CAI aims at remunerative prices for cotton farmer’s yield

The Cotton Association of India (CAI) is advocating for an equitable solution to ensure farmers receive remunerative prices for their cotton without undermining the competitiveness of the Indian cotton industry. The CAI believes, programs like the Bhavantar (price deficiency payment scheme) should be considered for the cotton sector.

Under a price deficiency payment scheme, farmers are directly compensated for the difference between the Minimum Support Price (MSP) and the prevailing market price when the latter falls below the MSP. This approach gains significance as cotton prices for the current 2024-25 season have largely been bearish, often trading below the MSP. This trend has forced the state-run Cotton Corporation of India (CCI) to procure over 100 lakh bales at the MSP.

At a recent CAI meeting, stakeholders representing the entire cotton trade and textile industry voiced concerns that the annual increase in cotton MSP is creating challenges. For the upcoming Kharif 2025 season, the MSP for medium staple cotton has been raised to Rs 7,710 per quintal from Rs 7,121 last year, while long staple cotton's MSP increased to Rs 8,110 from Rs 7,521. These increases come amidst a bearish market, primarily driven by weak demand and declining global prices.

Higher MSPs not only distort market dynamics and hinder the natural price discovery process, but they also inflate production costs for textile mills, states Atul L Ganatra, President, CAI. This can lead to potentially higher prices for consumers and negatively impact the competitiveness of Indian cotton production in the global market. As this threatens the entire value chain, stakeholders emphasized the need for a fair solution that continues to provide remunerative prices to farmers without compromising the competitiveness of trade and industry.

Suresh Kotak, Chairma, Textile Advisory Group and Kotak Group of Companies, also acknowledged the necessity of adjusting the MSP structure and CCI sales policy. He assured attendees that he would raise these suggestions with the government.

For the ongoing 2024-25 season, CAI stakeholders estimate, India’s cotton production to reach 301.15 lakh bales of 170 kgs each. Imports for the year are projected to more than double to 39 lakh bales from 15.20 lakh bales in 2023-24. Domestic demand for the 2024-25 season is estimated to decline to 305 lakh bales from 313 lakh bales, with exports expected to be lower at 17 lakh bales down from 28.36 lakh bales. CAI estimates the closing stocks for the current season will be higher at 48.34 lakh bales compared to 30.19 lakh bales.