Govt's subsidy burden to rise on cotton MSP hike

The subsidy burden of the government is likely to shoot up this fiscal due to hike in Minimum Support Price as acreage under the crop is expected to cross 100 lakh hectare-mark in the country, a top official said here today.

"The acreage under cotton has jumped by 6-8 per cent this fiscal, and is projected to cross 100 lakh hectare-mark for the first time," ,Textile Joint Secretary J N Singh told reporters on the sidelines of a conference here.

"Last year, the textile ministry had to pay Rs 3,500 crore as subsidy, after the announcement of hike in cotton MSP," Singh said.

As per government estimates, production of cotton is likely to touch 315 lakh bales this fiscal (one bale is equal to 170 Kg) from 290 lakh bales last year.

"On account of higher production estimates this year, the subsidy is also likely to shoot up," official sources said.

The Centre had raised MSP of standard cotton (long staple) to Rs 3,000 per quintal for 2008-09 from Rs 2,030 in the previous year. The MSP of medium staple cotton had been raised to Rs 2,500 from Rs 1,800 per quintal.

"Gujarat is likely to lead this year by producing about 100 lakh bales of cotton," sources said.

According to a senior government official, Cotton Corporation of India (CCI) purchased a record 89.4 lakh bales in the last season, while National Agricultural Co-operative Marketing Federation (Nafed) procured 37 lakh bales to avoid distress sales by farmers.

"The cotton prices are currently ruling higher than the MSP in Punjab, Haryana and Rajasthan. Once the crop arrival shoots up after Diwali, the government will have to step up its MSP operations through agencies like CCI and Nafed," a top official said.

"The CCI has already begun cotton procurement in Punjab, and soon will start its operations in Rajasthan and Haryana," Singh said.

In the backdrop of global slowdown, the country exported only 35 lakh bales of cotton in 2008-09 as compared with 85 lakh bales in 2007-08.

According to industry estimates, both domestic and overseas demand for cotton is expected to rise this year due to recovery in economy.

The carry forward stock of cotton in the country from 2008-09 is at 71.50 lakh bales, up from around 43 lakh odd bales in 2007-08, according to figures of Cotton Advisory Board.