By Krishna Barot
Amidst declining cotton exports and rising imports, the clamour for reducing the Minimum Support Price of the crop is growing among cotton traders and associations in Gujarat.
According to Ajay Shah, Secretary of Gujcot Trade Association, if the MSP remains the same, it may signal another nationwide dry spell for the cotton sector, and the textile value chain.
“Implement a free market mechanism for cotton while giving farmers more subsidies,” he said. The MSP mechanism is implemented by the government to support farmers by purchasing their crops at a pre-determined remunerative price.
The 2024-2025 MSP for cotton stands at Rs 7121 per quintal and Rs 7521 per quintal for medium and long-staple cotton varieties respectively. This has exacerbated the challenges faced by cotton traders and mills, which are already struggling to remain competitive in the global market. Speaking to FE, Shah said, “As of December 2024, we estimate that the government has bought almost 60% of the cotton stock from farmers. Private players are buying lesser stock due to the high MSP.” Instead, many companies are importing cotton from countries such as Brazil, Australia, Western African regions and the USA – which offer a lower price compared to India’s MSP. Brazil, for instance, lowered its cotton export prices to USD 0.7060 per pound in October 2024 – marking a 15.9% lower price than that of the international market average.
This spells trouble for India’s cotton exports, which are not competitive despite a depreciating rupee. “Our exports are not competitive either,” Shah stated. “A weakening currency can boost export parity. However, our traders must set higher export prices to make some gains. Why would countries buy from us when there are more affordable prices available from the likes of USA and Brazil?”