Cotton procurement may remain slow, hitting textiles

Government procurement of cotton could remain slow even after the new crop season begins in October, as prices of the commodity are expected to remain high, a government official said, outlining a development that could benefit farmers but hit textile manufacturers. The spot price of cotton has nearly surged back to record levels of ₹1 lakh a candy amid a drop-in production in major cotton producing countries, including India. 

Source : Reuters

Production estimates of cotton in India have already been cut to 31.5 million bales for FY23 as production in major cotton producing states such as Maharashtra and Karnataka are set to drop due to pests and heavy rains. Cotton prices globally have been on the surge after the US, one of the largest cotton producing countries, cut its production forecast by 3 million bales to 12.6 million bales for FY23.

“The prices will certainly drop from the new season that starts from October. But in the entire next season, I don’t expect any MSP operation (because prices will be elevated). Cotton prices are expected to be well above the MSP. “During covid-19 demand was low and that is why 20 million bales were procured at MSP in those two years. Earlier also cotton procurement has been small,” the government official said.

However, the government has said that India has sufficient cotton stocks as the total availability of cotton without considering imports is 38 million bales while consumption stands at 32 million bales this year. Meanwhile, the global average of cotton productivity stands at 877 kg per hectare. Experts said that the demand for cotton had jumped sharply this year but the production fell over 20%, which led to a surge in cotton prices. Textiles form a significant part of the free trade agreements (FTA) that India is negotiating with countries such as the UK and EU.

“The carry-over stock to the next cotton season could be the lowest in many years. But currently the problem is cotton productivity. It has stagnated due to lack of new seeds and frequent pest attacks and diseases,” the official said.

A duty cut for Indian textile products could make Indian exports more competitive and at par with countries such as Bangladesh and Vietnam. Industry representatives also expect textile demand from India to rise on account of the FTA signed with the UAE and the one being negotiated with Australia.  

The private sector must also contribute to boost research in productivity, farmer’s education, invest in the MSMEs involved as well as branding to which the government would provide matching support, Minister Goyal had said, according to a statement issued by the textile ministry.

Source : The Mint Newspaper