Cotton traders and groups in Gujarat are increasingly calling for a reduction in the crop’s Minimum Support Price due to a decline in cotton exports and an increase in imports.
The cotton industry and the textile value chain may experience another statewide dry spell if the MSP stays the same, according to Ajay Shah, secretary of the Gujcot Trade Association.
“Give farmers more subsidies while implementing a free market mechanism for cotton,” he stated. The government supports farmers by buying their products at a predetermined remunerative price under the MSP mechanism.
For medium- and long-staple cotton types, the 2024–2025 MSP is Rs 7121 per quintal and Rs 7521 per quintal, respectively. The difficulties that cotton mills and traders currently confront in maintaining their competitiveness in the worldwide market have been made worse by this. “We estimate that the government has purchased nearly 60% of the cotton stock from farmers as of December 2024,” Shah told FE. Because of the elevated MSP, private investors are purchasing fewer shares. Instead, a lot of businesses are importing cotton from nations that provide cheaper prices than India’s MSP, like Brazil, Australia, Western Africa, and the United States. For example, in October 2024, Brazil reduced the price of its cotton exports to USD 0.7060 per pound.
Despite a declining rupee, India’s cotton exports are not competitive, so this is a problem. Shah added, “Our exports are not competitive either.” “Export parity can be increased by a declining currency. But in order to profit, our traders need to set higher export prices. Why would nations purchase from us when countries like the USA and Brazil offer lower prices?
