Cotton Production for 2011-12 is estimated to be around 353 lakh bales, of which consumption is estimated at 252 lakh bales and exports at 128.81 lakh bales, as per report complied by Cotton Advisory Board (CAB). Despite the increase in production, record cotton exports helped sustain Indian cotton prices during cotton season 2011-12 above minimum support price (MSP) levels.
The domestic cotton prices crossed international prices by July 2012 thereby causing several textiles mills to import cotton from cheaper international destinations.
The textiles industry experienced negative operating cash flows, low profit margins, skewed debt to equity ratio, inadequate debt service coverage ratio and low return on capital employed which was resulted due to volatility in cotton prices in cotton seasons 2010-11 and 2011-12. Besides it also necessitated a Rs 35,000 crore debt restructuring package undertaken on a case by case within the RBI’s prudential guidelines.
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