Foreign firms buying Indian cotton push up domestic prices

June 26th, 2008 - 5:03 pm ICT by IANS  

A file-photo of Manmohan Singh

Ahmedabad, June 26 (IANS) American and Singaporean companies have begun buying cotton from India, leading to an “abnormal increase” in its price in the country, a leading trade lobby has said. The Confederation of Indian Textile Industry (CITI), an organisation of textile mill owners, told IANS that one Singaporean and three American firms have been buying and stocking Indian cotton for some time, leading to an increase in the domestic prices of cotton, especially that of the Shankar 6 variety.

CITI however declined to name the companies.

In a letter to Prime Minister Manmohan Singh, CITI has referred to the large-scale buying of cotton, and said: “It is pertinent to note that most of the increase in cotton prices this year has occurred after cotton (sale) changed hands from the farmers to the traders.”

It said Shankar 6, priced Rs.21,000 a candy (356 kg) in June last year, now costs over Rs.28,500.

“This illustrates the extent of price increase which is primarily due to the uncontrolled export of cotton,” CITI said in the letter.

“The current prices of cotton in the country are over 35 percent higher than the prices that prevailed during the same period last year, in spite of record cotton production in the country,” it added.

“The present situation in the market is that cotton traders are no longer interested in supplying to our mills, as they anticipate continued increase in prices because of the shortage the foreign firms have created,” the letter said.

CITI followed up its letter to the prime minister with a meeting with Union Textiles Minister Shankarsinh Vaghela Wednesday evening, requesting a ban on cotton exports.

CITI secretary-general C.K. Nair told IANS that Vaghela had assured the delegation he would pursue the matter with the authorities concerned and find an early solution.

CITI now proposes to take up the issue with Commerce Minister Kamal Nath and Agriculture Minister Sharad Pawar, Nair said.

According to CITI, a year-ending stock of six million bales is necessary to ensure cotton prices remain competitive. This year, the ending stock has declined to 4.3 million bales after exports increased to 8.5 million bales from 5.8 million during last year.

Traders estimate exports this year could even exceed 10 million bales.

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