Worried over the wrangling between cotton ginners and the textile industry over the high minimum support price (MSP) of cotton and falling export market, the group of ministers (GoM) on textiles, headed by agriculture minister Sharad Pawar, plans to shortly meet to resolve the contentious issue. The meeting assumes added significance as the bumper cotton production of over 30 million bales and steep decline in local and export markets, following the global economic slump has forced the government Cotton Corporation of India (CCI) to increase its procurement manifold.
Sources said that the CCI is now facing a lack of infrastructure to store large quantities of cotton procured during the 2008-09 season. Officials in the textile ministry said that after the MSP of cotton was hiked by as much as 40%, demand from cotton mills declined sharply. So much so, that stocks of cotton this year could rise to around 8.5 million bales (1 bale equals 170 kg), up from last year?s 5.0 million bales. ?This would create problems for both the industry and farmers unless the government takes some immediate remedial action to sustain cotton consumption by reducing the MSP or by assisting the industry to absorb the extra cost,? officials said.
They added that the government had to ensure that cotton procured against the MSP was sold to mills immediately at the available price or mills will have no cotton to use, though production in the country was quite high. According to sources, the issue of reviewing cotton prices was raised by textile minister was scuttled down by agriculture minister Pawar as it was a politically sensitive issue with the Lok Sabha polls round the corner. Later, textile minister Shanker Sinh Vaghela told FE, ?The MSP had been raised from Rs 1,800 in 2007-08 to Rs 2,500 for medium staple cotton and from Rs 2,030 to Rs 3,000 for long staple. The standard variety of Shankar cotton is currently being quoted at Rs 24,500 per candy for the new crop based on the MSP and the mills are finding it difficult to buy at these prices because of a fall in international cotton prices and low realisation on textiles.?
According to industry sources, cotton prices in India are 15%-20% higher than international prices and if immediate action was not taken to ease working capital norms for mills to buy and hold cotton, and for disposal of procured cotton on a daily basis without creating artificial shortage in the market, both the textile industry and farmers will be adversely affected.