Textile and apparel companies are calling on the government to ban cotton futures

Textile and clothing companies have approached the government to ban futures trading in cotton, claiming it is contributing to market speculation and further pushing up the fiber’s prices.

Some players are reiterating their call for an immediate ban on cotton exports to tame rising prices, and are also pushing for a long-term commodity strategy for the sector, under which they want the government to impose an export tariff on the fiber to help local supplies to keep stable.

Similarly, they have also suggested that the government follow the Chinese model and set up a strategic reserve of about 10 million bales through the state-owned Cotton Corporation of India (CCI). This enables it to intervene in the market when raw material prices rise. These are part of a series of proposals submitted by these stakeholders to address the problem of resource shortages in the country, official and industry sources told the FE.

“After considering these and other possible options, Textile Minister Piyush Goyal is expected to make a decision once he returns from Davos later this week,” one of the sources said.

Domestic cotton prices have more than doubled in the past year, surpassing Rs 1,00,000 per 356kg of candy. As a result, the prices for cotton yarn have also risen sharply.

In December 2021, the stock and commodity market regulator Sebi suspended trading in futures and options for seven agricultural commodities such as chana, mustard seed, crude palm oil, moong, paddy (basmati), wheat and soybeans and their derivatives for a year. However, the trade in cotton was not restricted.

“We have asked the government to ban cotton futures trading. Likewise, the government should have a long-term strategy to ensure adequate availability of cotton for the consuming industries that add value and create jobs here, rather than giving free rein to traders,” said Raja Shanmugham, President of Tirupur Exporters Association, which represents the largest clothing cluster in the country.

In a letter to Goyal, Apparel Export Promotion Council Chairman Narendra Goenka pointed out that the price of cotton yarn rose by about 20% from 376 rupees per kg in March to 446 rupees in May.

India is already losing out to competitors like Bangladesh due to its duty-free access to markets like the EU. “This continuous price increase will make us further uncompetitive,” said Goenka.

Goenka advocated promoting the export of finished products, Goenka said, while the outbound supply of raw cotton brings in about Rs 275 per kg, when converted into yarn it touches Rs 400 per kg. In contrast, a value-added product such as a garment could fetch between 1,000 and 1,200 rupees per kilo when exported.

Goenka added: “We have proposed to the government to limit the volume of raw cotton and cotton yarn exports, to reduce the export advantage for the export of cotton and cotton yarn, and to declare cotton as an essential commodity (which will make it easier for the government). regulation of supply).”

According to T Rajkumar, director of Sakthi Group and chairman of the Confederation of Indian Textile Industry, imposing restrictions will not harm farmers.

Sanjay Jain, former CITI chairman, said Indian cotton prices have risen much faster than Chinese cotton, further eroding India’s competitiveness against the world’s largest textile and clothing company.

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