China being top buyer of cotton from India cutting in imports depressing prices, India will be forced to make large-scale government cotton purchases from farmers for a second straight year. In the marketing year that ended on September 30, India spent 160 billion Indian rupees ($2.5 billion) to buy 8.7 million bales of cotton at a government-set minimum support price (MSP), against just 400,000 bales in the previous year.
During the peak supply season, prices will drop below the MSP level since demand is negligible from China, according to Dhiren Sheth, president of the Cotton Association of India (CAI).
He counts on Cotton Corporation of India (CCI) to make aggressive purchases again this year as export demand was subdued and carry forward stocks were at record highs at an estimated 7.9 million bales.
China has in recent years taken more than half of India’s cotton exports, propping up prices despite record output, but last year began cutting import quotas to stimulate demand for domestic cotton after it halted a state stockpiling programme.
B.K. Mishra chairman, managing and director of the CCI said that they haven’t fixed any procurement target for the current year, but they will buy as much as farmers want to sell. However, this year since production was set to drop 1.5 per cent to 37.7 million bales and consumption by local textile units has been rising, procurement was still likely to be lower than last year. So far CCI have opened 50 procurement centres. They could open 300 centres across the country like last year.
