Domestic cotton prices in the 2008-09 season are likely to rise by 5 per cent over and above the minimum support prices (MSP) in tune with the expected increase in prices of the commodity globally.
“Domestic prices of cotton may go up by 5 per cent above the MSP, as prices in global markets are expected to shoot up,” a senior government official said.
With the International Cotton Advisory Committee (ICAC) projecting a fall in global output of the crop, prices are expected to go up, which in turn propel domestic traders to increase exports in the hope of better returns.
The government has sharply increased the MSP of standard cotton (long staple) to Rs 3,000 a quintal for 2008-09 from Rs 2,030 in the previous year. Similarly, the MSP of medium staple cotton has been raised to Rs 2,500 from Rs 1,800 a quintal last year.
ICAC has projected a six per cent fall in global production to 24.7 million tonnes in 2008-09 season as increased competition from alternative crops dented its acreage.
The cotton output in the country is projected to be marginally higher at 32 million bales in the next cotton year starting October 2008, against the expected production of 31.5 million bales in this year ending September.
However, prices may get affected if significant difference in rates is noticed between global and domestic markets, an industry expert said.
“Arrivals of the crop are likely to decline after January. So, some price variation is likely then,” Cotton Corporation of India Chairman and Managing Director Subhash Grover said.
The cotton season runs from October to September. The domestic consumption, at present, is estimated at 24 million bales and imports stand at about 500,000 bales.
