A record crop, abundant availability and modest export prospects in the face of a weak global market outlook have made Indian cotton growers vulnerable to a price fall.
With arrivals building up, prices are set to weaken from the current levels of around ₹33,000-34,000 a candy (356 kg). Arresting a precipitous price fall and protecting growers’ interests is the primary objective of policymakers this season.
But is supporting the market and protecting growers’ interests the responsibility of CCI alone? What is the role of the user industry? Is it not the responsibility or duty of the user industry – the mills, in particular – to rise to the occasion and prevent a price collapse? But experience suggests mills would rather wait for prices to fall as low as possible before starting their purchases.
If anything, it is the current season that is sure to provide a context for the true test of character of the user industry and, by implication, that of its leaders.
In one of the conferences, the head of a regional textile association demanded that not only should CCI procure maximum quantity, but it must also immediately announce a policy for sale of cotton – obviously to benefit the mills. Simply put, some of the industry leaders seem to think, it is not their duty to support cotton growers – the very people who provide the industry raw material year after year. They seem to believe it is for the government to provide support to growers through procurement.
At the same time, the industry wants CCI to sell the procured stocks. In other words, CCI is being treated as a warehouse for holding stocks for some time and sell to the user mills as and when the latter wants it. This presumptuous attitude is the bane of the industry. While procurement may be part of the government’s function, policymakers must make it clear to the industry that it is not the government’s duty to provide raw material for the industry.
Also, CCI is not a transit warehouse for the industry; and CCI is not duty-bound to sell it domestically.
Backward linkages Fortunately, the outlook for world cotton market in 2015-16 is constructive. There will most likely be a supply response to prices – that is a cutback in production in response to current low prices.
In the event, the export market prospects can be expected to improve from the current weak levels. It is conceivable that CCI may carry the procured goods and start to export from the second quarter of 2015 when market conditions are widely expected to improve.
Prices Most growers received fairly remunerative prices in recent years; and therefore may be in no hurry to rush all the produce to the market. “Prices will be supported at around ₹32,000 per candy,” said an industry expert.