Whether raw cotton, cotton seed or cotton textiles, India has been a leader in producing and exporting cotton. The cotton textile industry is the largest organised industry in India. It has grown tremendously during the last four decades and this industry has about 16% of India’s capital and more than 20% of India’s industrial labour. In total, it employs up to 15 million workers. There are more than 3000 textile mills in India, both small and large, out of which 188 are in the public sector and 147 are in the cooperative sector. The rest are in the private sector. In addition, there are several thousand small factories with 5–10 looms each. Maharashtra, Gujarat, Andhra Pradesh and Madhya Pradesh are the leading cotton-producing states in India because of their tropically wet and dry climate.

Table 1. Cotton production in India
October to SeptemberCotton production (lakh bales of 170 kg each)
2016-17 345
2017-18 370
2018-19 312
2019-20* 355

*Estimated

  • Estimates for 2019-20

The Cotton Association of India (CAI) has declared that its cotton crop estimate for 2019/20 is 355 lakh bales of 170 kg compared to 330 lakh bales in 2018/19, which is up by 9%. Total demand is also estimated to grow by 6% to 381 lakh bales from the 359.50 lakh bales last season. Even as a large part of the cottongrowing region in Gujarat faces pink bollworm infestations, which casts a shadow on production, the improved prospects in Maharashtra and Telangana will maintain the overall level of cotton output for the 2019-20 season in India. Moreover, the textile industry is also expected to continue to grow and reach USD 223 billion by 2021, therefore driving demand for Indian cotton.

Table 2. Top 10 cotton-producing states
State2019-20* (lakh bales of 170 kg each)2018-19 (lakh bales of 170 kg each)
All India 354.50 312.00
Gujarat 96.00 88.00
Maharashtra 83.00 70.00
Telangana 51.00 35.00
Rajasthan 29.00 28.00
Haryana 26.00 23.00
Karnataka 20.00 15.50
Karnataka 20.00 15.50
Madhya Pradesh 16.00 23.00
Andhra Pradesh 15.00 12.00
Punjab 10.00 8.50
Tamil Nadu 5.00 5.00
Others 5.00 4.00

Source: Cotton Association of India *projected

Gujarat and Maharashtra together produce about 50% of India’s cotton, with Gujarat ginning almost all of it. However, they are not the main cotton-consuming states. Tamil Nadu, at the bottom of the list of the top 10 producers of cotton, is the highest consumer of cotton. It is spun into yarn, and used for Indian cotton made-ups, cotton T- shirts and other cotton products.

  • EXIM

The total exports for the crop season 2019-20 are projected to be 42 lakh bales. The CAI expects that the country will export 15 lakh bales to China, compared to 8 lakh bales last year. Cotton exports to Pakistan have been suspended due to the border issue. India had already exported 8 lakh bales to Pakistan with another 6.5 lakh bales en route. The pending orders will be fulfilled once normalcy returns. Cotton is exported from the Gujarat ports at Pipavav and Mundra to China, Pakistan, Vietnam etc.

  • US–China Trade War

The ongoing trade war between the world’s two largest cotton economies is having a significant impact on the global cotton market. However, the uncertainty has also created opportunities for India, which is exporting more raw cotton to China to meet India’s deficit created by the fall in demand by the US for cotton.

  • India–Bangladesh Bilateral Trade

Bangladesh has emerged as the biggest importer of Indian cotton this season. The CAI plans to sign a memorandum of understanding with Bangladesh to increase India’s cotton exports to that country by 30% from the 20 lakh bales shipped out last year. Since April 2019, India has exported 10 lakh bales to Bangladesh. Over 90% of the cotton supplied to Bangladesh’s textile mills are met through imports. The country has over 200 textile mills and a large presence in power looms and processing. There are no restrictions on the import of Indian cotton into Bangladesh. Cotton is exported to Bangladesh from India via the ports at Kolkata, Krishnapatnam and Visakhapatnam on the east coast and via the road route through Benapole. The prime minister has signed a coastal shipping agreement, which will reduce shipment times from Indian ports.

  • Domestic Cotton Logistics

Because the top cotton-producing states are not the top cottonconsuming states, logistics costs and the efficiency of the cotton supply chain are very important. For example, consider the first and the last in the top ten cotton-producing states: Gujarat and Tamil Nadu. Tamil Nadu produces only 5 to 6 lakh bales of cotton per year against its annual requirement of 12 million bales, while Gujarat consumes only around 1.5 million bales a year out of its annual production of over 10.0 million bales. To fill the demand– supply gap, mills in Tamil Nadu procure over 10.0 million bales of cotton from other states, especially from Gujarat and Maharashtra. Almost 50% of the cotton used for textile manufacturing in Tamil Nadu is purchased from Gujarat. In May 2018, the Government of India finally relaxed its strict cabotage laws. The change allows foreign flag vessels to transport laden export-import containers for trans-shipment and empty containers for repositioning between Indian ports without specific permission or a licence. Hence, domestic cargoes like cotton are being moved more by coastal carriers than by rail from Gujarat to Tamil Nadu.

Overall, the relaxation of cabotage may help in producing an additional 5–7% of cost savings in the coastal movements of cotton, but the inducement both ways is a limiting factor, which is an opportunity for domestic logistics companies to leverage.

Table 3. Transportation modes for domestic cotton
  Road Coastal ShippingRail
Costs High Can be improved Best
Timeline Low Meets expectations Poor
Fleet availability Poor Can be improved Poor
Limitations 10 MT trucks are not feasible for bales; 35’ special trucks work, but there are not many of them and they are expensive Upon inducement to Main-line Operators (MLOs) or the availability of return cargo from Tuticorin and Kochi Priority is given to the movement of fertilisers, food grains, etc. and also to passenger traffic
  • Port Infrastructure For Handling Cotton

There are ginning mills in Gujarat like Rajkot, Rajula and Junagad where raw cotton is converted into cotton bales. These bales are transported to a container freight station (CFS) and to private warehouses by road. From there, the bales are gated inside gateway ports before being exported.

Raw cotton grown in Gujarat is stuffed inside dry containers and shipped along the coast from Kandla Port to Tuticorin or Kochi. Upon reaching Tuticorin or Kochi, these containers are then moved towards the ginning mills or spinning mills, which convert them into cotton bales or yarn, respectively. These bales and the yarn are consumed by the domestic market, with very little being exported to foreign shores from the gateway ports of the south.

The second container terminal at V. O. Chidambaranar Port, Dakshin Bharat Gateway Terminal Pvt. Ltd. (DBGT), is developing a special storage facility for handling raw cotton. This facility is likely to accommodate around 500 TEUs of 40-foot containers and will be in the custom bonded area of DBGT. The raw cotton can be stored for 30 days free of cost. Customs has also issued the necessary guidelines for handling and storing imported raw cotton in the facility.

There are special facilities for handling cotton at Kochi Port, which are designed to attract some of the EXIM cargo currently being handled at the neighbouring port in Colombo. SIMA is bringing in cotton in containers using the port at Colombo as a hub. Kochi offers amenities that match international standards for importing, warehousing and reexporting the product at comparable costs. If things go as planned, the port anticipates that it will handle 30,000 TEUs of cotton in the current year.