Read in Full... - Ministry of Textiles

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Cotton
Dhiren N. Sheth
President
Association of India
5th July, 2010
To,
Shri V. Srinivas,
Joint Secretary,
Ministry of Textiles,
Government of India,
Udyog Bhavan,
New Delhi
Respected Sir,
Sub.: Draft National Fibre Policy
At the outset, we welcome the initiative taken by the Ministry of Textiles in preparing draft of a long
term National Fibre Policy for the Country. Our observations / comments on various aspects of the
draft National Fibre Policy are as follows:
1. In order to ensure sustained and adequate supply of cotton fibre in the Country, it is
necessary to protect the long term interests of cotton farmers.
We are, therefore, dismayed to note that the draft Policy envisages a much lower growth
rate of 4.7% for production of cotton in the Country during the period from 2010-11 to
2019-20. We strongly feel that specific measures should form part of the National Fibre
policy to explore the full potential of growth rate of cotton production of our Country.
These measures should include improving the productivity and yield and also the quality of
cotton produced in the Country. Such measures should continue in a strong manner at least
until our productivity level reaches the level of the world average yield.
2. In Para 62 of the Draft Policy, it is mentioned that actual export shipment from the Country
is reported to the extent of 73.28 lakh bales and additional 3.121akh bales are being shipped
to Bangladesh and Pakistan and considering the cotton consumption of the Country as 260
lakh bales, carry over stock for the next season shall be around 34 lakh bales, which is
equivalent to 45 days consumption only and around 14.3% of the total cotton production of
292 lakh bales estimated for the Cotton Season 2009-10, resulting in a very tight supply
position of cotton for Indian textile mills.
In this regard, we wish to state that the figures relating to cotton production are based on
the estimates of the Cotton Advisory Board which are pessimistic. In fact, not only the arrival
figures for the current crop season are higher than that of the last season at the same time
but have also surpassed the crop estimated by the CAB. Moreover, if the CAB estimates are
to be followed, cotton consumption in the Country is expected to be 250 lakh bales and not
260 lakh bales. It is also expected that imports will be higher than estimated by CAB.
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R.O. : Cotton Exchange Building, 2nd Floor, Cotton Green, Mumbai-400 033.
Telephone No.: 23704401, 2372 9438 • Gram: "COTBOARD" • Fax: +91 2223700337
E-mail: president@eica.in • Website: www.caionline.in

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Cotton
Dhiren N. Sheth
Association of India
President
That being the case, the Country is likely to witness a comfortable carryover stock for the
next season.
3. Para 63 of the draft Policy also seeks to introduce calibration of cotton exports and putting
in place credible and transparent institutional mechanism as measures for improving the
supply chain management.
In this regard, we wish to place on record our disagreement on putting any artificial
restriction on free trade.
In this context, it is also pertinent to note that the draft Policy seeks to make man-made
fibre more competitive domestically which will result in larger availability of cotton in the
Country. That being the case, calibration of exports will lead to further deterioration in
realisation of value by the cotton farmers for their produce and discourage further acreage
under cotton which will adversely prejudice the long term interest of the entire cotton
textile value chain. Nothing can be more undesirable than seeing a decrease in the growth
rate of cotton crop on a year to year basis and also more seriously an absolute reduction in
the crop size. One of the reasons for sharp increase in cotton production has been free
exports of cotton because of which farmers are realising good price for their produce.
4. Para 65 of the draft Policy seeks to expand the scope of Cotton Corporation of India (Cel) to
purchase 20% of cotton production in the Country to ensure secured supply of cotton to the
textile mills at competitive prices.
We do not agree with the above proposal. We are of the view that the conclusions of CAB
should be used by the entire Cotton value chain only for taking informed decisions to buy
and sell cotton. Textile Mills are free to procure cotton at market rates. Therefore, we do not
see any reason why CCI(Government) should procure 20% of the Cotton Crop of the Country
i.e. about 60-80 lakh bales for the textile mills. Such a move could lead to distortion of
cotton prices in the market and may well prove to be inflationary.
Besides this, the economic cost involved in undertaking this exercise also needs to be
examined as it would be a burden on the exchequer. CCI's increased role in an already
established marketing system will also affect the jobs and employment of lakhs of people in
the cotton value chain.
5. The Draft Policy also seeks to provide for allotment of export quotas to Cel from time to
time depending on the cotton consumption of domestic mills vis-a-vis expected cotton
production and availability of surplus cotton to be ascertained by the Cotton Advisory Board
and based on the decisions of an Inter-ministerial Committee of Secretaries under the
Chairmanship of the Textile Secretary.
2
R.O. : Cotton Exchange Building, 2nd Floor, Cotton Green, Mumbai-400 033.
Telephone No.: 23704401, 2372 9438 • Gram: "COTBOARD" • Fax: +91 2223700337
E-mail: president@eica.in • Website: www.caionline.in

" Cotton
Dhiren N. Sheth
President
Association of India
We believe that export should be free for all and register our strong disagreement to
introduction of any quota regime.
The introduction of quota system, if implemented, will result in cotton being exported only
during few months leaving huge quantities of cotton in the market which will be a burden on
the entire cotton value chain and depress cotton prices resulting in realisation of lower price
by the farmers for their produce. No doubt, the farmers in our Country have the protection
of Minimum Support Price. However, the same should not be the reason to deprive them
from realising higher international prices for their produce.
Further, allotment of any export quota only to Cel will bring us back to the 1990s preliberalised
era. The Country has since Iiberalised and projected itself as an economy rapidly
moving towards a free market. Further, if implemented, this will deprive others of a level
playing field. It is through sheer hard work of all concerned for several years that Indian
cotton has now found a dominant role in international markets and all should be treated
equally in providing them opportunity of exporting Indian Cotton at competitive prices. CCI,
in a free export regime, hardly enjoys any market share in exports of cotton which indicates
its limitation when competing with others.
The role of the Cel is to carry out price support operations and there is a huge responsibility
on CCIto fulfil this role. In fact, there is an urgent need for Cel to adopt a transparent and
dynamic sales policy to dispose off the cotton being procured by it on a daily basis during
MSP operations.
6. We also wish to point out that the draft National Fibre Policy seeks to implement the stockto-use
ratio in a way which is not warranted in a Country like ours and which is rather
injurious to the long term growth of the entire cotton and textile value chain.
Firstly, no sector of Cotton Textile Value Chain maintains predetermined level of closing
stock for others. Predetermined level of Yarn stocks is not maintained for fabric
manufacturers. Predetermined level of Fabric stocks is not maintained for garment
manufacturers. Similarly, predetermined level of polyester stocks is not maintained
although it too is a fibre used to manufacture textiles.
Secondly, the formula used for calculation of the stock-to-use ratio includes the figures of
cotton exports together with consumption of cotton by mills for arriving at the ratio.
However, for our Country, stock-to-mill use ratio is more relevant and since, exports are
different from mill use of cotton and do not require any protection insofar as calculation of
stock-to -mill use ratio is concerned, consumption of cotton by mills (including SSIand nonmill
consumption) alone should taken into account for the purpose of arriving at the stockto-mill
use ratio. Thus, the formula for stock-to-mill use ratio should be -
3
R.O. : Cotton Exchange Building, 2nd Floor, Cotton Green, Mumbai-400 033.
Telephone No.: 2370 4401, 2372 9438 • Gram: "COTBOARD" • Fax: +91 2223700337
E-mail: president@eica.in • Website: www.caionline.in

Cotton Association of India
Dhiren N. Sheth
President
Carry over stock
--------------------------------------------------------------------------------------- X 100
Total Consumption of cotton by mills, 551 and non mill consumption
instead
of-
Carryover
stock
-------------------------------------------------------------------------------------------------------- X 100.
Total Consumption of cotton by mills, 551and non mill consumption plus exports
Secondly, non producing countries (like Bangladesh and Thailand) are the countries where
cotton is not grown and they have to depend entirely on other countries to meet the
requirement of cotton for their textile industry. It is, therefore, necessary for them to
maintain the highest level of stock-ta-mill use ratio.
Similarly, cotton growing countries but at the same time net importing countries (like China
and Pakistan) are also required to maintain higher stock-to-mill use ratio.
However, India is not only a cotton producing country but also a net exporting country and
therefore, its stock-ta-mill use ratio should be one of the lowest in the world. However, right
now, stock-ta-mill mill use ratio of our Country is one of the highest in the world.
In addition to the above, the cotton season in our Country is October-September as against
August-July internationally. In fact, during the last few years, cotton begins to arrive in India
even before the commencement of the statistical cotton season on 1st October which does
away with the need for a large carry-over stock.
In any event, stock-to-mill use ratio of our Country is quite healthy and in fact, in the past
years, no constraint of cotton was felt in our Country even with much lower cotton carryover
stocks as may be seen from the CAB data given in the Table below.
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R.O. : Cotton Exchange Building, 2nd Floor, Cotton Green, Mumbai-400 033.
Telephone No.: 23704401, 2372 9438 • Gram: "COTBOARD" • Fax: +91 2223700337
E-mail: president@eica.in • Website: www.caionline.in

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Cotton
Dhiren N. Sheth
President
Association of India
Table
STATISTICAL POSITION OF COTTON IN INDIA
(in Lakh Bales of 170 kg.)
10.00 40.00 88.50 0.15 20.00 47.50 71.50 21.26 12.17 2001- 2008- 02 148.00 147.00 07
0.84 12.11 0.24 19.13 290.03 325.38 0.23 12.00
11.63
22.08 268.00 278.00
24.70 194.89 190.00 2002- 2006- 211.70 09 337.53 360.88 24.00
58.00 0.20 15.88 19.00 264.00 52.00 35.50 171.70 169.67 14.78
229.00 295.00
180.00 195.67 2OOS- 2007- 03 11.50 5.53 6.38 06 29.00 318.00 335.50 35.00 0.31 266.00 0.14 17.67 124.50 142.42 193.67
204.17 231.00 0.12 163.98 72.00 05 210.21 276.17 189.21 13.71 14.48 13.00 11.00
ZOO4- 2003-
21.00 0.37 168.00 150.39 16.57
9.14 7.21 Carry-over 40.50 202.63131.00
173.63 149.36 zooo- 12.71 22.13 29.00 10.96 0.60
0.17
Stock-to-miU loose Estimated Production Crop use Ratio
Source: Cotton Advisory Board
It is important to note that cotton imports are completely free and with nil duty and
therefore, in case of need, the mills can resort to imports.
7. We very much support the idea of an Indian arbitration for cotton. In fact, the Cotton
Association of India (CAl) provides arbitration facilities for decades now which can be and is
being used for import of cotton, export of cotton and domestic trading of cotton. However,
we believe that selection of an arbitration forum should be the choice of the individual
parties to the contract and it should be bilaterally agreed between them as to which
arbitration platform they want to contract under. We are in favour of a free trade policy
and therefore, we do not agree to make it compulsory to adopt any particular forum of
arbitration.
8. We also wish to state that composition of the Cotton Advisory Board needs to be
restructured to provide more representation to the growers, ginners and traders of cotton
including exporters.
9. We whole-heartedly support the proposal to implement measures envisaged under the draft
policy for improving the marketing and branding of cotton. Such measures should also
include boosting the production and promoting the consumption of Cotton in the Country.
In this regard, we urge the Government to provide policy impetus to research and
development including development of seeds for high yielding varieties and allocate funds
for such projects. It may be pertinent to note that our Association is already undertaking
5
A.a. : Cotton Exchange Building, 2nd Floor, Cotton Green, Mumbai-400 033.
Telephone No.: 23704401, 2372 9438 • Gram: "COTBOARD" • Fax: +91 2223700337
E-mail: president@eica.in • Website: www.caionline.in

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Cotton
Dhiren N. Sheth
President
Association of India
promotion of cotton and undertaking research on cotton in various states. We also support
the idea of farmers marketing lint cotton instead of Kapas and are ready to play an active
role in implementing the same.
10.We also support the proposal to implement measures envisaged under the draft poliCYfor
promoting Organic, Suvin and ELScottons and are ready to play an active role.
We also agree that so far as ELScotton is concerned, there is a mismatch between demand
and supply of this cotton and adequate measures are imperative to correct the situation.
11.We agree with the idea of cotton mapping for the purpose of assessing the cotton
production in the Country. However, its use should be monitored initially and its
performance should be evaluated cautiously till it is established to be reliable.
12.We also support continuation
be included under TUFS.
of TUFS and urge that the ginning and pressing sector should
13.There is a need for price risk management facility in terms of a vibrant futures trading
platform which will help all stakeholders including farmers, ginners, traders, exporters,
fabric, yarn and garment manufacturers to hedge their risks. We suggest that the
Government plays an active role in promoting such a facility.
14.Contamination in Indian cotton has reduced significantly thanks to the upgradation of
ginning and pressing factories under the Technology Mission on Cotton. However, this area
still requires continued focus and we urge the Government to include measures for
reduction of contamination in cotton under the Policy.
While we may have other comments, we have restricted ourselves to the issues relating to
cotton only.
We at CAI are willing and ready to co-operate with the Government and play an active role
in all cotton related matters induding the ones raised above.
We are awaiting comments from some of our constituents
shortly.
and shall send the same to you
Thanking you,
C\l" ~
i0~~Y7
Yours faithfully,
(Dhiren N. Sheth)
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R.O. : Cotton Exchange Building, 2nd Floor, Cotton Green, Mumbai-400 033.
Telephone No.: 23704401, 2372 9438 • Gram: "COTBOARD" • Fax: +91 2223700337
E-mail: president@eica.in • Website: www.caionline.in