The cotton market in Andhra Pradesh, one of the major producers in the country, has plunged into a deep crisis in the aftermath of demonetisation, as transactions have almost come to a halt and prices have slumped by roughly ₹1,000 per quintal.
It is almost a month since the Prime Minister announced the move to scrap the high-denomination notes and one of the worst-hit commodities markets in the State is cotton.
The crop is grown widely in Krishna, Guntur, Prakasam and Kurnool districts and to an extent in the two Godavari districts. The ginning mills, most of them located in Guntur district, supply cotton to textile mills in other States such as Maharashtra, Tamil Nadu, Gujarat and Karnataka.
After demonetisation, ginning mills are in a crisis and have been unable to purchase cotton through brokers due to the liquidity crunch.
According to trade sources, almost 70-80 per cent of the transactions have come to a halt and the market has been hit hard.
A month ago, quality cotton was selling in the range of ₹5,300-5,500 per quintal and the price has now slumped to ₹4,300-4,500. Farmers are unwilling to sell at these rates.
On the other hand, the Cotton Corporation of India (CCI) has opened more than 40 cotton purchase centres in the State, but the price offered is much lower than the prevailing market price, at ₹4,100 per quintal. Farmers are therefore unwilling to sell the cotton at CCI purchase centres.
The net result is that the cotton market is almost at a standstill after demonetisation.