Prices take a hit, govt mops up cotton worth R1,177 crore to bail out farmers
State-run Cotton Corporation of India (CCI)— the government's biggest procurement arm — has bought 5,43,400 bales as of Tuesday at the state-fixed minimum support prices (MSPs) since October 1, compared with a paltry 7,696 bales during the entire 2011-12, a senior government official said.
One bale equals 170 kilograms. Government agencies usually buy cotton at the minimum support prices (MSP) to ensure farmers get the minimum fair returns in case the rates fall below the benchmark level, and sell the stocks later at market prices. Losses on account of the procurement operations are reimbursed by the government.
Strong Chinese demand had driven up domestic prices to record levels in 2011-12 with cotton exports reaching an all-time-high of 12.9 million bales, or roughly 2.19 million tonnes, last year. However, as cotton inventories from China to Australia are bulging with the biggest-ever glut, a year after record prices encouraged farmers to expand output, the demand for Indian supplies has dwindled significantly.
Global stocks in the beginning of the year that started August 1 reached an all-time-high of 15.16 million tonnes, which are expected to swell further to 17.47 million tonnes by the end of 2012-13 as harvests exceeded demand for a third straight year, according
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