Centre gears up for cotton procurement anticipating a fall in prices below MSP

AHMEDABAD: The Centre, anticipating a fall in cotton prices below the minimum support price (MSP), readies for procurement even as traders and government officials across Punjab and Gujarat remain optimistic about the prices remaining above the MSP of Rs 3,600-3,900 per quintal.

Both the Cotton Corporation of India (CCI) and National Agricultural Cooperative Marketing Federation of India (Nafed) have started preparations for the procurement across Punjab, Haryana, Rajasthan, Gujarat, Maharashtra and Andhra Pradesh.

The CCI has till date procured 20,000 bales (a bale weighs 170 kg) from Andhra Pradesh through 20 procurement centres at the MSP rate. It has also started commercial procurement in Punjab where it has been able to procure 3,000 bales from 7 procurement centres. "Current arrivals in mandis are slow, which are expected to pick up post-Diwali. Farmers are holding the crop as on date, ensuring firm prices," says RC Sarkar, GM-marketing, CCI. In 2011-12 marketing season, the CCI had procured 3.48 lakh bales.

Similarly, Nafed has started tying up with state-run procurement cooperatives across the cotton-producing states. Both the CCI and Nafed have demarcated mandis among themselves. The Maharashtra State Cooperative Cotton Growers Marketing Federation will source cotton for Nafed and will be opening 109 centres in Maharashtra. It might also enter Andhra Pradesh along with National Spot Exchange Limited. In Gujarat, the Gujarat State Co-operative Cotton Federation will open 18 centres. "We will be directly procuring cotton from farmers and making payment in 7 working days. After mid-November if prices fall below the MSP, we will enter," says SK Verma, GM (Cotton), Nafed.

Currently, cotton arrival in market yards in Gujarat and Maharashtra are ruling anywhere between 10,000-12,000 tonne, and in Punjab 6,000 -7,000 tonne. Depending on the moisture content and quality, the prices are in the range of Rs 4,000-Rs 4,400 a quintal. Local mills and traders have been buying cotton as per their requirement. "We don't expect prices to soften this year as the crop quality and quantity is less," says a government official in Gujarat.

"The input cost of farmers is very high by over 15% and hence they will try to hold the crop," says Baldev Pujara, an Aurangabad-based cotton agent. "Cotton prices at Rs 3,900-Rs 4,000 a quintal will be remunerative for them." He, however, feels that increased arrivals in mandis in the next fortnight will put pressure on prices by 3-5%, leading to a slight correction.