The Textiles Ministry is planning to create a Cotton Price Stabilisation Fund through collection from exporters of the natural fibre to utilise the funds for insulating them from the effects of price fluctuation.

"I am thinking of a price stabilisation fund for cotton which is at an initial stage at the moment," Textiles Minister K Sambasiva Rao told PTI in an interview.

Citing an example, he said, if there is surplus output of cotton in a particular year and global prices of the natural fibre are more than domestic ones, then exporters would be directed to export to the extent of surplus material available after meeting the domestic demand.

"When exporters will get more prices outside the country, we are thinking in terms of collecting some amount, some percentage of the difference (of the price) to be kept in the fund. Later on, this money could be used for the benefit of cotton exporters only..," Rao said.

The Textiles Ministry has proposed the plan to create this fund to be used at times when cotton output is lesser and prices undergo drastic fluctuations.

The amount of money from the fund would be used to build up a suitable cotton inventory to bring about stabilisation in cotton prices and ensure that neither the exporters nor the farmers are affected due to price fluctuations.

He, however, said the Textiles Ministry is yet to finalise the amount that can be collected from exporters for the fund. Asked if this would require the nod of the Cabinet Committee on Economic Affairs (CCEA), Rao said, "Yes. We have to go to the CCEA for the same."

As per the Cotton Advisory Board (CAB), India's cotton production is estimated at 340 lakh bales (170 kg each) for the 2012-13 season (October to September) against consumption of 270 lakh bales and exports of 81 lakh bales.

In the last cotton season, the natural fibre production stood at 352 lakh bales and exports were to the tune of about 127 lakh bales.