Import duty waiver leads to massive drop in ginned cotton prices

The government’s decision to temporarily lift the 11 per cent import duty on raw cotton has led to massive fall in the prices of ginned cotton. As per reports, prices of ginned cotton declined by around Rs 1,100 per candy within two days of the announcement. The Cotton Corporation of India (CCI) immediately responded by cutting its prices. Acting as the market stabilizer, CCI lowered its rates by Rs 600 per candy on one day, followed by another Rs 500 cut.

Following these reductions, the market rates for a candy of ginned cotton have declined to a range of Rs 55,200 to Rs 56,900. Farmers fear, the influx of cheaper imported cotton may depress domestic prices further, causing them to receive lower rates for their new harvest, which begins in October.

The new MSP for cotton is already being considered as insufficient by many. Now, this price drop is likely to lead to further distress with ginners holding stocks from previous season facing losses. Also, private ginners may not be able to purchase raw cotton from farmers at the MSP if market prices continue to decline.