The Indian textile industry has lost its competitive advantage in global market as domestic cotton prices have registered highest increase in last one year, making Indian cotton more expensive. The Indian Government is expected to listen to representatives of textile industry bodies recently amid calls to ban cotton export immediately.
The government’s meeting with industry captains is taking place in the background of the price of benchmark Shankar-6 cotton variety, mainly grown in Gujarat Region, increasing by 113.7 percent in the last one year. In comparison, China’s cotton price has registered a rise of only 37.5 percent. Cotton prices have increased about 70-75 percent in other international markets.
“Domestic textile industries are suffering because of unproportionate increase in domestic cotton prices as compared to the other markets. India has lost its ability to compete in the world market due to highest increase in cotton prices,” TT Industries Managing Director Sanjay Jain twitted tagging Indian Textiles Minister Piyush Goyal to attract the attention of the government.
China Cotton Index is ruling at CNY 22,289 per tonne, which was registered at CNY 16,202 yuan per tonne a year ago. Thus, Chinese cotton prices have increased by a mere 37.5 percent during the last one year. Cotlook index was recorded at US cent 162.20 a pound on May 13, up from US cent 92.90 per pound a year earlier, gaining 74.6 percent during the period. ICE Cotton July futures were recorded at US cent 145.20 a pound on May 13 this year, up from US cent 84.98 per pound a year ago, thus registering a growth of 70.80 percent. In comparison, the price of Gujarat’s Shankar-6 cotton stood at Rs. 99,500 per candy of 356 kg on May 13, up from Rs. 46,550 per candy a year ago. Therefore Shankar-6 cotton became costlier by 113.7 percent. These figures show that Indian cotton has become extremely expensive.
Indian cotton became expensive due to higher increase in price than other global markets. Currently, Chinese cotton is priced at Rs. 89,960 per candy (at current exchange rate). In term of Indian currency, Cotlook Index works out at Rs. 98,631 per candy and ICE Cotton at Rs. 88,293 per candy. Shankar-6 cotton from Gujarat was sold on May 13 at Rs. 99,500 per candy. Due to the recent free fall in rupee against the US dollar, global cotton prices have increased significantly in terms of Indian currency. But, if we compare Indian cotton in US dollars, it would be even more expensive.
Market also shows a strong rally in Indian domestic cotton prices. Shankar-6 cotton was sold on May 12 this year at Rs. 98,000 per candy as against Rs. 47,404 per candy last year. Therefore, the prices increased by 107 percent. J-34 RG cotton, which is grown in North India region, is being sold at Rs. 102,448 per candy. A year ago, it was priced at Rs. 44,769 per candy. It shows steep rise of 129 percent in cotton prices in the last one year.
According to industry sources, Indian textile industry came under huge pressure due to highest increase in domestic cotton prices. The increase of 70-75 percent in in ICE Cotton and Cotlook index indicate that the pressure in other countries was limited to some extent. Chinese cotton prices recorded increase of only 37.5 percent because of US ban on cotton and its products origin from Xinjiang region. The cotton produced in this region is believed to be consumed in China’s domestic market and non-US overseas markets which helped China to contain cotton prices to some extent.
The Indian textile industry has been raising its voice against such scenario. Raja M Shanmugam, president of Tiruppur Exporters Association (TEA) told, “Cotton export is benefiting our competitors at our cost. The figures justify industrial bodies’ version.” According to trade sources, domestic cotton was exported to all the garment exporting countries including China and other neighbours. When domestic supplies dried up, it fuelled price increase and now cotton price is ruling above Rs. 100,000 per candy in many regions.
