Explainer / Cotton sector in India

The Cabinet Committee on Economic Affairs (CCEA) approved the Minimum Support Price (MSP) funding of Rs 17,408 crore to Cotton Corporation of India (CCI) for cotton seasons 2014-15 to 2020-21 for direct support to farmers.

It will be primarily utilised for repayment of bank loans taken by the state-owned firm for the procurement of cotton during the previous seven marketing years.

Cotton Corporation of India (CCI), a Public Sector Undertaking under the ministry of textiles, is the nodal agency of government for undertaking MSP operations in the event of prevailing seed cotton (kapas) price touching the MSP level.

During cotton season 2020-21, area under cotton cultivation was 133 lakh hectares with estimated production of 360 lakh bales (of 170 kg each), which account for around 25 per cent of total global cotton production.

Amid the pandemic in the last two cotton seasons (2019-20 & 2020-21), the CCI procured around one-third of the cotton production in the country, about 200 lakh bales, and disbursed more than Rs 55,000 crore directly in the bank account of around 40 lakh cotton farmers.

For the current cotton season, the CCI has already made adequate arrangements in all 11 major cotton-growing states by opening 474 procurement centres in 143 districts, to meet any eventuality of MSP operations. The procurement of cotton at MSP helped stabilise the cotton prices and alleviate farmer’s distress. 

Cotton sector in India

• India is one of the largest producers, consumers and exporters of cotton in the world.

• Cotton is one of the most important cash crops and India accounts for around 25 per cent of total global cotton production.

• In the raw material consumption basket of the Indian textile industry, the proportion of cotton is around 60 per cent. 

• India occupies first position in the world in cotton acreage (area under cotton cultivation) with around 126.14 lakh hectares under cotton cultivation which is around 38 per cent of the world area of 326.50 lakh hectares. 

• Approximately, 62 per cent of India’s cotton is produced on rain-fed areas and 38 per cent on irrigated lands. 

• Apart from being the provider of a basic necessity of life — clothing which is next only to food — cotton is also one of the largest contributor to India’s net foreign exchange by way of exports in the form of raw cotton, intermediate products such as yarn and fabrics to ultimate finished products in the form of garments, made ups and knitwear. Due to its economic importance in India, it is also termed as “white gold”.

• Cotton plays a major role in sustaining the livelihood of an estimated 5.8 million cotton farmers and 40-50 million people engaged in related activities such as cotton processing and trade. 

In India, cotton is cultivated in three diverse agro-ecological zones:

1) Northern zone comprising the states of Punjab, Haryana and Rajasthan.

2) Central zone comprising the states of Madhya Pradesh, Gujarat, Maharashtra & Odisha.

3) Southern zone comprising the states of Telangana, Andhra Pradesh, Karnataka and Tamil Nadu.

• Cotton is also cultivated in small areas of non-traditional states such as Uttar Pradesh, West Bengal and Tripura.

• Cotton is a Kharif crop in the major parts of the country.

• Approximately, 62 per cent of India’s cotton is produced on rain-fed areas and 38 per cent on irrigated lands. 

• India grows all four known species of cultivated cotton. They are Gossypium arboreum, G.herbaceum, G.hirsutum and G.barbadense.

• Cotton is a freely exportable commodity from India. India exports cotton mainly to Bangladesh, China, Vietnam, Pakistan, Indonesia, Taiwan, Thailand, etc, out of which Bangladesh and China are the largest importers of Indian cotton. Although India is a major producer and exporter of cotton, some quantity of extra-long staple variety of cotton, which is not available in the country, is imported.

• To support the cotton industry, the government of India announces Minimum Support Price (MSP) for two basic staples groups — medium staple and long staple cotton.

Cotton Corporation of India (CCI)

• The Cotton Corporation of India (CCI) was set up in 1970 by the government as a public sector organisation in the field of cotton marketing.

• Ever-since its inception, the Corporation has been operating in competition with private cotton traders and other institutional buyers, its market share varying from 5 per cent to 8 per cent except in some years under MSP operations when it has gone up to 31 per cent.

• With the changing cotton scenario, the role and functions of the Corporation were reviewed and revised from time to time.

• As per the policy directives received from the ministry of textiles in 1985, the CCI is the sole agency of the government for undertaking Minimum Support Price (MSP) operations, whenever the prices of kapas (seed cotton) fall below the MSP level.

• Besides MSP operations, to fulfill the raw material requirement of the domestic textile industry, particularly during lean season, the Corporation undertakes commercial purchase operations at its own risk. 

Broad objectives of the Corporation are: 

• To undertake price support operations, whenever the market prices of kapas fall below the minimum support prices (MSP) announced by the government, without any quantitative limit.

• To undertake commercial operations only at CCI’s own risk.

Manorama Yearbook app is now available on Google Play Store and iOS App Store