To prevent distress sales, the central government-run Cotton Corporation of India (CCI) has plans to procure 15 per cent of the country’s total output of the crop this year.
The Cotton Association of India (CAI) estimates output at 40.55 million bales (1 bale = 170 kg) this year, a marginal decline from 40.73 mn last year (this is an October–September year). Of that, CCI plans to buy six mn bales from the open market.
Normally, CCI intervenes to buy cotton when the spot price falls below the minimum support price fixed by the Centre. Early this month, the price went below the Rs 3,750 a qtl MSP in some parts of Andhra Pradesh and Telangana. Following which, the Union agriculture ministry sought CCI’s intervention.
Accordingly, CCI has procured 800,000 bales so far from farmers in the two states. This helped arrest the price; the benchmark Shankar-6 variety is currently quoting a bit higher than the MSP.
B K Mishra, chairman and managing director of CCI, said: “MSP operations will intensify in the coming days. We plan to procure six mn bales this year.” This is expected to cost it Rs 12,000 crore, for which it has made arrangements with a consortium of 14 banks led by Bank of Baroda for fund raising. Last year, CCI had procured cotton worth Rs 80 crore.
Mishra added, “We have not decided when we will release cotton in the market. We will take a call after talking with the government.”
“Yield is a challenge for India at 550kg/ha, while the global yield stands at 900 kg/ ha. India has a lot of catching up to do,” said Jose Sette, executive director of ICAC. Global ending stocks of cotton as the 2014-15 year began were 21.6 million tonnes, as compared to 19.8 mt last year. ICAC pegs China’s national reserve at 11.4 mt.
International mill consumption for this year is estimated at 26.6 mt. Lower demand will cause demand for cotton to increase, says ICAC. It estimates the global price in a range of $64-89 cents a pound, with the average at $75.
Dhiren Sheth, president of ICAC, said at Cotton India 2014, “The value of cotton now being produced in the country every year is $16.5 billion in seed cotton form. Consumption in India has also witnessed a healthy growth and is estimated at 30.6 million bales during 2014-15. India exported 11.79 million bales in 2013-14 and the approximate value of cotton now being exported from India every year is $3.3 billion .”