Govt to take Rs 3,000-cr hit in cotton procurement

With the market price of cotton ruling below the minimum support price (MSP), the Union government is likely to incur an additional expenditure of Rs 3,000 crore in procuring the commodity directly from farmers this fiscal.

The MSP for cotton, which was increased by around 40 per cent this year, ranges between Rs 2,500 and Rs 3,000 per quintal, while the current market prices are around 10 per cent lower. As a result, government agencies are likely to procure record amount of cotton as farmers will happily sell their output to the government.

“Keeping in mind the current market situation, the government may have to buy 10-15 million bales from the farmers. The government is ready to take the loss of Rs 2,000 crore-Rs 3,000 crore,” said J N Singh, joint secretary, Ministry of Textiles.

The agriculture ministry headed by Sharad Pawar had increased the cotton price in the range of Rs 700 and Rs 1,000 for different varieties of cotton. Maharashtra and Gujarat are the two largest cotton-growing states in the country.

The decision was taken keeping in mind the high price of cotton in the international market then. However, the prices of cotton have crashed by 17 per cent in the international markets since August this year. This pulled down the domestic prices by around 10 per cent, thereby making MSP higher than market prices.

“The mills do not have the money to buy cotton and therefore, the government is forced to procure such a high amount of cotton from the market,” said D K Nair, secretary general, Confederation of Indian Textile Industry.

The government had bought 2.7 million bales two years back, the highest amount of cotton procured by it till now.

“We have bought 3 million bales from the farmers till today, out of the 7.5 million bales that have arrived in the market,” said Subhash Grover, chairman and managing director of Cotton Corporation of India, a state-owned entity that procures cotton on behalf of the government.

Around 1 million bales have been bought by the Maharashtra Federation and National Agriculture Federation.

Cotton Advisory Board, an apex body set up by the government, estimates the country’s cotton production to be 32 million bales this year against 31.5 million bales last year.