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Wednesday, March 03, 2021

Kapas prices cross govt-declared MSP, CCI stops procurement in over 300 centres

Despite external factors such as drought in USA, bullish procurement by China and Covid-19, Indian growers have benefited from CCI's procurement centres.

Written by Parthasarathi Biswas | Pune |
February 1, 2021 11:12:43 pm
Cotton Corporation of India, Cotton prices, Kapas prices, Cotton MSP prices, CCI, Crop procurement center, Pune news, Maharashtra news, Indian express newdIn the last three years, CCI has received a total of Rs 2050.33 crore as compensation, while it has helped farmers receive a total MSP of Rs 34,800 crore. (Representational)

JUST FOUR months after Cotton Corporation of India (CCI) started procurement in all its 400 centres across the country, the operations have stopped in over 300 centres as kapas (raw unginned seed cotton) prices in most mandis in major cotton producing states have crossed the government-declared minimum support price (MSP) of Rs 5,825 per quintal.

The government-owned corporation had to wade in at the beginning of the cotton marketing season (October to September) 2020-21 to begin procurement. PK Agarwal, chairman-cum-managing director of CCI, said, to date, they had affected procurement of 87.96 lakh bales (one bale having 170 kg pressed ginned lint) of cotton from 18.02 lakh farmers.

“As of January 25, farmers have received Rs 25,691.35 crore in way of MSP. Our centres will remain open but as average traded prices of kapas in most mandis have crossed MSP, there is no need for us to procure,” he said.

While global forces like a drought in USA — the largest cotton producer in the world — and bullish procurement by China sent cotton prices rallying, the presence and surety of CCI’s procurement centres have helped Indian growers, especially at the beginning of the season. Pradeep Jain, founder president of Khandesh Gin/Press Owners and Traders Association, said even with the Covid-19 pandemic, farmers benefited from CCI’s presence.

“Back in October 2020, when farmers started bringing their kapas to the market, average traded price was in the range of Rs 4,500 to Rs 4,600 per quintal. Prices started rallying only after CCI started procuring,” Jain said. His organisation largely deals with cotton growers in North Maharashtra. Jain and other traders said the CCI’s procurement was instrumental in ensuring that farmers, whose produce met fair and average quality (FAQ) parameters, were able to realise the MSP that traders would not have been able to afford given the supply-demand situation back then.

For kapas growers, over the past 60 years, CCI has become the go-to point for selling quality produce at government-notified MSP. This is particularly important in years when oversupply resulting from a bumper crop led to a price dip below MSP. Procurement by CCI provides much-needed support, especially in such times.

While procurement centres remain throughout the cotton marketing season, operations stop once prices cross the MSP. Thus, for 2019-20 season, when kapas prices remained low almost throughout the season, CCI ended up procuring a record 105.23 lakh bales of cotton (almost one-third of the cotton produced), while for the 2018-91 season, when prices were unusually high for most of the season, just 11.03 lakh bales were procured.

Like other government agencies, CCI procures via agricultural marketing produce committees (APMC). Farmers who want to sell their produce to the corporation have to register with the APMCs, with documents like land extract, bank details and Aadhaar card. Once the mandi verifies credentials of the farmer, the kapas is transported to the CCI’s procurement centre, which is normally the yard of the nearest gin/press unit. After quality checks in terms of moisture and presence of external material, the value of the produce is determined. If the farmer agrees to the value, the sale slip is drawn up and payment is credited to the farmer’s bank account within the next two to three days.

Once raw kapas is processed, cotton seeds and lint are separated with the lint being pressed into bales of 170 kg each. Both the seed and bales are separately auctioned off by CCI, as these are its main sources of revenue.

While the corporation is mandated to procure at MSP, while selling it often sells below the procured price thereby incurring a loss. The central government compensates the corporation for this, but CCI has reported successive profits in the last three years the because of the income generated from the properties it gives on lease, such as warehouses.

In the last three years, CCI has received a total of Rs 2050.33 crore as compensation, while it has helped farmers receive a total MSP of Rs 34,800 crore. Senior officials said last season, they procured almost one-third of the cotton produced in the country.

“Had it not been for the corporation, prices would have gone south. Even if we buy just one-third of the cotton produce, the ripple effect is enough to reach all kapas growers in the country,” they said.

Traders like Jain said in view of strict adherence to quality, CCI draws the best produce available in the market. This forces traders to raise their prices in response, they added.

Market trends show a clear Rs 200 to Rs 300 per quintal recovery in mandi prices once CCI goes into action. Also during off season, CCI ensures availability of quality cotton thereby negating hoarding by traders.

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