Cotton prices expected to stabilize due to 9% hike in MSP
Cotton prices, which have fallen over 25% in the last eight months, are expected to stabilize after the government on Wednesday raised the minimum support price (MSP) of the commodity by around 9% annually for the 2023-24 marketing season .
The fall in prices caused unrest among cotton farmers, who were holding their produce in the hope of better prices, causing a shortage of cotton in the market.
Cotton prices have come down to Rs 7,200 per quintal from a high of Rs 10,000 per quintal in October. Industry experts said if the fall in prices continues, farmers may prefer to wait till the next season to sell at the new MSP of Rs 7,020 per quintal.
An increase in the MSP of cotton will also help arrest the fall in cotton prices. “Instead of selling cotton at lower rates, farmers can choose to wait and sell cotton at the new MSP to the government in the next cotton season.”
The area planted under cotton is also likely to be supported by the increased MSP. “We were expecting a drop in cotton acreage before the government announced the MSP. However, now the area under cotton may increase by around 5%,” said Pradeep Jain, president, Khandesh Ginning and Pressing Association.
The increase in MSP is expected to provide sufficient raw material to the cotton processors. "We could not run our mills at full capacity as farmers did not bring enough cotton to the market this year," said Avinash Kabra, a cotton processor from Dharangaon in northern Maharashtra. "Any increase in production of cotton due to increase in MSP will increase the supply of raw material for the cotton-based industry."
However, south India's export-oriented spinning mills cautioned that a hike in MSP without increasing cotton productivity could jeopardize India's competitiveness in international markets.
Southern India Mills Association President Ravi Sam said, "Increasing MSP is not the solution to increase cotton production in India. We need to improve the productivity of cotton by bringing in better technology and better seeds."
Sharma said, "Although higher production is expected in cotton for the marketing year 2023-24, if mandi prices are seen to decline, this higher MSP will augur well for farmers' income in Maharashtra, Telangana and Gujarat." which are major cotton producing states.
