Since credit is not available to these purchasers, they invest their own money and run the risk of financial crisis when mills default on payment, Shah said.

He was addressing the All India Cotton Trade Association's meeting and 5th programme of platinum jubilee of East India Cotton Association on Saturday.When mills procured moratorium under the Sick Industries Special Provisions Act-1985, there was no provision for settling dues of suppliers which were frozen. This isvery unfair and totally unjust, laments Shah suggesting that cotton suppliers should be made secured creditors by inserting a provision in the Companies Act and the Sick Industries Special Provision Act - 1985 should be suitably amended for payment of creditors' dues.

The government is now considering to introduce an act to protect dues of SSI units. Cotton traders feel that this should also include small and medium enterprises to be covered under Suppliers Protection Act which they have been asking for. In Japan, small and medium business units are given such protection, Shah said.

The function also included a session on futures trading presided by VK Aggarwal, chairman of Forward Market Commission. In view of cotton futures to be introduced this year, the participants raised some significant points. One, Maharashtra cotton cannot be tendered because of monopoly procurement by the state federation this means traders cannot deal in cotton grown in the state. Another suggestion was even short staplevarieties should be included in the hedge contracts. As of now only finer varieties are being considered. A common doubt among members was about the delivery of the hedged cotton which is outside the tenderable range.

For example if the range for a future contract for cotton of 26 mm staple length is 24 mm to 28 mm, will the cotton of 23.5 mm be rejected? The answer is that since it is a hedge contract, what the seller of cotton of this variety should do is that sell in the spot market and buy back the future sold position, a panel member clarified. Similarly, the buyer should buy at spot rate the required staple length cotton and sell the future bought position. The hedge contract is meant for risk cover and not always for delivery.