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Hike in MSP : good for cotton sowing, bad for spinners

Published: June 11, 2020
Author: Millionaires


On Monday 1st June, the decision taken by India’s Cabinet Committee on Economic Affairs (CCEA) hiked the minimum support prices (MSP) for kharif crops (summer), including cotton, of paddy (common) marginally by Rs 53 per quintal to Rs 1,868 per quintal for the 2020-21 crop year, while the rates for oilseeds, pulses and cereals were also raised.

This decision of the Cabinet, chaired by Prime Minister Narendra Modi, will help farmers take a call on which kharif (summer) crop to grow as sowing picks up with the arrival of southwest monsoon.

According to an analysis by credit rating agency ICRA, this decision is favourable for cotton sowing but is likely to be unfavourable for the domestic spinning sector.

In an official statement, the government said that the MSP for cotton – medium staple variety has been increased by Rs 260 per quintal to Rs 5,515 per quintal for 2020-21 from Rs 5,255 per quintal last year.

While the MSP of cotton -long staple variety has been increased by Rs. 275 to Rs 5,825 per quintal from Rs 5,550 per quintal in the said period. The Indian cotton year ends in September.

The MSP of Grade A variety of Paddy has been increased to Rs 1,888 per quintal for 2020-21 crop year from 1,835 per quintal last year.

The increase of 5 per cent in cotton comes after a muted 2 per cent increase implemented for CYi2020, which followed a significant increase of 26-28 per cent for the period. As per the ICRA report, this hike is in line of at least 1.5 times of the all-India weighted average cost of production as announced in the budget 2018-19 to fix the MSPs.

Jayanta Roy, senior vice president and group head, ICRA Ratings, said: “The main purpose of this scheme is set to benefit the farmers on commencement of harvesting for the ongoing kharif season, from October 2020 onwards. Despite a fall in cotton prices in the past few months, this move will encourage and guide farmers for cotton planting. However, under the pandemic of Covid-19 this move has become a challenge for the domestic spinning companies

 The Met Department has projected normal monsoon during the June-September period.

Due to Covid- 19 Government is taking a holistic approach towards supporting the farmers and facilitate farming-related activities in the lockdown situation. Efforts are being made to facilitate the marketing of agricultural produce by the farmers.


Together the plan, of increased MSP and expected monsoon augur well for cotton sowing in India but threats the spinning sector.  Again the locust swarm that attacked India since April and has hit several parts of western and northern India including Gujarat, Maharashtra, Uttar Pradesh, Rajasthan, pose a looming threat for the crops as these insects feed on a large variety of crops & west the entire seasonal efforts of the farmers.

MSP hiked the cotton prices in domestic market & exports have fall down, coupled with the discontinuance of subsidy benefits under the Government of India’s Technology Upgradation Fund Scheme (TUFS) for the spinning segment all this has weakened the domestic spinner in India.

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