Lok Sabha Question No. 3656 (UNSTARRED), answered on 2022-08-08
Subject: Removal of Cotton from MCX
Ministry: FINANCE
Asked by: S. Jothimani

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA

## UN-STARRED QUESTION NO.: 3656

## TO BE ANSWERED ON MONDAY, AUGUST 8, 2022/SRAVANA 17, 1944 (SAKA)

## Removal of Cotton from MCX

## 3656. MS. S. JOTHIMANI:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government plans to remove cotton from the Multi-Commodity Exchange of India  (MCX)  Limited  to  prevent  the  excessive  speculation  in  cotton  prices  and  if  not,  the reasons therefor;
- (b)  the details of steps which the Government has taken or intends to take to counter the recent hikes in yarn and raw material prices;
- (c) whether it is a fact that the recent increase in cotton and yarn prices can be attributed to huge hoardings by private entities;
- (d) if so, the measures which the Government intends to take to ensure that the interests of textile sector are not neglected; and
- (e) the steps which the Government has taken or intends to take to counter the recent hikes in yarn and raw material prices?

## ANSWER

## SHRI PANKAJ CHAUDHARY MINISTER OF STATE FOR FINANCE

- (a) to  (e)  : There  is  no  such  proposal  at  present  to  remove  cotton  from  the  MultiCommodity Exchange of India (MCX) Limited. Cotton and cotton yarn prices are dependent on market forces of demand and supply and are also dependent on their international prices. Recently, an overall upward trend has been observed in cotton and cotton yarn prices with some fluctuations. Among, many steps taken by the Government to counter the recent hike in cotton prices, Ministry of Finance has exempted the customs duty on raw cotton imports upto 31 st October  2022.  Further,  Ministry  of  Textile  has  constituted  a  Textile  Advisory  Group (TAG) - an informal body - to deliberate and  recommend suitable measures on the issues pertaining  to  the  entire  value  chain.  TAG  is  constantly  engaged  with  various  stakeholders across the entire cotton value chain which includes MCX on the issue of cotton and cotton yarn prices. Some of the recent initiatives undertaken by MCX are:-
- Vide circular dated 01.06.2022 MCX has notified reduction in position limit to 20,000 bales  against  95,000  bales  per  client  w.e.f  09.06.2022  up  to  end  of  August  2022  futures contracts traded on their exchange.
- Vide  circular  dated  04.08.2022,  effective  from  08.08.2022,  MCX  has  notified  that Daily Price Limits for Cotton August 2022 Expiry Futures contract will be narrowed to 2%.

Further additional margin will be increased from existing 6% to 11% on long (buy) and short (sell) side on Cotton August 2022 expiry futures contract, effective from 08.08.2022.

As a result of various steps undertaken, the domestic cotton prices have reduced from its peak level of Rs.1,03,000 in the month of May 2022 to Rs. 86,400 per candy. The yarn prices which were in the range of Rs. 400 to Rs. 440 per kg for 40s Cone combed in the month of April & May 2022, have reduced by Rs. 35 to 40 per kg in the month of July 2022.

***