Coimbatore: Low carry-over stock of 43 lakh bales (170 kg each) is behind thesky-rocketing of raw cotton prices this year, says the textileindustry. According to B K Patodia, Vice-Chairman and Managing Director ofGTN Textiles Ltd, the ending stock at 43 lakh bales amounted to 18per cent of the stock-in-use ratio and this low carry-over has ledto soaring of domestic cotton prices, whereas the global averagestock-in-use for 2007-08 is 44 per cent. More India business stories Some of Indias competitors such as China, Pakistan and Turkey havehigher stock-to-use cotton ratio of 34 per cent, 35 per cent and 31per cent respectively. Allowing export disproportionate to itsdomestic consumption has created imbalance in demand and supply,Patodia felt. He held that cotton export should be below 20 per cent of the crop.He also felt the need for levying 5 per cent duty on cotton exportas exporting Indian cotton at low prices would amount tosubsidising foreign buyers. Alternatively, he wanted the duty oncotton imports be removed or brought down to 5 per cent. One of the traditional tools of Cotton Textile Materials industry in arrivingat the comfort zone of raw material buffer at the end of the cottonbudget (Oct-Sept) year is estimating the stock-to-use ratio ofcotton (namely, the stock left as a percentage to the totalconsumption demand) available by end-September (when the cottonyear closes). The thumb rule from industry stalwarts stipulates a carryover stockequivalent to an average three months cotton consumption by theindustry or 25 per cent of stock-to-use ratio that will allow theindustry to retain consistency in production. As per the current consumption figures, the average monthlyconsumption of cotton by the textile industry is put at 22 lakhbales and hence the total desirable level of carryover stock willbe 66 lakh bales. The balance sheet for 2007-08 worked out at theCotton Advisory Board (CAB) meet last month has spelt the closingstock for the season at 43 lakh bales, one of the lowest evercarry-over stocks in recent times, according to the industry. According to the CAB worksheet for 2007-08 cotton season, of thetotal estimated cotton supply of 369 lakh bales (comprising a finalestimated production of 315 lakh bales along with an opening stockof 47.50 lakh bales and imports of another 6.50 lakh bales), thetotal demand for mill consumption and non-mill consumption is putat 241 lakh bales (comprising organised mill consumption of 203lakh bales, SSI mill consumption of 23 lakh bales and non millconsumption of 15 lakh bales). More India business stories Besides, the balance sheet has also worked out the total cottonexports for the yearat an all-time high of 85 lakh bales which,according to the industry, represents 27 per cent of the total cropand is responsible for eroding the closing stock.
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