Govt orders Cotton Corp to buy produce, check price fall

As cotton prices dropped below the minimum support price fixed by the Centre, the government on Wednesday directed the Cotton Corporation of India to increase its purchase from the major producers, including Gujarat and Maharashtra.

The prices have fallen due to an expected bumper harvest.

The two states — Gujarat and Maharashtra — account for almost 80 per cent of the total cotton produced in the country.

“The CCI has been asked to step up its procurement operation by opening more centres wherever necessary,” Textiles Minister Santosh Gangwar told reporters after a meeting with the Agriculture Minister Radha Mohan Singh. The cotton season runs from October to September.

Commerce Minister Nirmala Sitharaman, too, participated in the meeting. The CCI has so far purchased around 2,50,000 bales of cotton (1 bale = 170 kg) in the current season, mainly from the southern states.

The central government has fixed a minimum support price (MSP) of Rs 3,750 per quintal for medium staple cotton and Rs 4,050 per quintal for long staple cotton for the 2014-15 season. However, due to expected bumper harvest, prices have dropped below these levels in many places across the country. The CCI’s aggressive intervention will prevent distress sale by farmers.

“The CCI has been instructed to open more centres and collect cotton from the farmers’ doorsteps,” another official said.

Prices have also slumped below the MSP in many places because of weak global markets, which has stopped exports.

As per government first advanced estimate for 2014-15 season, cotton production in India is expected to be around 34.62 million bales, down from 36.5 million bales last year.

However, the estimates seem to be on the conservative side as late rains pushed up harvest. The estimates were released in September.

According to the CCI, production in India in 2014-15 is expected to be around 40 million bales, while the opening stock for the season is expected to be around 6 million bales making a total supply during the season of around 46 million bales.

However, domestic consumption is estimated at 30 million bales, making a surplus of around 1.7 million bales. A weak export market has made absorption of this surplus difficult.