The Cotton Corporation of India (CCI) has threatened legal action against 70 yarn companies that have reneged on their contract to purchase cotton bales following a steep drop in its market rate.
BK Mishra, the chairman and managing director (CMD) of CCI, said they have also approached the Central Bureau of Investigation (CBI) to see if criminal action can be taken against the companies.
“During the period November 2010 to March 2011, these companies agreed to buy cotton bales from us at a price ranging between Rs 18,000 to Rs 31,000 a bale. The market rate of the bales suddenly came down to Rs 16,000 a bale, so these companies are now shying away from fulfilling their contract which amounts to breach of trust,” Mishra said while explaining that the CCI, in the past, had kept its contractual promises despite market rates shooting up. “This is the first time in more than 40 years that the market rates have gone down and these companies are reneging on their obligations.
CCI, a government undertaking under the ministry of textiles, procures cotton from farmers after offering a market support price and then processes the same and sells cotton bales to companies that further process it into yarn.
“Most of these companies are based in south India and we are also approaching the courts to file a civil suit if required,” Mishra said, adding that a notice was sent to these companies but no one has responded.