Private Traders Offer Higher Than MSP For Cotton In Punjab On Huge CCI Procurement, Spike In Yarn Rates

Even as a section of their fellow farmers is protesting against the agricultural reforms brought about by the Narendra Modi government, cotton growers in Punjab are reaping the benefits of the progressive policies that allow them to sell their produce to anyone of their choice anywhere in the country.

Punjab cotton growers are now being offered prices far higher than the minimum support prices (MSP) of Rs 5,515 a quintal fixed by the Union government for this season (July 2020-June 2021) by private traders.

The Tribune English daily reported that private players were buying cotton for as high as Rs 5,900 a quintal.

There are two reasons why Punjab growers are getting higher prices for their produce. One, state-owned Cotton Corporation of India (CCI) has procured over 50 per cent or over five lakh bales (170 kg each) of the crop estimated to be produced this season.

The Cotton Association of India (CAI), a traders association, has projected that Punjab would be producing 10.50 lakh bales of the estimated 356 lakh bales in the country.

This has now resulted in private traders rushing to covering their needs, especially for the spinning mills in the northern region.

“(Ginned) cotton prices have increased to Rs 43,500 now from Rs 41,000 a candy (356 kg) in a few states, including in north India. So, private ginners are buying from the farmers as they find parity,” said CAI president Atul Ganatra.

Private traders, including those representing ginners and mills from areas such as Patiala, Bhatinda, Ludhiana and Fazilka, have reportedly bought nearly 30 lakh bales.

In Fazilka districts, raw cotton prices in Agricultural Produce Marketing Committee (APMC) yards are ruling Rs 200 higher than MSP, while they are around MSP level in Bhatinda district.

The other reason why prices are ruling high despite the country having record carryover stocks of over 120 lakh bales this season is that yarn prices have surged over 50 per cent since June last year.

With normal production almost returning in garment and fabric sectors, the spinning mills have run out of yarn stocks.

As spinning mills cover their requirements along with demand for export from countries such as Bangladesh, Vietnam and China, cotton prices have increased.

“Raw cotton prices have increased also because rates for cottonseed have improved. Since the seed prices are up along with ginned cotton, ginners are offering better prices,” said Anand Poppat, a Rajkot-based trader in raw cotton, yarn and spinning waste.

According to the Solvent Extractors of India, cottonseed prices are currently ruling at Rs 22,000 a tonne, up from Rs 20,500 during the December last week.

In view of private trade rushing to cover the needs, the CCI, which has procured 83 lakh bales so far since 1 October from various cotton-growing states including Punjab, Telangana and Maharashtra, has slowed down its purchases.

“CCI has reduced its purchases from 2 lakh bales a day to 1 lakh bales now,” said CAI’s Ghanwat.

“CCI could not procure much in Gujarat as prices in the state have ruled higher than MSP since October,” said Poppat.

The Tribune quoted a Bathinda textile firm owner as saying that they were facing problems in getting cotton supplies as CCI had bought most of the stocks.

The textile industry, particularly spinning mills, are running around 90 per cent of their capacity now. Panic buying of yarn by garment and fabric manufacturers is reported to be the reason for yarn price spike and shortage.

Spinning mills officials say the shortage will likely be set right in a month’s time and prices could then stabilise.

This has not stopped some farmers to hold back their produce, hoping for prices to rise further.

One of the reasons why the price rise could be limited is the high carryover stocks this season. Next season, too, the high carryover stocks could continue with CAI estimating it over 100 lakh bales.

The high carryover stocks are despite 50 lakh bales of cotton being exported last season and projections of 54-60 lakh bales exports this year.

The development with regard to Punjab comes on the heels of farmers in the state leading the protest in the national capital region of Delhi against the three bills passed by Parliament in September.

A Supreme Court bench, headed by Chief Justice S A Bobde, stayed the implementation of the three bills, though the farmers have ruled out withdrawing their protests.

The three bills passed by Parliament, as part of the government’s Atmanirbhar Bharat Abhiyan to help the economy recover from the novel coronavirus pandemic, are: The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, and the Essential Commodities (Amendment) Act, 2020.

The Act on Farmers’ Produce Trade and Commerce allows a farmer to sell his produce to anyone and anywhere in the country with the government saying it promotes the concept of “one country, one market”.

The Agreement on Price Assurance Act enables farmers to enter into contract farming, while the Essential Commodities (Amendment) Act removes the cap on the stocks of commodities such as onion and potato that wholesale and retail traders can hold in their warehouses.

The farmers, especially in Punjab, have been led to believe by opposition parties such as Congress, Aam Aadmi Party and the Left that these reforms have been brought in to end the MSP system and favour a few corporate houses.

Farmers have also been put ill-at-ease by scare-mongering of some elements, who have spread rumours that farmers would lose their lands.

The Centre has been at pains, explaining that these reforms were only to benefit them and achieve the government’s objective of doubling farmers' income. Its efforts, so far, have been in vain.

It can, however, expect some relief if the committee set up by the Supreme Court to look into the reforms finds merit in them.