Study on cotton calls for long-term policies

The long-term policies of the government should address the fundamental constraints faced by the cotton sector to improve productivity. It should ensure economic viability of the crop for the growers and also take into account the interests of the entire value chain, said a study taken up by the Confederation of Indian Textile Industry, with Gherzi Textile Organization and the International Cotton Advisory Committee, as knowledge partners.

The 11 % import duty imposed in 2021-22 was to address the temporary surplus of cotton due to the fall in mill consumption forced by the COVID pandemic. The Cotton Corporation of India (CCI) stepped in to procure large volume of cotton. However, the years after that witnessed an increase in mill use, necessitating imports. The demand/supply imbalance is likely to widen in the near future. India’s competitors in Asia have free access to international cotton without any import duty, placing India at a significant disadvantage. A stable and predicable policy is imperative to allow the mills to sustain their operations and fulfil the market demand.

There is a need to better align domestic cotton pricing mechanisms with international market trends (Cotlook A prices) while continuing to protect farmers’ interests. A more balanced approach would help ensure the competitiveness of the textile industry without undermining the MSP framework.

Similar to the cotton reserve policy adopted by other major cotton-textile producing countries, such as China, the CCI should consider the feasibility of keeping a strategic inventory for about three months and have a dynamic selling policy to meet the current requirement of the mills through its warehouses, the study said.