Yes, this question was asked multiple times in past AGMs and rationale given was that the stock already suffers from lack of liquidity and that buyback would further reduce the floating stock. Any excess cash will be distributed in form of dividends. I wondered why a buyback followed by a stock split (to increase floating share, if that was a major concern) couldn’t be considered.
This time the question was why it wasn’t distributed in dividends or buyback as that would effectively reduce tax. What I understood is the cash chest gives enough protection from situations where bankers couldn’t support business with Sri Lankan vendors due to the financial turmoil there. But as per the CMD, they were never defaulted of a single payment in past 32 years, and they tried to prove the same to bankers but in vain. Still they went ahead without the support of bankers and all the payments are received on time. His point is that these things cannot be done if we do not have that amount of cash as a cushion.
He also says that when other mills were struggling due to the lack of cotton, Ambika sold the excess cotton to them and made handsome profits. If they do not have enough cash, they couldn’t hoard the cotton when prices are cheap and take advantage when prices go up with cotton being a highly volatile commodity. Expansion wouldn’t be prudent as the demand seen previously is temporary, and other mills that did the same are suffering now when demand came back to normal. The cash may be used to acquire a company if profitable.
Ultimate goal is profit is what I understood. As of now I don’t see it as a concern. The CMD with his extensive experience in the business I believe his decision is in the interest of the company’s profitability at large. But that’s just my take! 
Disclosure: Invested and may be biased. Forms about 25% of my portfolio.
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