One third of India's new cotton will be acquired by the Central Government this year

The central government of India is preparing to buy one-third of this year's new cotton because the government is worried that the decrease in apparel demand may cause the price of cotton to fall below the minimum support price, causing widespread farmers to suffer losses.

This will be the largest number of cotton purchases in the history of the Indian government. The government may spend Rs. 13,000 million for this purpose. Cotton is the most important economic crop in India, accounting for 30% of the total agricultural production.

Last week, the heads of nine major cotton-growing states demanded that the Federal Textile Department, through the Indian state-owned cotton company, acquire at least 13.5 million bales of the expected output of 35.5 million bales in the new sales year starting from October 1.

The average cost of growing cotton within two years has risen by 20% from INR 2111/kg in 2009-10 to INR 2528/km this year. The current minimum support price is INR 2800/c.

According to the estimation of the Ministry of Textiles, the cloth production in 2011-12 is expected to decrease by 15%, and yarn production is expected to decrease by 17% due to the slowdown in the demand for cloth in India and overseas markets. Intergovernmental organizations, the International Cotton Advisory Committee estimates that global cotton production will rise by 11% this year, and consumption will only increase by 1.5%. Therefore, excess inventory will reach 10 million tons.

In India, there were no sales of 5 million bales in 2010-11, and 10 million bales of new cotton arrived. Therefore, during the period of October-January, there may be 15 million bales of cotton available for purchase by textile mills. However, they have enough cotton in their hands to meet the production needs in October.