The predominantly cotton based Indian textile industry has been facing challenges after the removal of cotton from the Essential Commodities Act since February 2007 due to price volatility. Cotton futures trading on MCX platform was also often affecting cotton prices that had severe impact on the performance of the textile industry, especially during the last few years. In order to mitigate the challenges, the Hon’ble Union Minister of Textiles, Piyush Goyal had constituted a Textile Advisory Group under the Chairmanship of Suresh. A. Kotak and so far conducted five meetings.
The Hon’ble Minister had taken several initiatives to address the issues relating to cotton. Under his direction, the MCX Cotton Product Advisory Committee was reconstituted with the whole textile value chain so as to enable the MCX platform to benefit all the stakeholders and also curtain speculation.
Based on the recommendations made by the Product Advisory Committee and on the approval of SEBI, MCX launched the new contract on 13th February 2023. The MCX conducted its maidan Workshop to create awareness among the stakeholders on 27th February 2023at The Residency Hotel, Coimbatore, in which Ravi Sam, Chairman, SIMA, delivered welcome address, T.Rajkumar, Chairman, CITI, delivered the key note address, Nishant Asher, Honorary Secretary, Indian Cotton Federation delivered the special address, M. Aravind, Corporate Hedging Consultant, Badruddin Khan, Assistant Vice-President, MCX and Ganasekar Thiagarajan, Director, Commtrendz Research have made presentations on cotton hedging and cotton contract specifications respectively.
Prior to the Workshop, Chairman of CITI and Chairman of Product Advisory Committee of MCX, T.Rajkumar and SIMA Chairman, Ravi Sam addressed the press. They have stated that under the free market economy, it has become essential for all the stakeholders across the textile value chain to take active part in the cotton futures trading on MCX platform to reduce the risk and take advantage of the price discovery. They stated that the revised cotton contract specifications have taken into account the various concerns of the stakeholders like farmers, ginners, traders, spinning mills and downstream sectors in the entire textile value chain including readymade garments.
They stated that the exporters had to often face problems due to price volatility as they had to make price commitments for 3 to 4 months. They said that the fabric, garment and made-up manufacturers had been seeking the intervention of the Government to control the cotton and yarn prices as the same have been severely impacting the industry. They added that as the volume of business on the MCX platform was only around three lakh bales as against the industry consumption of 300 to 320 lakh bales and country’s cotton production of 340 – 360 lakh bales per year. They said that the physical delivery was negligible and therefore, the participation from the spinning mills was absent.
They hoped that the new contract specifications would bring more volume of cotton into trade, increase the liquidity and benefit all the stakeholders. They further said that New York Cotton Futures and Chinese cotton futures had over 80 to 90% of physical transaction. They thanked the Government for the intervention and for revamping the Product Advisory Committee and also cotton specifications. They hoped that two more pending specifications in the MCX cotton futures relating to daily price limit and depositor’s default penalty would be reduced in the coming months to control any speculation in the price. They have advised all the stakeholders to actively participate in the MCX cotton futures trading and reduce the risk of cotton price volatility.
The predominantly cotton based Indian textile industry has been facing challenges after the removal of cotton from the Essential Commodities Act since February 2007 due to price volatility. Cotton futures trading on MCX platform was also often affecting cotton prices that had severe impact on the performance of the textile industry, especially during the last few years. In order to mitigate the challenges, the Hon’ble Union Minister of Textiles, Piyush Goyal had constituted a Textile Advisory Group under the Chairmanship of Suresh. A. Kotak and so far conducted five meetings.
