The Cabinet Committee on Economic Affairs chaired by the Hon’ble Prime Minister, Shri Narendra Modi has approved increase in Minimum Support Price (MSP) to the tune of 28.11% for medium staple cotton and 26.16% increase for long staple cotton for the season 2018-19. Accordingly, the MSP for medium staple cotton per quintal has been increased from Rs.4020/- to Rs.5150/- and in respect of long staple cotton, it has been increased from Rs.4320/- to Rs.5450/- per quintal. The Cabinet has also approved various farmers’ friendly initiatives apart from the MSP of kharif crops.
In a Press Release issued recently, Mr.P.Nataraj has hailed the proactive and historical initiatives taken by the Prime Minister to strengthen the agriculture sector that would greatly benefit the cotton farmers. He has said that though the steep increase in cotton MSP would largely benefit the farmers, it would have some impact on the industry and would increase the clothing cost of the masses of the nation. It might also affect the cotton exports if Indian cotton prices rule above international prices. SIMA Chairman has appealed to the Prime Minister to exercise cotton MSP operation under Direct Benefit Transfer System (DBT) and revamp the role of Cotton Corporation of India so as to benefit the farmers and the industry equally.
Mr.Nataraj has said that India has become the largest cotton producer in the world since 2015-16 surpassing China and USA and became the net exporter of cotton. He has said that India accounts 36% of world cotton acreage by covering 11.80 million hectares and estimated to produce 6290 million kgs and export 1190 million kgs of cotton during the season 2017-18. He has further stated that 2.3 crore farmers are currently cultivating cotton.
SIMA Chief has stated that due to 5 to 10% price advantage when compared to international price, home grown cotton has been the engine of growth for the textile industry, the second largest employment provider next only to agriculture. Consequent to the removal of cotton from Essential Commodities Act from February 2007, few multinational cotton traders started dominating cotton economy by covering large volume of cotton during peak season (December to March -75% cotton arrives in market) with 2 to 3% fund cost and hedging facilities. Indian cotton textile industry, predominantly MSMEs in nature, which is provided with three months working capital, 25% margin money and 12 to 14% interest, is not able to compete with the multinational traders and invariably pay 10 to 25% higher cost for the home grown cotton during off season (May to October). SIMA Chief has stated such price volatility in cotton prices has often been eroding the working capital and profit margins of the industry and restricting the growth rate between 6 and 8% as against the potential growth rate of 12 to 16% as predicted by many studies.
Based on the recommendations made by the industry four years back, the Government actively considered announcing 5% interest subvention for cotton inventory and also liberal credit limit and reduced margin money says, Mr.Nataraj. SIMA Chairman strongly felt that cotton Price Stabilisation Fund (PSF) scheme consisting of 5 to 7% interest subvention, 10% margin money and nine months credit limit would enable the spinning mills and CCI to compete with the multinational cotton traders and cover the cotton during peak season. This would enable the farmers to fetch better price, avoid MSP operations, prevent cotton hoarding and speculation and enable the industry to achieve its potential growth rate of 12 to 16% as against the current growth rate of 6 to 8%. PSF would also bring more GST revenue, boost exports and create more employment opportunities due to increased growth rate of the industry, says, Mr Nataraj.
The SIMA Chief said that India could become largest producer of cotton taking advantage of Technology Mission on Cotton (TMC) that existed between 1999 and 2002 and also the introduction of Bt Cotton. He has stated that TMC has not been extended and the farmers are suffering with spurious seeds, lack of seed technology, agronomy research, lack of technology transfer, quality deterioration at ginning stage (admixture of waste cotton, inferior quality cotton, high trash, contamination, high moisture content, etc). He has urged the Prime Minister to approve TMC-II proposal already submitted by the Ministry of Textiles and also to constitute a Task Force comprising of various stakeholders under Ministry of Agriculture and Textiles, prepare a detailed report based on the recommendations already made by Dr K R Kranti, former Director, CICR bench marking the Best Global Practices.
Mr.Nataraj has stated that country’s productivity per hectare is stagnated at 500 to 550 kgs per hectare as against over 1500 kgs per hectare achieved by around 20 countries across the world and countries like Australia is able to achieve over 2200 kgs per hectare. He has stated that the quality of Indian cotton is much inferior when compared to imported cotton and therefore both the farmers and the industry are suffering seriously. Therefore, Price Stabilization Fund Scheme (PSF) and Technology Mission on Cotton (TMC) with revised format are the need of the hour to make the Indian cotton farmers to double their income and the industry to double its business size and exports by 2022 as envisaged by the Hon’ble Prime Minister.