MUMBAI (Commoditiescontrol) – This is not a rumour, the Cotton Corporation of India, a government agency, has started buying raw cotton at prevailing market rate. It was heard buying cotton in Maharashtra and Gujarat. Sources said that CCI managed to buy 500 bales in Jalgaon and Marathwada at Rs5,050 per quintal of kapas. However, buying in Gujarat is very negligible at commercial rate.
A CCI official, when contacted by CommoditiesControl has confirmed the buying of low volume at market prices in Maharashtra and Gujarat. This is not a market intervention act, he added since prices have not fallen below the MSP level.
Why is CCI buying when prices are way above MSP?. In the past, whenever CCI had maintain certain volume of stock, the market tended to remain stable and when they had marginal stock market prices had gone up in one direction. Thus, CCI’s buying at commercial rate is only an attempt to maintain balance in the market.
In 2015-16 season, India’s production and closing stock was overestimated, leading to surge in exports during the initial months of the season, particularly to Pakistan. Later as stock depleted and available stock was inadequate to meet domestic demand, domestic prices started surging also supporting international prices to go up. Cotton had to be imported, then at prices as high as US cents 120 per pound. Thus, CCI’s current move can be seen as a balancing act to avoid a repeat of such an eventuality.
(By Commoditiescontrol Bureau; +91-22-40015522)
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