Trade seeks export sops for cotton, yarn to lower purchase burden

Our Bureau

Amid slowing global demand and falling prices in the domestic markets, the Cotton Association of India (CAI) has sought export incentive for cotton fibre and yarn so as to prevent additional procurement burden on the government.

Speaking to

BusinessLine , Atul Ganatra, President, CAI, informed that the exports have been badly hit due to economic slowdown in key markets such as Bangladesh and Indonesia. “Even though our cotton is the cheapest in the international market, exports are not taking off as expected. We believe the government should offer export incentive for cotton and yarn to encourage exports from India,” Ganatra said.

He further informed that in the current circumstances, India’s cotton exports are not likely to exceed 50 lakh bales, which is nearly same as last year.

The CAI held its 98th Annual General Meeting (AGM) through online mode, where trade members discussed the cotton scenario. At the AGM, Ganatra was re-elected as the President of CAI for the fourth time in a row.

Cheapest in the world

In his address to the members, Ganatra stated that the Minimum Support Price (MSP) is important to provide price support to farmers to prevent them from distress sales in the event of severely low prices. “However, the burden on the government exchequer can be minimised by incentivising exports of cotton from India, which will eventually enable farmers to realise competitive prices for their produce like their counterparts in other countries in the US, Australia, Brazil, etc.”

“Indian cotton is the cheapest cotton in the world and hence, there is a tremendous scope of improving export performance of the country,” he added.

Ganatra also underlined the Covid-19 impact on business which saw demand destruction due to lockdown and subsequent economic impact.

MSP & procurement

“Although production of cotton during the 2019-20 crop year was higher by over 15 per cent to 360 lakh bales from 312 lakh bales in the previous year, demand was drastically down by about 19.75 per cent to 250 lakh bales in 2019-20,” he said adding that the Cotton Corporation of India (CCI) will intervene with procurements through a massive support price operation. Ganatra also stated that the government has constantly increased the Minimum Support Price (MSP) for cotton over the past three years.

“During the last three years, the government has increased the MSP of GUJ ICS 105 29mm (Shanker-6 variety) by over 33 per cent cumulatively,” he added.

Last year, CCI had purchased 115 lakh bales, whereas this year Ganatra said the indications are that the Centre has set a target to procure about 125 lakh bales, of which about 60 per cent or 70 lakh bales is believed to have already been procured till December 27.

Ganatra added that the far-reaching impacts of novel coronavirus have severely impacted cotton business and has had a disastrous effect on every link in the cotton and textile value chain.