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Informist, Monday, Jun. 9, 2025

 

By Taniva Singha Roy

 

MUMBAI – Though the government has announced a hefty increase in the minimum support price for cotton for the kharif marketing season 2025-26 (Oct-Sept), industry watchers believe the measure may not boost the crop's acreage. With cheaper imports able to service the falling domestic demand, there is little incentive for farmers to cultivate cotton and many are shifting to other, more remunerative crops, farm experts said.

 

On May 27, the Cabinet Committee on Economic Affairs cleared increased minimum support prices for various crops for 2025-26. The minimum support price for cotton medium staple was increased by 8.3% to INR 7,710 per 100 kg and for cotton long staple by 7.8% to INR 8,110 per 100 kg.

 

Last year, despite the minimum support price rising over 7%, cotton acreage fell 9% to 11.3 million hectares as farmers switched to other crops. This year, too, farmers in Jalgaon, a major cotton-growing area in Maharashtra, are shifting to maize and the area under cotton in the district is likely to fall 10%, said Manish Daga, president of the All-India Cotton Farmer Producer Organisation Association.

 

Another problem is that not all farmers are covered under procurement at the minimum support price. Only 33% of farmers are able to sell their produce to the government. The other 67% have to sell to ginners as the government does not have adequate infrastructure to procure more than 10 million bales a year, said Daga. Moreover, small-scale farmers are unable to reach out to the government as several small villages and clusters do not have agricultural produce market committees. This results in brokers stepping into the supply chain and eating away the farmer's income, he said.

 

This situation has compelled farmers who own land with good soil and irrigation to shift to other crops. In Maharashtra, farmers are shifting to maize cultivation, while farmers in Gujarat have opted to grow groundnut, traders said.

 

The increase in minimum support price may well have a negative impact on demand for domestic cotton, with cheaper imports taking the place of local produce in local markets and exports also taking a hit, they said. The higher prices may also exacerbate the continuing trend of customers shifting to other fibres.

 

Indian cotton prices are currently at about INR 54,000-INR 55,000 per candy, which is about 2.09 bales, or about 356 kg, whereas cotton prices on the Intercontinental Exchange are around 64 cents per pound, or about INR 43,000 per candy. Even with an import duty of 11%, the landed cost of imported cotton works out to around INR 50,000 per candy, which is still about INR 4,000-INR 5,000 lower than domestic prices.

 

Private ginners will not be able to function with the new minimum support price, said market participants, particularly when they have to compete with imported cotton. The increase in minimum support price for medium and long staple cotton makes ginning operations challenging. For the past three years, global cotton prices are reeling from a bear phase in the market while domestic minimum support prices have continued to rise. Indian cotton prices are now trading at a hefty premium over cotton from the US, Brazil, and China, said Biren Vakil, founder at Paradigm Commodity.

 

Following the latest increase in support price, chances of cotton exports are poor, while imports may flood the domestic market. In the financial year 2024-25 (Apr-Mar), India's cotton imports are projected at 3.5 million bales and exports are seen at 1.5 million bales. So, despite the 11% import duty, India has turned into a net importer of cotton.

 

A few market participants, however, believe there will be no fall in area under cotton cultivation this time. "Due to the substantial hike in MSP, the acreage will not reduce," said Anand Popat, senior executive at Cotyarn Tradelink. However, there will be no increase in the area, he added. While the increase in support price may bring some respite to farmers, Popat agreed that it would be a losing proposition for ginners as prices of raw cotton are way too high and demand for pressed cotton is low.

 

GOVERNMENT INTERVENTION

To address the problems faced by the sector, government should focus on improving productivity using advanced technologies, experts said. Only government bodies such as the Cotton Corp. of India have stocks of cotton, but if mills want to buy from them, payment needs to be made before taking delivery, which disrupts the credit cycle, Vakil said.

 

The Cotton Corp. of India ltd. is a public-sector undertaking whose primary function is to support farmers by ensuring they receive fair prices for their produce, especially through minimum support price operations. It also manages procurement, trade, and export of cotton.

 

"We need surplus and competitively priced cotton in India and for that we have to focus on seed health," said Daga. Due to the early onset of the southwest monsoon and lack of early intimation by the government, farmers were not prepared to start the sowing process. Moreover, several farmers in Maharashtra had bought spurious seeds as they were not allowed to buy seeds officially in the state before Jun. 1.

 

With pink bollworm, a major cotton pest, causing significant damage to developing cotton bolls and affecting lint quality, the government wanted sowing to happen only after Jun. 1, but the southwest monsoon had other ideas and arrived eight days ahead of schedule in Kerala. "Government policies need to be more flexible," Daga said.  End

 

US$1 = INR 85.62

 

Edited by Rajeev Pai

 

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