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LATEST NEWS UPDATES | Offset ban on cotton export by raising floor price by 10%: CACP-Nidhi Nath Srinivas

Offset ban on cotton export by raising floor price by 10%: CACP-Nidhi Nath Srinivas

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published Published on Apr 11, 2012   modified Modified on Apr 11, 2012

The government should immediately announce a 10% increase in the floor price of cotton and rice to protect farmer incomes if it imposes a ban on the export of these commodities, India's two most economically significant cash crops, according to the Commission of Agricultural Costs and Prices (CACP), a body which advises the government on the pricing policy for major farm produce.

"Any ban on export is an implicit tax on farmers and should be immediately offset by a bonus on the minimum support price (MSP)," CACP chairman Ashok Gulati told ET. The suggestion to link trade policy with farmer incomes is significant as the government is scrambling for ways to manage the fallout of the current ban on cotton export which has sent prices crashing and led to political turbulence in Gujarat and Maharashtra.

Gulati said the CACP has submitted its recommendations for the forthcoming kharif planting season to agriculture minister Sharad Pawar. Both rice and cotton are planted in the kharif season. "We have recommended a good increase in the cotton MSP," he added.

The agriculture ministry fixes the MSP of major farm commodities based on the recommendation of the CACP. At present, the MSP of cotton is between 2,800-3,300 per quintal depending on staple length. The government last month decided to continue export of non-basmati rice, allowed under Open General Licence in September last year, because a record production of 102 million tonnes has pushed farm-gate prices below the MSP in several states.

Farmers are the worst hit by frequent changes in export policy. In March 2010, farmers saw cotton prices rise to a record 60,000/quintal on the back of brisk exports. But they crashed to less than half by June after exports were banned. This year, prices fell below MSP once the export ban was announced on March 9 because traders exited the market at a time when the debt-ridden domestic textiles industry does not have the cash to hold cotton inventory for more than 15 days.

Following a meeting with MPs from cotton producing states like Maharashtra and Gujarat who warned of growing farmer unrest, commerce and textiles minister Anand Sharma was compelled to write a letter to Sharad Pawar, seeking a hike in MSP for the remainder of the current marketing season.

The Economic Times, 11 April, 2012, http://economictimes.indiatimes.com/news/economy/agriculture/offset-ban-on-cotton-export-by-raising-floor-price-by-10-cacp/articleshow/12616688.cms


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