New Delhi : Textile spinning mills in the region have started importing cotton as prices of the commodity are ruling higher in the local market compared to the international market. While the landed cost for imported cotton works out to around 41,000 per candy (a candy is 355 kgs), the popular Shankar-6 cotton (Indian Raw Cotton) grown mostly in Gujarat costs about 43,000 per candy including transportation costs.
"Mills have started buying West African cotton as costs are lower," said K Selvaraju, secretary general, Southern India Mills' Association (SIMA). Two leading textile mills in south India have bought about 2 lakh bales (a bale is 170 kgs) each of West African cotton in the past 2-3 months, industry officials said. "The cost of imported cotton is lower by at least 2,000 per candy. Moreover, the quality is also much better," a top official with a leading textile mill said.
Many spinning mills, including smaller ones with a capacity of 10,000 spindles are importing cotton now, he said. "With imported cotton, mills get better credit facilities and lower interest rates. Yarn productivity is also good when they use imported cotton," industry officials said. Prices of Shankar-6, which were ruling at about 34,000 per candy, has jumped to around 40,000 per candy now.
While local cotton prices have surged by 12.9% between April and mid-June, they have increased by only 6% in the international market. "This (price rise) is because of hoarding by some traders. Enough cotton is available in the country," industry officials said.
High prices in the domestic market would push up cotton imports in the current season (October-September). While the Cotton Advisory Board (CAB), which comprises representatives of the textile industry, trade, ginners and government officials, had projected imports of around 11 lakh bales for 2015-16 season, it is likely to cross 15 lakh bales, industry officials said.
Textile mills in the country consume around 25 lakh bales of cotton per month. Mills in the south alone use about 10 lakh bales a month. With area under the crop declining on the back of a drought in Maharashtra and Karnataka and pest attacks affecting output in Gujarat, Punjab and Haryana, cotton production would fall to a five-year low of 352 lakh bales for the 2015-16 season, CAB estimated in February this year.
Industry officials said that output could drop to 340 lakh bales. CAB had pegged output at 365 lakh bales during its first assessment for the 2015-16 season in November. The area under cotton is projected to have fallen 7.3% or 9.4 lakh hectares to 118.81 lakh hectares during the season.