Special reserve fund protected Khadi units against sharp rise in raw cotton prices: KVIC


A special reserve fund created in 2018 to deal with market fluctuations and other contingencies has acted as a savior for Khadi institutions by protecting them against the sharp rise in raw cotton prices, the Khadi Commission said on Sunday and Village Industries.

In 2018, KVIC had decided to establish a Commodity Price Adjustment Account (PPA), a reserve fund for its 5 Central Ribbon Mills (CSPs), to deal with market-driven contingencies.

These CSPs purchase cotton and process it into sliver and roving for supply to Khadi institutions, which process it into yarn and fabric.

The PPA fund was created by transferring to it only 50 paise of each kilogram of the total ribbon/roving sold by these CSPs.

”Three years later, when the entire textile sector is facing the weight of shortage and a sharp rise in the price of raw cotton, KVIC has decided not to increase the cost of the ribbon/roving supplied to Khadi institutions. . by its ribbon mills across the country despite cotton prices rising more than 110%,” the Commission said in a statement.

Instead, KVIC will bear the excess cost of Rs 4.06 crore on the purchase of bales of raw cotton at the premium rates from the PPA fund, it added.

The price of raw cotton has increased from Rs 36,000 per candy to Rs 78,000 per candy (each candy weighs 365 kg) over the past 16 months. This has had a direct impact on the production of cotton garments by the country’s main textile companies, which have also reduced production by 30-35% in recent months.

The decision to set up the reserve fund is a “great relief” to over 2,700 registered Khadi institutions and over 8,000 Khadi India Outlets who are already grappling with production and marketing challenges due to restrictions imposed during the pandemic, KVIC said.

The Commission largely purchases bales of cotton from Cotton Corporation of India (CCI) for its 5 CSPs located at Kuttur, Chitradurga, Sehore, Raebareli and Hajipur which process various varieties of cotton into sliver and roving.

The KVIC will need 6,370 bales of cotton of different varieties by March 31, 2022, which at the current rate will cost Rs 13.25 crore compared to Rs 9.20 crore at the old rates. The price difference of Rs 4.05 crore will be covered by the PPA. reserve created by KVIC these days, he said.

“The reserve fund has ensured that Khadi institutions in the country are not affected by the price increase and the prices of Khadi cotton garments do not increase either,” the commission said.

KVIC chairman Vinai Kumar Saxena said the move would save Khadi institutions as well as Khadi buyers from any negative impact of the price hike. Khadi holds almost 9% share of India’s textile industry and produces nearly 150 million square meters of fabric per year.

(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)


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