India Budget 2025: CITI calls for DBT scheme in cotton procurement
India Budget 2025: CITI Demands DBT Program for Cotton PurchasingThe Cotton Corporation of India (CCI) is expected to acquire approximately 25–35 per cent of the cotton produced this season, as it purchases between 50–70 per cent of the daily cotton arrivals. This surge in procurement is attributed to open market prices falling below the minimum support price (MSP).The Confederation of Indian Textile Industry (CITI), the country’s leading industry body, has urged the government to replace the current procurement system with a Direct Benefit Transfer (DBT) scheme. This demand features prominently in CITI’s recommendations for the Union Budget for the 2025–26 fiscal. Union Finance Minister Nirmala Sitharaman will present the budget on February 1, 2025.CITI noted that the government annually announces an MSP for cotton. When market prices drop below the MSP, the CCI intervenes to purchase cotton directly from farmers at the MSP rate. After procurement, CCI stores the cotton in warehouses and sells it in the open market or through auctions.However, CITI has proposed a DBT scheme where farmers can sell their cotton at prevailing market prices. If the selling price falls below the MSP, the difference would be directly transferred to the farmer’s bank account.This scheme would provide more liquidity to cotton farmers, enabling them to sell their produce without waiting for government procurement. Additionally, it would reduce the financial burden and storage costs for CCI, benefitting all stakeholders.CCI has already purchased around 55 lakh bales of cotton this season, with total procurement expected to reach 100 lakh bales. This would account for over 35 per cent of the estimated output of 302 lakh bales (170 kg each). Mills are facing challenges in sourcing cotton from the open market due to CCI’s aggressive buying and may encounter greater difficulties as arrivals decline, leaving CCI as the largest stockholder.CITI also requested that the government, through CCI, ensure sufficient availability of cotton at globally competitive prices. Currently, domestic cotton prices are higher than international prices. If CCI incurs losses, the government should compensate it through subsidies, similar to those provided for other commodities.CITI has also called for support through a Price Stabilisation Fund Scheme to ensure the industry has access to raw materials at reasonable prices. Currently, textile mills can secure working capital from banks for only three months. Consequently, mills typically procure three months’ worth of cotton stock at the start of the season when prices are generally lower. For the remaining months, mills rely on traders and CCI, whose prices fluctuate based on market conditions. This uncertainty makes it challenging for mills to plan their production schedules effectively.To address the issue of price volatility, the government could consider implementing a Cotton Price Stabilisation Fund Scheme. Under this scheme, mills should receive a 5 per cent interest subvention or loans at NABARD rates, recognising cotton as an agricultural commodity. Additionally, banks should extend the credit limit period for cotton procurement from three months to eight months, with a reduced margin money requirement from 25 per cent to 10 per cent.This scheme would enable the industry to procure raw materials at competitive market rates at the beginning of the season and shield mills from price fluctuations during the off-season, facilitating better production planning and stabilityread more :- On Friday, the Indian rupee closed marginally lower at 85.78 per dollar from its previous close of 85.75.
