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NAFED may intervene if cotton prices slip below MSP
Nov '11
India is expecting a bumper cotton crop in the new season which has recently begun. In order that domestic prices do not slip below the minimum support price (MSP) mandated by the Indian government, National Agricultural Cooperative Marketing Federation of India (NAFED) is mulling to take up a market intervention initiatives.

NAFED will be undertaking market intervention program after a period of two years and towards that end has informed its top officials to carry regular assessments of cotton price trends mainly in the cotton producing states like Gujarat, Maharashtra, Punjab, Andhra Pradesh and Haryana.

Currently cotton prices are ruling over the MSP announced by the government. The MSP for 2011-12 for cotton farmers for long staple type variety of cotton is Rs 3,300 per quintal and for medium staple quality; it is Rs 2,800 per quintal.

Giving details about the need for market intervention, a senior official of the cotton division of NAFED told fibre2fashion, “We have a bumper cotton crop this time and the output is estimated to be around 35-36 million bales (1 bale = 170 kg). Due to this the prices will surely see a downward trend.

“Prices are expected to fall after November. But if China's policies remain same and they import more this time, then cotton exports will get boost from India. We are hopeful that about 7-8 million bales of cotton can be exported. So, we are waiting for them to declare their policies for cotton imports from India.

“The dollar is weak currently and hence exports are lower to European countries where mainly yarn is exported. In such a situation, expectation of exports to the European region is less. The Government of India, along with the Cotton Corporation of India (CCI), has made NAFED a procuring agency for cotton procurement. So, if prices move downward, NAFED will do the procurement as per the government's policies”.

“If prices fall below the MSP, then the government agencies purchase the cotton at the MSP so that the prices remain stable and do not fall below a certain value, so that farmers do not incur losses. The MSP is decided keeping in mind the cultivation costs of farmers and making sure the farmers are not on the losing side. This also encourages the farmers to keep producing more and more cotton in their fields.

“After procurement, the cotton is processed further viz. ginning, pressing, etc. and sold as per the norms of CCI”, he concluded by saying.

Fibre2fashion News Desk - India

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