Increase in minimum support price of cotton may hurt industry
The increase in the minimum support price (MSP) announced by the Government for certain cotton varieties may hurt some Indian textile firms and is likely to boost imports of cheaper cotton, a senior industry official said.
By PTI |
MUMBAI : The increase in the minimum support price (MSP) announced by the Government for certain cotton varieties may hurt some Indian textile firms and is likely to boost imports of cheaper cotton, a senior industry official said.
The Textile Ministry had announced the raising of MSP for certain cotton varieties by around 40 per cent.
MSP for farmers growing cotton of staple length of 24.5-25.5 mm has been raised to Rs 2,500 from Rs 1,800 per quintal and that of farmers growing staple length 29.5-30.5 mm has been raised to Rs 3,000 from Rs 2,030 per quintal.
"The increase in MSP became necessary due to increased input cost and an overall rise in cotton prices," Ministry of Textile Joint Secretary J N Singh told reporters here.
"The hike is very, very steep and it will certainly lower the competitiveness of textile companies," Cotton Association of India President P D Patodia said.
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The unprecedented rise in MSP will fuel inflation and escalate costs, Patodia said. "We feel that MSP should have been appropriately cost-based, gradual, bearable, consultative and essentially a balanced proposition. We are indeed baffled at such an increase," he said. "Cotton prices were already higher than the MSP but a steep rise may further push up prices which may raise imports despite a healthy supply," Patodia said.
The revival of monsoon in all parts of cotton-growing zones during the last few weeks has brightened the prospects of another good crop for the ensuing cotton season.
"We are expecting cotton production to be robust and above last year's levels. Cotton production is estimated to be at 32.5 mn bales in the crop year ending September 2009," Singh said adding that textile exports for the January-April period in 2008 rose about 23 per cent from the same period last year.
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Exports of raw cotton in 2007-08 stood at 10 mn bales, mainly due to higher global demand and fall in acreage in the US. Higher export of raw cotton had an impact on cotton prices, which shot up to historic highs during the current cotton season. The BT technology has conferred a great production advantage in terms of low-cost and resultant improvement in productivity. However, this has resulted into lopsided production of 28 mm to 30 mm staple group. "Now, we need innovative solutions to bridge the varietal gap between demand and supply of short staple cotton," Patodia said.
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"We need competitive finance to meet global competition," he said. According to him, international hedging facilities were restrictive and "our export trade cannot function without ability to hedge its risk, especially when global players already enjoy such a facility." Start a SIP with as low as ₹500 with ET Money App!
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