The government is likely to increase the minimum support price (MSP) of cotton by 40 per cent or more for the cotton year 2008-09, according to official sources.
At a time when inflation has touched 12.63 per cent for the week ended August 9, such a measure may spell trouble for the $45-billion domestic textile industry.
Senior officials in the Ministry of Textiles told Business Standard that the prices of medium long stable cotton is likely to be increased to Rs 2,500 a quintal from the current MSP of 1,900 a quintal.
| POLICY PUSH Month-wise cotton prices | ||||
| Rs/candy Period |
J-34 | |||
Shankar-6
Source : Cotton Corporation of India
Similarly, the prices of long stable cotton is expected to be raised to Rs 3,000 a quintal, which currently rules at Rs 2,030.
The official added that though these prices would have seemed too high three months ago, the MSP would still be less taking into account the present rates of cotton (Shankar-6).
Since the beginning of the current cotton year (October-September), the prices of Shankar-6 variety of cotton have increased from Rs 20,000 a candy (1 candy=356 kg) in October to Rs 28,300 a candy in July, up 41.5 per cent.
The Commission for Agricultural Costs and Prices (CACP) recommends MSP for two basic varieties of raw cotton of fair-average quality.
While on is the medium long staple length group of 25 mm-27 mm of the variety F414/H-777/J-34, the other is the long staple group of 27.5 mm-32 mm which is of the variety H-4.
While deciding the MSP, the cost of production and a reasonable margin of profits for cotton growers are taken into account.
The country produced 31.5 million bales (1 bale=170 kg) in 2007-08 against 28 million bales in 2006-07.
However, due to a fall in acreage in the US and higher global demand, cotton exports from the country exceeded the target of 8.5 million bales and went ahead 10 million bales.
This had its impact on the cotton prices which shot up to historical highs in the current cotton year.
