Why are cotton prices skyrocketing?

Prices of cotton and yarn are at an 11- year high with the price of candy cotton i.e., 365 kg of cotton now costing Rs 1 lakh as compared to the comparatively lower cost of Rs 40,000 in October 2020. Similar inflation in the price of yarn has occurred with 1kg of yarn now costing Rs 481 against Rs 244 in the same period. Manufacturers complain that they have the worst part of the deal as the price of each garment manufactured by them is agreed upon at the time of signing the agreement. Any loss of profit caused due to the fluctuation in the price of raw materials is expected to be handled by them.

Exporters in Tiruppur district of Tamil Nadu, which accounts for approximately 53 percent of the total knitwear exports in India complain that the exorbitant increase in prices has led to a decrease in their profits and even led to losses for them. Due to the steady incline in prices, exporters are losing out to their competitors from other neighboring countries such as Bangladesh and Sri Lanka.

The root of the problem stems from the low yield of the cotton crop in several states such as Gujarat, Madhya Pradesh, Rajasthan, Karnataka, and, Maharashtra. The low yield of the crop is attributed to numerous key issues from a reduction in cultivation areas to unseasonal rainfall and extended monsoon. Coupled with the farmers' reluctance to grow the crop, all these factors play a large role in the low yield and high price of cotton.

Textile makers are calling for a temporary ban on the export of cotton and an increase in the current drawing limit from 30 to 50 percent under the Emergency Credit Line Guarantee Scheme (ECLGS). Union minister Piyush Goyal has asked for a “hassle-free supply of cotton and yarn” from the spinning and trading community for domestic and industrial usage.