Govt may procure 38% of fresh cotton supplies in January to support farmers

The government expects to procure a massive 38% of cotton supplies from the fresh crop this month, as the Centre steps up efforts to provide relief to farmers following a drop in the fibre's prices below the state-fixed benchmark rates in many regions.

The Cotton Corporation of India (CCI) is expected to purchase 1.9 million bales in January out of the crop arrival of 5 million bales, a senior government official told FE. While procurement in third-largest producer Andhra Pradesh, where prices are still ruling around 3% below the minimum support prices, will likely touch 1.5 million bales in January, purchases from Maharashtra may reach 4,00,000 bales, he said. The total costs of procurement operations until end-January would be to the tune of R 8,100 crore, an all-time-high, despite a projected 5% drop in the country's cotton output in 2012-13.

CCI procured 1.3 million bales, almost all from Andhra Prdesh, until December 31 since the marketing year started on October 1, out of the arrivals of 8 million bales. One bale equals 170 kg. Ginners have already procured 1.27 million bales and have ginned 8,00,000 bales out of the purchases, said the official.

The government won't reduce procurement despite a looming storage crisis, a senior official said on Wednesday. Excess cotton stocks in Andhra Pradesh, where a storage crisis is fast approaching, will be kept in other states, especially Tamil Nadu, where the facility is available, he added.

The CCI has projected cost of the procurement operation at R5,400 crore for January, on top of purchases worth R2,700 crore until December 31. CCI has also projected losses of R1,647 crore on its procurement operation during the entire marketing year through September 2013. Government agencies usually buy cotton at the minimum support price (MSP) and sell the stocks later at market rates. Losses on account of the procurement operations are reimbursed by the government.

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