Cotton purchase exceeds record 10 million bales

Even as a political slugfest flares up over two key farm Bills and the future of official procurement in India, the government’s cotton purchases so far in the 2019-20 marketing year through September has exceeded a record 10 million bales, of 170 kg each, or as much as 30% of the market arrivals.

A good harvest and poor export demand kept a lid on domestic prices, forcing the government to intervene in the market to prevent distress sales by farmers, especially up to March. Subsequently, a nation-wide lockdown prompted farmers to sell as much as two million bales to the state-run Cotton Corporation of India (CCI) between April and August, even though the peak arrival season was over.

According to the latest textile ministry data, procurement by the CCI hit 10.46 million bales as of August 31, a month before the current marketing year is set to end, compared with the previous record of 8.93 million bales in the entire 2008-09 and just about 1.1 million bales in the last marketing year. An official source said the purchases for this season were all but over by the end of August.

The government’s move to raise the minimum support price (MSP) of cotton, at which procurement is undertaken, by a steep 28% in the 2018-19 marketing year and a further 2% in the current year also led to a rise in official purchases.

Market prices of the ICS-105 cotton variety (28mm) in Gujarat were ruling at just Rs 35,900 per candy, of 356 kg, on Wednesday, down by about 12% from a year before.

The data also showed cotton arrivals in the market were as much as 34.34 million bales in the current marketing year (up to August). Cotton is one of the only three farm commodities (rice and wheat being the other two) procured in large volumes, and regularly, by the government machinery, whenever the situation warrants.

The country is estimated to have produced 36 million bales of cotton in the current year, against 33 million bales in 2018-19, according to the state-backed Cotton Advisory Board.

Thanks to a Covid-induced fall in demand, global cotton stocks at the end of 2019-20 are expected to swell sharply to 22 million tonnes from 18.7 million tonnes in the previous year, according to the International Cotton Advisory Committee. This has weighed on global cotton prices in 2019-20.

Speaking at the Indian Express Group’s Idea Exchange programme, agriculture minister Narendra Singh Tomar on Wednesday ruled out the possibility of giving a legal backing to the minimum support price-based procurement system under the Bills, which are awaiting the presidential assent. However, he assured that procurement operations won’t be affected by the move, and would continue to be done under an administrative order.

The Centre has brought in two Bills to deregulate essential commodities trade and introduce a central law that would enable farmers to sell their produce wherever they like. This proposed law also promises free inter-state movement of farm commodities without any barrier.