Special Reserve Fund Cushions Khadi Units From Steep Rise In Raw Material Prices

At a time when the entire textile industry is grappling with the rise in the prices of raw cotton and reeling from the volatility in the market, the khadi units have received help from the special reserve fund.

Khadi and Village Industries Commission (KVIC) in 2018 had decided to prepare a product price adjustment account (PPA), a reserve fund for its five central sliver plants (CSPs), to counter market volatility and other developments.

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

According to KVIC, it was a far-sighted policy decision to create a special reserve fund to deal with market fluctuations and other eventualities. It has come as a saviour for all khadi institutions across the country, just when the entire textile industry is grappling with a steep price hike of the raw cotton.

As the entire textile sector is facing a crisis of short supply of raw cotton and surging prices, KVIC has decided not to increase the cost of sliver/roving being supplied to the khadi institutions by its sliver plants across the country despite the cotton prices surging by over 110 per cent.

Instead, KVIC will bear the excess cost of Rs 4.06 crore on procurement of raw cotton bales at the increased rates from the PPA fund.

KVIC chairman Vinay Kumar Saxena said that with this decision, khadi institutions as well as buyers of khadi will avoid the negative impact of price hike.

"Short supply of raw cotton from CCI and the consequent rise in price of cotton has hit the entire textile industry including khadi. But KVIC has decided to continue the supply of roving/sliver to khadi institutions at the old rates so as mitigate any financial burden on the institutions.

The price of raw cotton has increased from Rs 36,000 per candy to Rs 78,000 per candy (each candy weighs 365 kg) during the last 16 months.

This has put a direct impact on production of cotton apparels by major textile companies across the country, which has also reduced the production by 30 to 35 per cent in the recent months.

This decision of KVIC, which has been taken for the first time to create such reserve fund, comes as a big relief for over 2,700 registered khadi institutions and over 8,000 Khadi India outlets that are already grappling with production and marketing challenges due to restrictions imposed during Covid-19 pandemic.

KVIC largely purchases cotton bales from Cotton Corporation of India (CCI) for its five CSPs located at Kuttur, Chitradurga, Sehore, Raebareli and Hajipur, which convert various varieties of cotton into silver and roving.

The reserve fund has ensured that the khadi institutions in the country remain unaffected by the price rise and the prices of khadi cotton apparels also do not go up.

Khadi institutions have unanimously welcomed the move and thanked KVIC for the big support saying this would safeguard the institutions against any market adversities.

"Cotton prices have gone up by over Rs 70 per kg. This step of KVIC will help khadi institutions survive during these difficult times. Any hike in the price of silver and roving would have put a huge financial burden on khadi institutions that are yet to recover from the impact of Covid-19,” said Khadi Udyog Jathlana secretary Sarthank Singla.