Industry's plight is far more than the burgeoning stock of cotton

Speculation is rife about the carry-over stock of Indian cotton. The United States Department of Agriculture (USDA) has, in its report dated June 15, 2020 estimated the carry-over stock of Indian cotton as at end July at 244 lakh bales. The Cotton Association of India (CAI) has categorically objected stating “it is astronomically high.”

Atul S. Ganatra, President, CAI in a release said the USDA’s estimation was creating a perception that there is a glut of Indian cotton, which in turn is depressing the price of the white fibre.

The Cotton Corporation of India (CCI) and the Cotton Advisory Board (CAB) have estimated the carry-forward stock at the close of the season (September 30) at 50 lakh bales and 48.41 lakh bales respectively.

“Even if we reduce the consumption by the mill sector for August and September, the USDA’s estimation of the closing stock would be at least four to five times more than the estimates drawn by CCI and CAB,” he said.

A cross-section of industry stakeholders conceded that there would be a huge surplus of over 100 lakh bales at the close of the current cotton year.

“The demand has fallen as the mill sector is operating at less than 50 per cent of the capacity, excepting a few. The situation is inching, it could take at least another 3-4 months for things improve,” said Prabhu Damodharan, Convenor, Indian Texpreneurs Federation (ITF).

“Shrinking market, poor off-take of yarn and other challenges on the demand front are issues that the mills have to tide with at this juncture. With people looking to buy low-cost, value-for-money items, industry players would have to rework their strategy,” he said.

Indian Cotton Federation President J Thulasidharan said the consumption of cotton by the mills in the State touched its lowest ebb this quarter. “At this rate, the carry-forward stock could hover at over 100 lakh bales.”

“The yield levels have been good. It could be a bumper crop,” he added.

“That’s not all. The holdings with CCI and the inventory with the mills is no less. With the steep drop in capacity utilization levels, the mills would, under the present circumstance put off cotton buying for now. Yarn demand has dropped, so mills want to play safe,” the ICF President said

To add to the industry’s woes, the state government has placed a clamp on the inter-district movement of people. “Those units that are located near the border are facing acute shortage of labour, as the workforce from the villages in the vicinity (which could fall in another district) is unable to report for work. Transportation and logistics costs are hitting the roof,” Thulasidharan said.

Both – the ICF President and ITF Convenor said that the Government should help in bringing back the migrant workforce.

“Just as they created a good system to send them back to their hometowns, the Government should usher in a robust system to bring them back. Those that had returned are now desperate to return to eke out a living. The Government, in partnership with the industry should facilitate; those units that have the wherewithal can also help quarantine such workers as this would help revive the economy,” Damodharan said.

Industry stakeholders felt that the State Government should draw a definitive, quarterly strategy for the upliftment of industrial activities in Tamil Nadu.

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