Govt saddled with huge volumes of high priced cotton

19 Mar '09

2 min read

The Indian government in the process of giving a bonanza to the cotton farmers, had raised the Minimum Support Price (MSP) of the white gold in the new cotton season by 25-40 percent, but has ended up hurting the interests of the domestic textile industry at a time, when global prices of cotton were ruling at four year lows.

Altogether, the procurement agencies of the state and central government have purchased a huge quantity of cotton amounting to 2,700 million kg of raw cotton in the new season which ended on March 15, against 213 million kg procured in the last cotton year, up by a massive 1,285 percentage.

But the moot point that arises is that the government is saddled with such a huge quantity of cotton at a price very much higher than those prevailing in global markets and when cost of warehousing and transportation is added to the overall cost, it will be difficult for the government agencies to dispose off the cotton.

In the last few weeks, though, the government has started the process of disposing off the stored cotton by offering discounts to bulk purchasers, but it has not met with success, mainly due to the high prices. Experts warn of a possibility of an artificial shortage of long staple length cotton in the markets due to this excessive procurement.

Fibre2fashion News Desk - India

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