Cotton corporation to step up MSP ops this season

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Published: November 28, 2014 12:25:56 AM

Cotton Corporation of India (CCI) intends to step up MSP operations this season...

Cotton Corporation of India (CCI) intends to step up MSP operations this season. The corporation is targeting a procurement of 6 million bales worth R12,000 crore this year as prices in the majority of cotton growing states have fallen below the minimum selling price, BK Mishra, MD of CCI, told FE.

Last year, CCI procured R80 crore worth of cotton. For the season of 2012-13, it procured cotton only from Andhra Pradesh and there was no reason for procurement in the season prior to this year, he said.

CCI procured a record R14,000 crore worth of cotton in the season of 2008-09 when it purchased 90 lakh bales. For procurement of R12,000 crore this year, it has made arrangements with a consortium of 14 banks led by Bank of Baroda for fundraising. CCI is expected to buy 60 lakh bales (of 170 kg each) of cotton across Telangana, Andhra Pradesh, Madhya Pradesh and Maharashtra. Currently, it has an inventory of eight lakh bales.

The government has fixed an MSP of R3,750 a quintal for medium staple cotton and R4,050 for long staple cotton for the 2014-15 season. Cotton Association of India (CAI) estimates output at 40.55 million bales this year, a marginal decline from 40.73 million last year (this is an October-September year). Of that, CCI plans to buy six million bales from the open market.

Mishra said cotton supplies from farmers this season have fallen by 19% so far. “Farmers are holding on to their crop in Maharashtra and Gujarat. In Maharashtra, since Parliament’s winter session is in progress, they are hoping for some succour from the government. In Gujarat, the farmers are in good financial health and so have the capacity to hold,” Mishra explained. “Till date, we have bought 1 million bales in Telangana, Andhra Pradesh and a small quantity in Madhya Pradesh,” he said.

This year, the number of states coming under MSP operations has increased — Telangana, Andhra Pradesh, Madhya Pradesh, Maharashtra and Gujarat. Gujarat and MP are new additions to the MSP operation list.

CCI plans to offload its inventory over 15 months depending on market conditions.

Mishra said that going by the current price trend and future forecasts, it is unlikely the corporation would look at the overseas market this season. India’s cotton output is estimated to touch 40 million bales against 37 million bales recorded last year. Cotton exports from India have almost come to a standstill, with domestic prices ruling five cents above the global market. China, which imported 50% of the 12 million bales shipped by India last year, is cutting down on shipments.

National Agricultural Cooperative Marketing Federation (Nafed) is also expected to begin MSP operations soon.

Mishra said Nafed has begun modalities with the Centre for seeking funds. The funds are expected to be routed through the CCI, he added, saying paperwork is in progress. Nafed is expected to procure some 28 lakh bales this season and has opened 15-20 centres through its agencies.

For the first time in five years, Maharashtra State Cooperative Cotton Growers Federation had to begin cotton procurement in Maharashtra under CCI. Every year, the federation procures cotton as an agency under Nafed. However, this season, the credit borrowing limit of Nafed has been exhausted.

Dhiren N Sheth, president, Cotton Association of India, said cotton production, which was 15.80 million bales in 2001-02, has more than doubled and is estimated at 40.55 million bales of 170 kg each during 2014-15. The acreage under cotton in India has increased to 12.65 million hectares during 2014-15 and India now has a share of 37% of the world’s total cotton acreage.

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