Ministry set to regulate ‘cotton-hoarding’ CCI | business | Hindustan Times
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Ministry set to regulate ‘cotton-hoarding’ CCI

business Updated: Dec 29, 2008 20:36 IST
Sumant Banerji
Sumant Banerji
Hindustan Times
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The ministry of textiles is set to regulate the functioning of the government’s nodal agency for cotton procurement — Cotton Corporation of India (CCI) — amidst allegations of the latter hoarding the commodity.

“There is a case for intervention and we will ensure that sufficient cotton is available for the domestic textile industry,” a senior textile ministry official said on condition of anonymity. “The steep increase in MSP did not take into account the global downturn and now it has become a perpetual problem as cotton prices are not likely to firm up soon.”

The government had announced a 40 per cent hike in MSP earlier this year from Rs 2,025 to Rs 2,800 per quintal for the Shanker 6 variety. But the downturn in exports and domestic demand for textiles has led to a fall in cotton prices. The higher MSP has kept the farmers happy, but it has posed problems for the textile industry and CCI.

“We did not need MSP last year but have given it a substantial increase this year. Though it is impacting our ginning, pressing and spinning industries, our farmers which are the priority of the UPA government are happy,” said Shankersinh Vaghela, textiles minister.

The industry said CCI is “hoarding” cotton to restrict its losses. While the differential between market rates and MSP for cotton is as high as 20-25 per cent, CCI is selling the cotton only at marginally lower rates than the MSP making it impossible for the cash-starved industry to buy it.

“The ideal solution would be to take the politically incorrect step of revising the MSP. CCI is waiting for demand to pick up and prices to rise,” said an official at a Punjab-based textile company who did not wish to be named.