Fall in raw cotton rates: Why CCI entry has failed to cheer farmers in Punjab

The Indian Express
October 17, 2019
Anju Agnihotri Chaba


With raw cotton rates falling below MSP over the past few weeks after an excellent beginning when the going market rate was much higher than the MSP benchmark, the Cotton Corporation of India (CCI) has entered the North region market, mainly Punjab, Rajasthan and Haryana, to purchase the narma or kapas (raw cotton) directly from the farmers. The Indian Express explains why the CCI’s entry won’t help the farmers much.

Why has the CCI entered the market?

The government has fixed Rs 5450 per quintal as kapas MSP. In the beginning, when the first picking of the cotton started over a month back in Punjab, the rate was quite above the MSP and farmers have had sold it at the rate of Rs 5600 to above Rs 6100 per quintal. But for the past over two weeks, the rates started coming down and currently the rate is between Rs 4800 to Rs 5,000 per quintal which is Rs 400 to 600 per quintal below the MSP in all the main mandies of Punjab including Bathinda, Abohar, Fazilka, Mansa, Mukatsar among others.

When the rate is above the MSP, the CCI is not supposed to entre the market, but when crop rate comes below the MSP, then it becomes mandatory for CCI to enter the market to support farmers by purchasing kapas at the MSP.

Also, this time farmers, who were against CCI’s entry last year when the rate was good and had sold their crop through arhtiyas (commission agents), too want that the CCI should purchase it from them directly.

Why have rates fallen in the mandies?

There is less demand from the spinning industry due to downward trend in the export of yarn from India for the past several months. Also India’s export of lint to the Pakistan got suspended recently.

“This year the cotton production in Pakistan was quite less against India’s bumper crop and the demand would have been much as Pakistan is importing around 1.25 lakh bales weekly from USA while India is getting 70,000 bales per day in the market currently which would go up to 1.5 lakh and 2 lakh bales daily in November and December, respectively,” said a cotton expert Sanjiv Dutt, Vice Prsident of Winsome Textile.

He said that this time, India is expecting to produce 3.96 crore bails this season against 3.25 crore bales last season. The total consumption of Indian units is 2.80 crore to 3 crore bails and remaining are exported to Bangladesh, Vietnam, China, Indonesia, Pakistan. Also around 50 per cent of the Indian manufactured yarn is exported.

How can entry of the CCI help farmers?

According to the norms, the CCI is supposed to purchase the cotton at the MSP rate. But as per the parameters of the crop, CCI can purchase kapas with the moisture level between 8 per cent to 12 per cent only. For 8 per cent moisture level, CCI would pay full MSP (Rs 5450 per quintal).

If the moisture level is higher and then there would be a cut of 1 per cent each with the increase of each per cent moisture level. For instance, if the moisture level is 9, 10, 11 and 12, then the rate of the crop would be Rs 5395 (with a cut 55 per quintal which is one percent of the MSP), Rs 5341, Rs 5288 and Rs. 5232 per quintal, respectively.

With such parameters CCI’s purchase would stand Between Rs 5238 to 5450 per quintal for 8-12 per cent moisture level and there would be only Rs 200 difference per quital even if a farmers’ crop has 12 per cent moisture level.

Then how is it that the farmers won’t benefit this time?

Against the norms of the CCI, which can purchase kapas with the moisture level between 8-12 per cent, currently 98 per cent kapas, which contains around 33 kg lint and 64 kg seed and one per cent wastage, of first picking of cotton is arriving with the moisture level beyond 12 per cent — mainly with 15-18 per cent moisture level.

There are three pickings of the cotton. The first picking takes place in September-October months when 30 per cent of the total kapas arrives in the market. Second arrival starts in November during which 45 per cent of the total crop arrives and last picking takes place in December when remaining 25 per cent cotton reaches in mandis.

CCI sources said that in first 30 per cent picking, the agency cannot help much because 98 per cent crop part of this first cycle is beyond 12 per cent moisture level and farmers have to sell it to private players like ginners, traders, spinners only. They said that if the moisture comes down in the second picking than they may purchase maximum level of crop. Farmers, however, allege that CCI is avoiding purchase only making baseless excuses of moisture level.

What is the total arrival of cotton in the mandies of Punjab, Haryana and Rajasthan till date?

This year, till date nearly 7 lakh bales (one bale is equal to 177 kg lint) has reached in the mandies of Punjab, Haryana and Rajasthan. As total production of north region is around 58 lakh bales which included 12 to 15 lakh bails in Punjab, 18 lakhs in Rajasthan and 28 lakhs in Haryana.

What is the total purchase of CCI till date in these states?

CCI has purchased 4000 quintal in Punjab (800 bales in Punjab), 2500 quintal in Rajasthan (500 bales) and only 20 quintal in Haryana till Wednesday noon.

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