Ministers meet to resolve price of cotton

Written by Commodities Bureau | New Delhi | Updated: Jan 9 2009, 05:38am hrs
As cotton prices refuse to budge from below the minimum support price (MSP) at many markets, farmers in Punjab have resorting to blocking traffic in the state. A high level team comprising textiles minister Shankar Sinh Vaghela, agriculture minister Sharad Pawar, minister of state in the Prime Ministers Office Prithviraj Chavan and home minister P Chidambaram have scheduled a meeting in mid-January to thrash out a solution.

Sources said the meeting called at the behest of textile minister Shankar Sinh Vaghela would be the second in the last two months to find a way out from the current impasse of falling prices, low demand and a bumper harvest. The last meeting held in December failed to arrive at a conclusion. The issue of rollback of the cotton MSP of Rs 2,500-Rs 3,000 per quintal could also come up for during the discussion, sources added.

The meeting comes amid growing complaints from farmers in Punjab, Indias largest cotton growing province, that the state-run Cotton Corporation of India (CCI) did not buy their produce because of low quality, forcing farmers to part with produce at dirt-cheap rates. CCI officials however insist that they would only purchase cotton of a particular quantity under the price support scheme.

The Centre had, in September, significantly increased the minimum support prices of standard cotton (long staple) to Rs 3,000 per quintal for 2008-09 from Rs 2,030 in the previous year. The MSP of medium staple cotton has been raised to Rs 2,500 from Rs 1,800 per quintal.

However, mills protested strongly against the hikein MSP, saying that domestic rates will skyrocket at a time when prices in global markets are declining.

India is projected to produce at least 320 lakh bales of cotton in the 2008-09 season (1 bale=176 kilograms), up from around 300 lakh bales last year.

The rise in production coupled with fall in export market has pulled prices sharply down in the local markets, forcing Cotton Corporation of India to undertake one of its largest procurement programmes till date.

Earlier in November, around 1,600 ginners across the country went on a three-day strike in protest against the sharp increase in MSP and fall in export market.

The downstream textile industry, which is also reeling under sharp downturn in export market wants CCI to offload the procurement through a opaque tender process that would ensure adequate cotton to local textile industry instead of exports.

At present, cotton prices are ruling at around Rs 20,000 per candy (1 candy=356 kgs), almost Rs 7,000-8,000 less from last year.