Hike in minimum support price of cotton will make fibre expensive, may hit textile sector, says industry body CITI

New Delhi: The hike in minimum support price of cotton would make Indian cotton fibre relatively expensive with respect to international prices and inflate prices of its products, the Confederation of Indian Textile Industry (CITI) said on Thursday, while urging the government to establish a delivery mechanism for the industry to procure raw material at reasonable prices.

The government on Wednesday raised the minimum support price of cotton (medium staple) to Rs 5,150 per quintal from Rs 4,020 per quintal and that of cotton (long staple) to Rs 5,450 per quintal from 4,320 per quintal.

"The Textile & Clothing being an integrated industry, the proposed hike in MSP based on 1.5 times the A2+FL costs would impact each segment along the supply chain raising the final price of the product.

 Hike in minimum support price of cotton will make fibre expensive, may hit textile sector, says industry body CITI

Representational image. Reuters

"Further, this intervention would also make Indian cotton fibre relatively expensive with respect to international prices. As Textile & Clothing exports are still reeling under the pressure to perform, absorbing a hike of 28 percent would be difficult for the entire textile Industry," Confederation of Indian Textile Industry (CITI) Chairman Sanjay Jain said.

He said there was a need to examine the event from different perspectives and understand that the farmers' gain should not impact the $120 billion textile industry which employs over 10 crore people, and hoped the government would devise a direct subsidy route so that interests of both farmers and the industry are protected.

"From 2009-10 to 2017-18, MSP increased by Rs 1,320/quintal and in 2018-19, it has been increased by Rs 1,130/quintal. The impact is huge and possibly unprecedented. Although, China has imposed an additional 25 per cent import duty on American cotton and the rupee has also depreciated against the dollar, still cotton and yarn would face headwinds," Jain said.

He emphasised that the real impact depends on the movement of international prices of cotton, and also pointed out that higher MSP would further compel huge cotton procurement by the state-run Cotton Corporation of India (CCI).

"In the past, for instance, the Centre raised cotton MSP (medium staple) by a record 39 per cent in 2008-09, driving up CCI's procurement to an all-time-high of 8.9 million bales. Industry hopes that a clear CCI Policy is spelt out, so that in case they need to make massive procurement, the industry gets regular offering from them throughout the season at international parity prices," Jain said.

Updated Date: Jul 06, 2018 11:23:33 IST