KOLKATA: Cotton linter prices have crashed in the domestic market by 66% due to a drop in demand in Chinese and Japanese markets. The overall gloomy economic sentiment has added to the bearish movement of Cotton linter prices. The domestic price is hovering around Rs 25 per kg as compared to Rs 75/kg in 2010.

Prices in Chinese and Japanese markets have crashed to $500 per tonne from $1,500 per tonne in 2010. India produces 50,000 tonnes of cotton linter annually. The Indian defence service is one of the leading buyers of cotton linter.

The drop in prices is likely to affect cotton linter producing units in India and most of them fear a loss in the current financial year. There are 25 cotton linter plants in the country.

Talking To ET, Dhanalakshmi Cotton director Veera Narayana said: "Prices have come down significantly from the beginning of the new season as the global markets are down. We do not see any price recovery before March."

The ordnance department of India's defence ministry has assured a steady supply of 1,500 tonne cotton linters to three explosive manufacturing factories located at Itarsi (Madhya Pradesh), Bhandara (Maharashtra) and Aruvankadu (Tamil Nadu). Bleached cotton linters -- prepared out of raw cotton linters manufactured by cottonseed processors -- are used by ordnance factories in the production of propellants used in ammunition. Cotton linter is manufactured from the outer coating of the cotton seed. Cotton linters are fine, silky fibres which adhere to the seeds of the cotton plant after ginning.

Tirumala Cotton & Agro Products director Koti Rao said: "We are losing Rs 60,000 - Rs 70,000 per day due to falling prices. We manufacture 16-18 tonne of cotton linters everyday. The inventory is piling up as buyers, mainly from China, are offering abysmally low prices. China is offering a price of Rs 20,000 per tonne as compared to Rs 65,000 per tonne last year. Japan consumes only 5% -10% of cotton linters produced in India."

This will have an impact on the farmers who sow cotton seeds. "The price of cotton seeds will come down if this trend continues for long," said Rao.

Added Coromandel Agro Products & Oil general manager Satya Narayana: "If this trend continues for long, we apprehend that units might close down."