Cotton production seen higher than ministry estimates

First advance estimate by ministry pegs India�s cotton output at 33.5 million bales, the lowest in five years -

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September 25, 2015 New Delhi: The farm ministry�s estimate of cotton production is too pessimistic and the actual production will only be marginally lower compared with last year, according to the Cotton Corp. of India, the government agency that procures the fibre crop at support prices.

�We are expecting an output of 35 million bales (of 170kg each) in 2015-16, marginally lower than last year�s 35.5 million bales,� said B.K. Mishra, chairman and managing director of Cotton Corp. The first advance estimate by the ministry, released last week, pegs India�s cotton output at 33.5 million bales, the lowest in five years.

So far, cotton has been sown in 11.5 million hectares, compared with 12.6 million hectares sown last year, data from the agriculture ministry shows.

According to the India Meteorological Department, the June-September South-West monsoon recorded a deficit of 12% till 23 September, with rain-fed cotton growing areas in Telangana, Maharashtra and Andhra Pradesh witnessing lower than normal rain.

Although the area under cotton has reduced in states such as Gujarat, and some crop was damaged due to a white fly pest attack in the northern states (like Punjab), the revival of the monsoon in the last few weeks will help the crop in rain-fed areas, Mishra said over the telephone from Mumbai.

However, he added that procurement by government agencies such as Cotton Corp. may be lower this year on account of higher prices of cotton seed (used to produce oil) and possibility of exports to Vietnam and Bangladesh. Last year, on account of crashing international prices and lower imports by China, Cotton Corp. had to procure a record 8.7 million bales, nearly a quarter of the India�s production.

Mishra said that the government is considering replacing the physical procurement of cotton at support prices by a sort of �deficiency price payment� system. In such a system, farmers will be paid the difference between the market price and a predetermined threshold, a form of price insurance.

�The discussions are at an early stage and it may not be implemented in the current season,� Mishra said, adding, �a price deficiency system is more useful as CCI (Cotton Corp.) would not incur costs for stock holding, interest payments and insurance.�

This is also a price support operation but without physical procurement, he said.

Numbers show that the financial loss to Cotton Corp. goes up in years of record procurement. For instance, in 2008-09, when the agency procured 8.9 million bales, it incurred a loss of Rs.2,400 crore. Last year, the procurement of 8.7 million bales is estimated to cost Cotton Corp. nearly Rs.2,700 crore.

A price-support mechanism without physical procurement will reduce such losses but the actual quantum will depend on the coverage and (benchmark) price under a deficiency payment system, Mishra said.

Sayantan Bera

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