve for ensuring supply of cotton to domestic textile mills was mooted on the lines of a similar reserve in China. But the situation in India and China is not comparable, he said. Supply of cotton in China is much less than the demand, while in India cotton economy is more vibrant and the supply exceeds demand. India is also ranked among top exporters.
A total investment of about Rs 5,000 crore is required for procuring 25 lakh bales, said Mr Sheth. Another Rs 500 crore is required every year for servicing interest and warehousing cost, said Mr Sheth. In addition, CCI will have to bear the loss that may arise due to fluctuation in prices.
“If the problem is non-availability of funds with the textile mills to buy and stock cotton, it would be appropriate to address the same through banking channels, rather than creating a scheme which distorts the market and unsettles other sectors in the cotton value chain,” said Mr Sheth.