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| Domestic cotton demand all set to see a 5% fall |
| Press Trust Of India / New Delhi Mar 14, 2009, 00:38 IST |
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 Cotton prices in the domestic market are unlikely to exceed the minimum support price (MSP) this season, ending September, as the demand for the commodity is set to dip 5 per cent, increasing stockpiles for the next year.
“There will be surplus cotton stocks this year as demand is set to decline to 23 million bales (one bale is equivalent to 170 kg) from 24.1 million bales in 2007-08,” state-owned Cotton Corporation of India (CCI) chairman and managing director Shubhash Grover said.
“Even if output touches 29 million bales, there will still be surplus stocks. Therefore, the prices have not risen this season and may not rise if exports don’t surge dramatically,” Grover said.
The government’s Cotton Advisory Board (CAB) trimmed its output projection for the commodity last month to 29 million bales from the earlier 32.2 million bales, citing delayed sowing by farmers and erratic monsoon. The carry-forward stocks from this season are projected to touch 6 million bales from 4.3 million bales last year.
However, the CCI’s present sale of cotton at discounts is expected to help check the price rise. An industry analyst said, since the CCI accounts for most of the purchases from farmers and is now selling at reasonable discounts following the government directive, the chances of a price rise this season are very remote.
“The prices at present are ruling below the MSP at different levels in different regions,” the analyst said.
Moreover, the import of cheaper cotton from countries such as neighbouring Pakistan have taken a knock, especially after the sale by the CCI at a discount.
The CCI has offloaded a record 2.175 million bales of cotton during the fortnight-ended March 6, as millers shunned “need-based purchase” to take advantage of incentives on bulk purchases provided by the corporation.
“No import has taken place for the last two-three months. Some imports took place after the MSP was hiked sharply but have almost stopped now,” CCI’s Grover said.
Earlier last month, the Cabinet had decided to ask the CCI to dispose of the cotton procured at the MSP by offering discount for bulk purchases.
The CCI is providing disc-unts of up to Rs 650 a candy on the bulk purchase of cotton. The CCI’s move came as a relief to the industry, which has long been lobbying with the government for making cheaper cotton available for millers and traders following the hike of the MSP of the commodity for this year.
The government has increased the MSP of stan-dard cotton (long staple) to Rs 3,000 a quintal for 2008-09 from Rs 2,030 in the previous year.
The MSP of medium staple cotton has been raised to Rs 2,500 from Rs 1,800 per quintal.
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