Cotton Report

Multi Commodity Exchange of India Ltd

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Andheri (East), Mumbai - 400 093
Tel: 022 66494000 / 26836016, Fax: 022 66494151
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Contents

No Chapters Page No

1 Background 2

2 International Scenario 2

3 Domestic Scenario 3

4 Supply 4

Stagnant Yield 4

Production 4

Producing Regions 4

Imports 5

5 Exports 6

6 Import Duty on cotton 7

7 Price Seasonality 7

8 Minimum Support Price 8

9 Quality Problem in Cotton 8

10 Andhra Pradesh 9

11 International Cotton Market Review 9

12 Domestic Cotton Market Review 9

13 Why Futures in Cotton 10

14 Suitability of Cotton Futures 10

15 Annexure

Contract Farming in Cotton 12

Technology Mission on Cotton in 10th Plan 13

Research and Development 14

Statistics 15 – 20

© Multi Commodity Exchange of India Ltd.

1. Background

India is traditionally cotton producing country, being world’s number one in acreage and third in output. Cotton is a
very important commercial crop for India. It sustains the country’s cotton textile industry, which is perhaps the largest
segment of organized industries in the country. India earns foreign exchange to the tune of $10-12 billion annually
from exports of cotton yarn, thread, fabrics, apparel and made-ups. Cotton provides gainful employment to millions of
people in the country who are engaged in its cultivation, trading, processing, manufacturing, fabricating and
marketing.

According to Dr. Terry P. Townsend, Executive Director, International Cotton Advisory Committee (ICAC), cotton is
one of the most important employment generating ‘industrial crops’ with about 250 million people directly or indirectly
dependent on it for their livelihood. The world consumption of textile fibres has gone up to some 50 million tones now
from 15 million tones in 1960. At present the average per capita annual consumption of textile fibres in the world is
about 8 kg of which 3 kg is cotton.

2. International Scenario

As can be observed from the above graph, the world production and consumption keep fluctuating from year to year
based on several factors. The annual opening and closing stock of the commodity is also considerable to cushion
against succeeding years crop failure.

China, US and India are the three largest producers of cotton. However, of them only US is having considerable
share in the world exports. India and China both fall short of their domestic requirement and are net importers.
Pakistan, Brazil, Turkey and Uzbekistan are the other main producers. Among the consumers China leads the way
being followed by India, Pakistan, US and Turkey.

© Multi Commodity Exchange of India Ltd. Page 1

China has now become a net exporter of cotton from an importer about four years back. This is because while in
India, both the yield and quality of cotton have remained low during the past few years, in China and some other
countries significant improvements have been made i.e. early adoption of Bt cotton.

3. Domestic Scenario

COTTON BALANCE SHEET

(Quantity in lakh bales of 170 Kgs)

Year (Oct - Sept) 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02

Supply

Opening Stock 30.15 22.75 23.52 30.93 30.38 30 36.5 40.5 29

Production 121.5 138 161.5 176.5 158 165 156 140 154.5

Imports 3 5 0.5 0.5 4.13 7.87 22.1 22 16

Total 154.65 165.75 185.52 207.93 192.51 202.87 214.51 202.5 199.5

Demand

Mill Compound 120 125 138.29 150.41 143.51 149.86 157.86 150 150

Non- Mill Compound 8 8 9.5 11.86 9 9 9 10.9 12

SSI Compound - - 6.5 7.89 6.5 6.5 6.5 6.5 7.5

Exports 3.9 1 8 7.39 3.5 1.01 0.65 0.6 2

Total 131.9 134 162.29 177.55 162.51 157.49 174.01 173.5 171.5

Closing Stock 22.75 31.75 30.93 30.38 30 36.5 40.5 29 28

(Source: Cotton Advisory Board)

Despite having the largest area under cotton in the world, India ranks third in world output of cotton due to its
abysmally low average yield of 300 kg against a world average of 550 kg per hectare. The problem is also
compounded by higher production costs and poor quality in terms of varietal purity and trash content. Despite
adequate output, the country has to import about 22 lakh bales of cotton equivalent to 12 percent of the domestic
production due to price and quality considerations. There is a 10 percent import duty on cotton but most of the cotton
is imported duty free in the country as it is used for the production of goods that are exported.

11% of the cotton is produced in India in 20% area, as indicated in the following table:

India’s
Particulars World India
share
Area (in million hectares) – 2002-03 30.27 7.57 20%

Production (in million MT) – 2002-03 19.77 2.30 11%

Source: Cotton Corporation of India

It is the most important raw material for the Rs. 1,50,000 crores textile industry in India. The textile industry is on a
recovery path since April 2002 after passing through a crisis in the past 5 years. The textile industry contributes 5
percent to the GDP and 14 percent to India’s industrial production. It accounts for about 30 percent of India’s exports.
Cotton accounts for more than 75 percent of the total fibre that is converted into yarn by the spinning mills in India
and 58 percent of the total textile fabric materials produced in the country.

© Multi Commodity Exchange of India Ltd. Page 2

4. Supply

Stagnant Yield

In India, cotton yields increased significantly in the 1980’s and through the first half of 1980’s but since 1996 there is
no increase in yield. In the past, the increase in cost of production of cotton was partially offset by increase in yield
but now with stagnant yield the cost of production is rising. Besides low yield, Indian cotton also suffers from
inconsistent quality in terms of length, micronaire and strength. Modem textile machinery, both spinning and weaving
require cotton and yarn of high strength and good micronaire value. Low macronaire cotton is difficult to process cost
effectively on modern machinery.

Production
With not more than a third of the cotton cultivation under irrigation, it is not surprising that cotton output varies
considerably from year to year in response to the vagaries of weather and pest attacks. In the last ten years the
country’s production has ranged from as low as 146 lakh bales in 2000-01 to 177.90 lakh bales in 1996 - 97.

(Source: Ministry of Agriculture)

The area under cotton was 81.22 lakh hectares in 2000-01 against 58.91 lakh hectares in 1950-51. The average yield
of cotton in India went up from 88 kg in 1950-51 to 301 kg per hectare in 2000-01. In India, every year, the output of
cotton is estimated by the ministry of agriculture and the Cotton Advisory Board (CAB).

Producing Regions

Although cotton is cultivated in almost all the states in the country, the 9 states of Punjab, Haryana, Rajasthan,
Gujarat, Maharashtra, Madhya Pradesh, Andhra Pradesh, Tamil Nadu and Karnataka account for more than 95
percent of the area under and output.

© Multi Commodity Exchange of India Ltd. Page 3

(Source : Ministry of Agriculture)

Imports of Cotton
India imported just 30,000 bales of cotton in 1996-97 (Oct-Sept). The imports rose to 4.13 lakh bales in 1997-98, 7.87
lakh bales in 1998-99 and 22.01 lakh bales in 1999-2K. India’s imports of cotton went up from Rs.381 crores in 1998-
99 to Rs.1.254 crores in 1999-2K before declining slightly to Rs.1, 183 crores in 2000-01. India imported about 22
lakh bales of cotton in 2000-01 season. Its imports were likely to be about 16-18 lakh bales in the 2001-02 seasons.
Despite good domestic crops, India is importing cotton because of quality problems or low world prices particularly for
processing into exportable products like yarns and fabrics.

In 2000-01, the international price of cotton was high compared to the domestic price. Therefore, most export
oriented cotton-spinning mills in the country also preferred to use the domestic cotton. In April 2002, however the
imported cotton was about 8 percent cheaper than India cotton. Therefore, the mills planned to import cotton.

In recent years, India’s imports of cotton from the US have started growing. The imports rose from 21,221 tons in
1998-99 (Aug- Jul) to 48,805 tons in 1999-2K and 1,28,065 tons in Aug’01-Jan’02. The US is expected to have
exported cotton worth $110 million to India in 2001 against $60 million in 2000. In the cotton-marketing year 2001-02
(August-July), the US cotton traders were expected to export 12-13 lakh bales from a total of 23 lakh bales India was
expected to import.

In 2001-02 (Aug- Jul), the price of good quality US cotton was lower in the world market compared to that from its
competitors in Australia, Brazil, Uruguay, CIS nations. Turkey and West African countries. The Indian mills want good
quality cotton (clean and of uniform staple length), particularly for converting into products for exports throughout the
year, as they do not have resources to purchase their annual needs in one go. The US cooperatives were offering
cotton with long credit period. In 2001-02, India’s 60-70 percent imports from the US were long staple cotton.

© Multi Commodity Exchange of India Ltd. Page 4

5. Exports of Cotton

In July 2001, the union government removed all curbs on cotton exports. The quota system was done away with and
the exporters are now not required to obtain any certificate from the Textile Commissioner on the registration,
allocation, quality and quantity of export. According to the Planning Commission, India is not likely tomake any
significant growth in its exports of cotton in the next 2-3 years (2002-05 in view of low world prices that are expected
to prevail notwithstanding removal of all restrictions on cotton exports from India since July 2001). India’s imports of
cotton are also expected to remain high unless steps are taken to increase the production of 27-30 mm staple cotton
under Technology Mission on Cotton. India is expected to have imported 22 lakh bales of cotton in 1999-2K and 16
lakh bales in 2000-01. India’s exports of cotton fell from 16.82 lakh bales in 1996-97 to 3.5 lakh bales in 1997-98.

INDIA'S EXPORTS OF COTTON (Quantity, M.T; Value, Rs. Crores)

Description
Year 1998-99 1999-2000 2000-01 2001-02
(Apr – Mar)
QTY VAL QTY VAL QTY VAL QTY VAL

A. Bengal Desi 13,492 64.7 8,067 40.58 9,165 43.66 4,254 20.39

B. Indian cotton
Staple< 20.5
mm 3,697 21.54 188 0.84 282 1.29 867 4.44
Staple> 20.5
mm but <
24.5mm 2,016 9.96 149 0.8 2,120 11.46 - -
Staple> 24.5
mm but <
28.0mm 12,746 61.15 1,476 6.2 850 3.46 355 1.59
Staple > 28.0
mm but < 34.5
mm 67 0.53 30 0.2 245 1.29 - -
Staple > 34.5
mm 193 1.17 15 0.09 49 0.48 - -
C. Foreign
cotton of all
staple - - - - - - 61 0.27
Total 32,211 159.05 9,926 48.7 12,710 61.64 5,538 26.68
(Source : DGCIS

© Multi Commodity Exchange of India Ltd. Page 5

6. Import duty on Cotton

India’s Exports of Readymade Garments

(quantity, Million Pieces, Value, US$ Million)

Year Quantity Value

1997-98 1,314.2 4,910.3
1998-99 1,390.8 5,269.4
1999-2K 1,440.6 5,524.5
2000-01 1,264.3 4,542.9

In 2001, there was a 5.5 per cent import duty on cotton (5 per cent basis + 10 percent additional on basic). In
December 2001, the union government was contemplating an increase in this duty. While the cotton growers were
demanding that the duty should be raised to 25 percent, the government had also to consider the impact of duty
increase on fabric manufacture. The Indian Cotton Mills’ Federation (ICMF) was vehemently opposing the hike of
import duty. According to ICMF, India’s exports of cotton yarn, fabrics and other textile materials were already
dwindling in 2001-02 and any hike in import duty would worsen the situation. As such there was little difference in the
price of indigenous cotton and imported cotton after taking into the account the incidence of import duty, freight,
insurance, etc. on imported cotton.

The main incentive for the importer was, however, the imported cotton is clean and of uniform quality. There was
also a shortage of long staple cotton in the country. Further the import of cotton is permitted only by yarn exporters
under advance licencing. Manufacturers of fabric, garments and made-ups are not allowed to avail this facility. On
January 9, 2002, the union government raised the import duty on cotton (not carded/combed) to 10 percent after the
domestic cotton prices fell by 20-30 per cent during Sep-Dec ‘2001.

The Way Ahead

The demand for cotton is expected to rise to 220 lakh bales by the end of the Tenth Plan. It is proposed to raise the
output of cotton in the country to 223 lakh bales by 2006-07. Although the average yield of cotton in the country is
showing some improvement, the area under cotton is stagnant. According to some scientists there is some scope for
increasing the area under rice follow cotton to 1-lakh hectares from 15,000 hectares at present. Further cotton can
also be inter-cropped with groundnut and pulses. The use of Bt cottonseeds is also likely to help in raising the
production to adequate levels. The other view is to improve the yield of cotton from 300kg to 400kg per hectare to
achieve a yield of 220 lakh bales by 2005. This can perhaps be done by increasing the irrigated cotton area, bringing
more area under hybrid cotton and encouraging the cultivation of drought-resistant desi cotton. The irrigated cotton
area can be increased by installing drip irrigation system in central and southern states.

7. Price Seasonality

In India cotton is sown during March to September and harvested during September to April. The peak marketing
season for the crop is during November to March. At present about 40 percent of the 9 million hectares of total area
under cotton in India is under hybrid cotton.

In India more than 80 percent of the cotton produced is sold out by March 31 every year and the price starts firming
up from April and starts easing only in September when the new crop starts arriving in the market.

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8. Minimum Support Price

In September’2000 the Cabinet Committee on Economics Affairs decided to increase the minimum support price
(MSP) of F-414/H-777/J-34 varieties of cotton

In early September 2002, the CCEA decided to maintain the MSP of cotton for 2002-03 at the same level as in 2001-
02. But on September 30,2002, the government decided to provide a drought relied of Rs.20 per quintal

In 2001-02 (Oct.-Sept.), the CCI and the Maharashtra government are expected to have spent about Rs,1,000 crores
in the procurement of cotton from farmers. In 2001-02, the CCI procured 8.51 lakh bales of cotton at a cost of
Rs.778.92 crores to prevent distress sale of the crop by the farmers. In the coming years, this expenditures is
expected to rise further as lower world prices would require higher subsidies. At present the import duty on cotton in
India is only 10 percent as against a WTO bound rate of 40 to 80 percent. The import duty on cotton, however,
cannot be raised as in such a case India’s exports of cotton yarn and cotton textiles will be affected badly.

In recent years, with the imports and exports of cotton being permitted under OGL, and the MSP always going up
every year, the output of cotton in the country does not affect its price much. Even when the production is high, the
domestic price remains high because of a high MSP. If the production is low, the domestic price cannot rise much
above MSP as the import option for cotton is always open to the industry.

According to the International Cotton Advisory Committee, for increasing the output of cotton and growers income the
yield of cotton in India should be raised and support prices should be based on yield rather than cost of production. In
India, until recently, the support prices were almost at par with the international prices but if the prices are kept on
being raised from year to year, the support price will go above the global price. This will neither benefit the farmers
nor the industry.

9. Quality Problem in Cotton

One of the problems faced by the cotton spinning mills in the country is they are not able to procure bales of cotton of
uniform variety in bulk purchases as a number of varieties of seeds are used by farmers which yield cotton of varying
staple length, micronaire, strength and other properties. A 5-member panel appointed by the Cotton Advisory Board
has suggested that only 30 percent or 40-45 varieties of cottonseeds, of the 150 plus certified varieties that are in
circulation in the country need to be retained to get good quality cotton. The other varieties, which have been officially
released but have lost their relevance with time, should be denotified by the government.

The panel, however, has not taken into the account the other 175 to 200 different varieties of cottonseeds for sowing
produced by the private companies in the country and being used by the farmers, many of which are officially not
certified. Even in the case of varieties developed by the public research institutions, it is a well-known fact that only
about a quarter of them account for the 95 percent of the cotton produced from such varieties. In other words the 100
different varieties of seeds the panel wants to be denotified are in fact not in use in any significant quantities in the
country, though their official denotification is still necessary. In this matter, the concept of one variety in one village is
more relevant.

© Multi Commodity Exchange of India Ltd. Page 7

10. Andhra Pradesh

Cotton is grown in Andhra Pradesh in some 9 lakh hectares in Adilabad, Mahbubnagar, Guntur, Warrangal and
Karimnagar. The output of cotton in Andhra Pradesh has been estimated at about 25-27 lakh bales in 2001-02 same
as in 2000-01.

During Oct. ’01-Jan “02, about 10 farmers in Andhra Pradesh committed suicide due to fall in the price of cotton. The
price of cotton fell from Rs.1,890-1,900 per quintal in October 2001 to about Rs.1,600-1,650 in end-December 2001.
The fall was attributed to lack of demand from ginners, spinners, weavers and ready-made garment exporters in the
entire chain. There was a slump in demand for cloth and garments both in the domestic and export markets.

11. International Cotton Market Review

st
The world price of cotton started declining from a level of 66 cents/lb on 31 December 2000 and fell to 35 cents/lb on
st
31 October 2001(the lowest since November 3,1972). In November 2001, however, the price rose and went up to 43
cents/lb on November 30,2001. The price was still 41 percent lower than the long-term average of 72 cents. Despite
better demand supply balance in 2001-02, the price did not show any sharp rise as supplies were sufficient to meet
demand. The ICAC had earlier projected average cotton price of 46 cents/lb in 2001-02 and 49 cents/lb IN 2002-03.
The world price of cotton was unlikely to touch 72 cents/lb even in the next two years. The world output of cotton was
expected to remain high with many farmers taking up the cultivation of Bt.cotton, which has higher resistance to pests
and gives better yield. The average price rose to 48 cent in June2002 and was expected to go further up in view of
rains affecting the 2002-03 cotton crops in China and the delay in cotton sowing in the US, which would to delay the
arrival of new crop by one month.

According to Dr. Terry Townsend, the Executive Director, ICAC the expanding production in low-cost producing
areas, advances in biotechnology and international farm supports would keep the world output of cotton high in the
coming years and the world prices under check. The low production costs would sustain US national average output
as about 4 million tones over the next six years. At the same time, cotton output in low cost producing countries,
Brazil and Turkey, was also going up. The cultivation of GM cotton in India and China would reduce its production
cost in these countries. As a result, in this decade, cotton prices may hover around 50 to 60 cents per pound for most
of the time. The share of GM cotton in total cotton output may go up from 30 percent at present to 50 percent in 2005.

12. Domestic Cotton Market Review

In November 2001, the domestic prices of various grades of cotton were lower by about Rs.2,500 to Rs.5,000
compared to those in November 2000. However, this was so due to higher prices in November 2001 because of a
lower domestic output in 2000-01. The price of cotton in the Indian market started rising since the middle of May
2002 because of paucity of stocks and also rise in its international price.

In the first three months of 2002-03 (April-June), the domestic price of cotton went up by 12-15 per cent and the
global prices by 17-18 per cent mainly due to lower end of the season stocks and also to some extent due to lower
output anticipated in 2002-03. The cotton prices were ruling low in past two years. This had prompted farmers to
shift to other more remunerative crops.

The market condition of yarn as well as fabrics began to improve and their exports also began to pick up. By the
middle of June 2002, the price of different varieties of cotton had gone up by Rs. 1,000 to Rs.1,500 per candy. The
price of Shankar-4 went up from Rs. 17,000 to Rs. 18,000 per candy. The international cotton dealers were not
willing to sell cotton to Indian mills at less than 43 cents per pound as quality cotton was not available and it was
nearing the end of the season.

© Multi Commodity Exchange of India Ltd. Page 8

13. Why futures in cotton?

Cotton producers, merchants and stockists face risk of large value losses on their production, purchases and stocks
from fall in prices. Similarly the exporters and spinners are exposed to heavy risks from adverse price increases on
their overseas or domestic sale commitments of fibre or yarn for delivery at a later date. Futures trading in cotton, is
likely to give an effective tool in their hand to hedge their price risk.

Introduction of cotton futures is also likely to improve the cotton quality (by improving varietal purity and reduce trash
content) to comply with the quality specifications of the underlying as traded in the exchange.

14. Suitability of Cotton Futures

Fluctuating and uncertain supply

The world cotton output keeps fluctuating year to year based on several factors, such as

Rains affecting the Chinese crop

Late sowing in US
Increased production in low cost producing countries like Brazil and Turkey
Advancement in biotechnology
Introduction of Bt cotton in India and China which are pest resistant and with higher yield

The domestic cotton supply has two parts – indigenous production and imports. India imports equivalent of 12 % of its
cotton production due to price and quality considerations.

The domestic production is influenced by several uncertain factors, such as

Stagnant acreage against introduction of Bt cotton with higher yields.

Poor rainfall leading to drought and moisture stress resulting in lower crop
Stock with the procurement agencies
Pest attacks by American Boll Worm in producing states like Haryana and Rajasthan
Fluctuating acreage in various states due to crop shifting
Intercropping with crops like groundnut and pulses
Area under irrigated cotton, hybrid cotton and drought resistant desi cotton
Plans to install drip irrigation system in central and southern states
MSP on cotton crop in certain varieties with sometimes additional drought relief

Procuring agencies like the Maharashtra State Co-operative Cotton Growers Marketing Federation keep cotton
stocks and also sells at discount. Some private players also involve in cotton procurement. Carry of stocks of major
producing states also influence supply.

In India several agencies periodically gives estimates of the country’s cotton crop apart from industry expectations,
such as

Ministry of Agriculture
All India Cotton Traders Association
Central Institute of Cotton Research, Coimbatore
Cotton Advisory Board

© Multi Commodity Exchange of India Ltd. Page 9

The main factors influencing cotton imports are

Price differential between Indian and imported cotton (landed cost). Local cost and landed cost of imported cotton
with 10 % import duty, fright and insurance keep fluctuating and accordingly the domestic mills go for procurement.

The domestic mills are motivated to go for imported cotton when they don’t find adequate supply of pest free, good
quality cotton in the domestic market.

Due to seasonal non-availability sometimes the mills are required to go for imported cotton. As when Bengal desi
from North arrive in September and American cotton from Western India in November leading to tight supply situation
for the textile mills, they look for import option.

Fluctuating and uncertain demand

The major cotton consuming segments are the mills and the small-scale industry. Their main considerations are for
quality and price of cotton. However, falling yield leading to high cost of production and falling quality (varietal purity
and trash content) are driving the domestic consumers to go for imported cotton.

Price Variation

The below tables, shows the high instability in cotton prices in Indian market, during the past several years. This
makes an ideal case for futures trading, so as to enable the cotton traders, importers and processors to hedge their
price risk.

Occurrence in percentage terms in Mumbai

Month on month variation in 5&

0–2 2-5
percentage terms above
Average prices of J-34 (S.G.) Cotton
38 29 34
between 1995-96 to 2001-02

Maximum Price Variation in Percentage Terms

Maximum Variation Percentage

Monthly 12.4
Year 21
Average prices of J-34 (S.G.) Cotton between 1995-96 to 2001-02
Source: East India Cotton Association Ltd, Mumbai

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Annexure - 1

Contract Farming in Cotton

In 2002, the union government had plans to introduce the concept of contract farming on a experimental basis in the
two states of Andhra Pradesh and Gujarat. The system was expected to be similar to the one being adopted for sugar
by most sugar mills in the country. In case of cotton, the ginning mills were expected to provide quality seeds and
other inputs to the farmers in their catchment areas and buy cotton from them at attractive price. The aim was to
produce quality cotton (clean,of uniform staple length and derived from a singly variety of seed) which could fetch a
better price also for the farmers.

Indian farmers spent about Rs.3,800 crores on pesticides annually. Of this about Rs.2,100 crores is spent on
pesticides for cotton alone. Despite this more than 30 percent of the crop is lost almost every year to pest and
diseases.

Moreover, the export oriented industry in India wants cleaner cotton and cotton of uniform physical properties to meet
specific demand of importers. Contaminated cotton is costlier to clean and also gives poorer yield, as during the
cleaning operation a high proportion of good quality fibre is also lost along with the contaminants and bad fibres.

The biggest need today is to improve the yield of cotton, cultivated specific seeds in specific regions for uniform
quality and improve handling of cotton to reduce contamination.

In April 2002, the Indian Cotton Mills Federation was demanding that the government to come out with the modalities
of contract farming in cotton at the earliest so that the mills may initiate steps and adequate supply of quality cotton is
available to them from the 2002 cotton crop. An organic linkage between the mills and farmers can help in achieving
substantial improvements in yield and reduction in cost of production, more so in the wake of the government
approving the cultivation of Bt cotton. Some of the proactive spinning and composite mills could go for contract
farming in specific qualities of cotton (i.e. – extra long staple) in specific areas.

For the past several years, the CCI has been running a “ Village Adoption Scheme“ under which it adopts a village,
supplies all inputs to tall the interested cotton farmers of the village, disseminates technologies for improving the
yields and quality of cotton to them and after harvesting purchases this cotton from the interested farmers at market
rates.

In 2002, the CCI was expected to take up integrated farming of cotton in select regions of Andhra Pradesh, Gujarat
and Madhya Pradesh on an experimental basis. It was proposed to take up the cultivation of Bunny/Mallika hybrid in
the Adilabad district of Andhra Pradesh. Bunny also called NCS-15 is a highly yielding long staple hybrid developed
by Nuziveedu Seeds. The farmers in this district were to be supplied quality seeds, fertilizers and pesticides and
given technical assistance also in cultivating specific quality cotton which was to be purchased by CCI or a user mill
with which the CCI or a farmer may have e an agreement.

© Multi Commodity Exchange of India Ltd. Page 11

Annexure - 2

Technology Mission on Cotton in the Tenth Plan

The ‘Technology Mission on Cotton’ is being continued in the Tenth Plan period. The union textile ministry has
finalized Tenth Plan proposals for Mini Mission III and IV. Under Mini Mission III, it is proposed to set up or improvised
200 markets yards at the rate of 40 market yards per year. The TMC assistance will be limited to 60 percent of the
project cost, same as during the Ninth Plan period, subject to ceilings of Rs.105 lakh for improvising of existing
market yards and Rs.150 lakhs for setting up of new market yards. By the end of the Tenth Plan period, there would
be 250 modern market yards functioning in the country, which will be adequate for handling about 80 percent of the
cotton produced in the country.

In May 2002, the Mini Mission III in Gujarat was progressing very well. About 25 market yards had been taken up for
development and up gradation located at Amreli, Bodeli, Visnagar, Mahua, Savarkundla, Rajula, Pavijetpur, Limdi,
Jamjodhpur, Bharauchpalej, Anjar, Visavadar, Sidhpur, Morbi, Gondal, Botad, Porbander, Kadi, Dhabol, Dhandhuka,
Vijapur, Kukarwada, Bavla and Unava etc. The work involves construction of new and repairing existing buildings and
buying new equipment wherever necessary.

In the Mini Mission IV, it is proposed to modernize or set up 450 new ginning and pressing (G&P) mills for cotton. The
TMC gives financial assistance of 25 percent subject to a maximum of Rs 20 lakhs per G&P mill. For buying a new
baling press, the 450 G&P mills gets an extra assistance of Rs.7 lakhs is also given.

Under Mission II, it is proposed to spend Rs.300 crores on improving cotton technology and cotton development in
the Tenth Plan. The ministry of agriculture is exploring the possibilities of involving NGOs,t he state cooperative
bodies/federations, etc in cotton development programme by funding them. It is proposed to increase the quality and
output of cotton seeds and increase the ratio of varietal: hybrid seeds from 60:40 to 50:50 provide a sum of Rs.1
crore to ICAR institutions and state farm universities to support the breeder seed programme: and to take an
insecticide resistance management programme in 80 cotton districts in the country during the Tenth Plan period.

According to a review, the Mini-Missions III and IV under the Technology Mission on Cotton (TMC) have done some
good work in strengthening the marketing infrastructure and improving the quality at the processing stage but the
performance of the mini-missions I and II which cover production planning and pre-harvest practices has been far
from satisfactory. The government has even failed to de-notify the 100 odds varieties of cotton that cause varietal
impurity.

© Multi Commodity Exchange of India Ltd. Page 12

Annexure – 3

Research and Development

In cotton, India is the only country in the world, which has developed and cultivated hybrid cotton commercially.
Indian scientists have developed a long-staple premier hybrid cotton H4 and extra-long staple interspecific Varalaxmi
and DCH 32. Suvin gives the finest quality cotton with spinning performance of 120s counts. It is comparable in
quality with the Giza 45,the best quality Eqyptian cotton. Some new varieties developed which are early maturing
hybrids are: Fateh, Dhanlaxmi and Rajhans. These hybrids are suitable for cultivation in Punjab, Haryana and
Rajasthan in the northwest region. Other hybrids released are: Om Shankar LH4144 and AAH 1 for the north zone:
PKV Hy 3, PKV Hy4 and JK Hy2 for the central zone: and Surya, Sruthi, DHB 195 and DHB 11 for the south zone.

An NGO based in Pune, Appropriate Rural Technology Institute (ARTI), Phaltan has suggested that the farmers
should plant the seeds of hybrid cotton in plastic bags and cultivate them in these bags for two – months. (May and
June) before planting the saplings so produced, in July, in the fields to protect them from severe damage from
American bollworm. The NGO is reported to have been using this technique for the last three years in Marathwada
and Vidharba regions and claims that a yield of 1,000 kg cotton per hectare can be obtained by following this method.
It had demonstrated this technique in fields of more than 30 groups with each group comprising of 15 to 20 farmers.

The Central Institute of Cotton Research, Coimbatore has developed a medium staple cotton variety, Sumangala,
which is tolerant to sucking pest and bollworm attack. Its open canopy attracts less pests and diseases. It can be
planted in closer now spacing in north as well as south zones and gives a yield of 25 quintal per hectare under
irrigated conditions and 15 quintals in rainfed conditions. It is an early maturing variety maturing in 150-160 days. It
can be used as parent to produce hybrids.

The SIMA Cotton Development and Research Association has appealed for a need to do maintenance breeding of
cotton hybrid variety like MCU-5, LRA-5166, MCU-7 and DCH-32 which currently meet the textile industry’s
requirement in terms of fibre quality parameters, before long so that their original fibre qualities are retained year after
year. Now fibre quality is of immense importance and research efforts should be directed towards development of
such new seeds in which these parameters are maintained or improved. The development of varieties which give
higher yield at the expense of quality parameters will only promote varietal mixing and quality deterioration.

© Multi Commodity Exchange of India Ltd. Page 13

Annexure – 4

Statistics

World Supply and Consumption of Cotton (Million M.T)

Supply Consumption
Year
Opening Stock Production Imports Opening Stock Production Imports

1994 – 95 26.28 85.54 30.84 84.69 28.48 29.29

1995 – 96 28.3 92.38 27.63 86.88 27.52 33.57
1996 – 97 33.76 89.43 29.18 88.21 26.9 37.03
1997 – 98 38.18 91.66 26.39 88.51 26.64 40.78
1998 – 99 43.49 84.72 25.23 85.13 23.69 44.78
1999 – 00 45.13 87.36 28.41 91.91 27.31 41.48
2000 – 01 45.3 88.74 26.7 92.01 26.61 42.7
2001 – 02* 42.7 98.06 29.44 94.4 29.09 46.84
2002 – 03** 46.84 88.57 30.9 96.71 30.6 39.16

*Estimated / ** Projected

Cotton Production, Supply and Distribution by country in MY 2003/04 in 1000 480 lb bales
Beg. Total Ending
Stocks Prod. Imports Supply Dom Use Loss * Exports Stocks

Brazil 2915 4250 300 7465 3700 -100 1000 2865

China; P R 9008 27000 3000 39008 30200 0 250 8558

India 3338 12000 1700 17038 13500 0 50 3488

Indonesia 376 37 2300 2713 2300 50 20 343

Mexico 941 300 1750 2991 2200 25 100 666

Pakistan 2436 8500 900 11836 9400 25 100 2311

Thailand 607 67 1950 2624 2100 25 5 494

Turkey 1259 4200 2400 7859 6450 0 200 1209

USA 5500 17104 50 22654 6600 -46 11800 4300

Uzbekistan 943 4500 5 5448 1300 0 3300 848

Zimbabwe 121 500 0 621 130 15 325 151

World 37619 95375 30458 163452 99161 -11 30010 34292

© Multi Commodity Exchange of India Ltd. Page 14

Country-wise Output of Cotton in 2001 - 02
(Area-Lakh Ha; Output-Million 480-lb Bales; Yield-Kg/Ha)

Country Area Output Yield

China 46 22,000 1,041

USA 58.28 19,200 717

India 86.5 12,300 -

Pakistan 30 8,300 602

Uzbekistan 14.3 4,600 700

Turkey 7.3 3,800 1,133

Brazil 9.4 4,200 973

Others 89.69 20,231 491

TOTAL 341.47 94.631 603

(Source : USDA)

World Cotton Scenario (in million tons)

Description 2000-01 2001-02 2002-03*

Production 19.408 21. 510 19. 270

Consumption 19.762 20.173 20.71

Exports 5. 750 6.487 6.45

Ending Stocks 9.274 10.206 8.76

Cotlook A Index
(cents/lb) 57. 20 41. 80 54. 00
* Projected
Source: ICAC, October 2002

© Multi Commodity Exchange of India Ltd. Page 15

All – India Area Output and Yield of Cotton
(Area, Lakh Hec: Output, Lakh bales: Yield, Kg/Hectare)

Year Area Output Yield

1950 – 51 58.82 30.44 88

1960 – 61 76.10 56.04 125

1970 – 71 76.05 47.63 106

1980 – 81 78.23 70.10 152

1985 – 86 75.33 87.27 197

1990 – 91 74.40 98.42 225

1991 – 92 76.61 97.14 216

1992 – 93 75.42 114.03 257

1993 – 94 73.21 107.41 249

1994 – 95 78.71 118.88 257

1995 – 96 90.35 128.61 242

1996 – 97 91.21 142.31 265

1997 – 98 88.68 108.51 208

1998 – 99 93.42 122.87 224

1999 – 00 87.10 115.30 225

2000 – 01 85.76 96.51 191

2001 – 02 87.50 100.90 208

2002 – 03* 67.60 89.40 238

*Projected (Source: Ministry of Agriculture)

© Multi Commodity Exchange of India Ltd. Page 16

State-wise Area, Output and Yield of Cotton
(Area in lakh hectares; Output in bales;: Yield in kg/hectare)

State 1997-98 1998-99 1999-2000 2000-01

Area Output Yield A O Y A O Y A O Y

A.P 8.98 13 246 12.81 15.22 202 10.39 15.95 261 10.22 16.63 277

Gujarat 14.79 27.58 317 16.59 39.03 400 15.39 20.86 230 16.15 11.61 121

Haryana 6.38 11.29 301 5.82 8.73 255 5.46 13.09 408 5.55 13.83 424

Karnataka 5.18 9.85 323 6.37 9.77 261 5.4 7.6 239 5.6 9.8 298

M.P. 5.17 9.32 306 4.97 4.29 147 5.25 4.57 148 5.06 2.38 80

Maharashtra 31.39 17.53 95 31.99 26.19 139 32.54 30.99 162 30.77 18.03 100

Punjab 7.27 9.41 220 5.62 5.95 180 4.75 9.5 340 4.74 11.99 430

Rajasthan 6.45 8.67 229 6.44 8.72 230 5.83 9.84 287 5.1 8.05 268

Tamil Nadu 2.48 4.02 276 2.19 4.06 316 1.85 2.58 265 1.94 3.25 285

Others 0.54 7.8 246 0.62 0.91 250 0.73 1.16 270 0.63 0.94 254
Source: Ministry of Agriculture)

© Multi Commodity Exchange of India Ltd. Page 17

India’s Country-wise Imports of Cotton
(Quantity in, M.T; Value in Rs. crores)

Country 1998-99 1999-2000 2000-01 2001-02

QTY VAL QTY VAL QTY VAL QTY VAL

Argentina 253 1,36 1,286 5,67 176 0.92 10,207 46.16

Australia 15,595 99.81 18,171 102.04 29,382 179.41 42,900 255.78
Belgium 122 1.05 5,362 29.11 713 4.83 1,025 6.63
Benin 2,179 13.78 14,501 84.37 24,286 129.93 25,745 162.01
Brazil - - - - - - 21,175 97.53
Burkina Faso 7,324 74.31 9,919 55.24 7,733 42.96 9,112 57.65
Cameroon 180 1,18 5,889 28.12 3,188 15.53 6,760 38.91
China Taipei - - 1,090 5.44 248 1.05 202 1.05
China, PRP - - 7,268 44.58 10,257 58.53 740 5.45
Czech Rep 46 0.26 584 3.91 - - - -
Egypt 7,324 74.31 7,908 77.73 8,827 68.87 11,652 155.51
Ethiopia - - - - 779 3.74 1,891 11
France 156 1.11 646 3.46 655 2.36 969 5.69
Germany 639 4.89 454 2.54 763 5.08 386 2.74
Ghana - - 3,254 15.46 4,697 24.29 - -
Greece 21 0.12 4,884 25.79 1,745 9.56 9,717 47.53
Guinea - - 399 1.79 507 3.32 1,831 104.18
Guinea Bibu - - - - 1,980 10.97 - -
Iran 327 1.75 5,609 29.91 621 3.19 1,799 10.39
Israel 774 6.81 144 0.88 90 0.5 - -
Italy 40 0.47 - - 300 1.49 480 3.41
Ivory Coast 976 6.28 18,532 98.06 28,775 153.03 14,081 81.92
Japan - - 444 2.52 14 0.1 478 2.23
Kenya - - 711 3.67 63 0.38 - -
Kuwait - - - - 456 4.48 46 0.44
Latvia 2,146 13.51 - - - - 69 0.38
Malagasy - - 876 4.97 - - - -
Malaysia - - 7,318 35 5,476 29.05 878 4.78
Mali - - 7,267 37.09 11,477 50.8 1,631 9.08
Myanmar 153 0.83 1,442 8.01 502 2.94 946 5.25
Mozambique 353 2.33 5,276 25.3 3,337 16.93 2,428 13.25
Nigeria 255 1.25 751 3.58 1,224 6.9 8,498 46.71

© Multi Commodity Exchange of India Ltd. Page 18

Pakistan 334 2.3 1,827 7.81 126 0.97 - -
Russia 1,153 6.37 13,439 66.43 8,752 43.11 560 3.81
Saudi Arabia 151 1.05 406 2.14 209 1.35 279 1.52
Senegal 1,082 8.25 969 4.98 1.014 5.73 - -
Singapore - - 646 3.36 102 0.7 1,591 9.57
South Africa 1,627 10.4 19,113 101.71 6,536 35.1 3,996 26.24
Sudan 5,712 34.01 1,341 9.37 3,115 21.64 1,486 12.45
Switzerland 632 4 1,391 6.75 622 3.84 1,007 5.36
Syria 366 2.29 1,802 8.65 737 4.97 3,597 19.51
Tanzania - - 5,081 25.23 3,134 19.15 6,446 36.3
Togo 57 0.37 5,037 29.67 5,044 28.04 2,508 15.22
Turkey 4,184 21.26 17,039 83.3 1,375 8.5 863 4.08
Turkmenistan - - 172 0.8 399 3.3 655 3.73
Uganda - - 682 4.95 1,155 5.82 425 2.99
UAE 144 0.86 1,265 6.07 1,755 8.49 1,473 4.58
UK 2,123 13.21 701 3.99 109 0.92 674 3.45
USA 3,316 21.39 12,831 67.23 13,889 90.57 1,41,167 644.6
Uzbekistan 945 5.2 12,145 51.97 10,976 45.31 13,122 60.23
Yemen 160 1.47 57 0.43 389 3.2 83 0.48
Zambia - - 1,307 6.48 747 4.22 250 1.36
Zimbabwe 302 1.96 342 1.86 25 0.17 1,374 8.01
Total* 55,685 376.27 2,30,626 1,244.18 2,10,589 1,177.66 3,83,964 2,042.36
*Including others (Source : DGCIS)

Disclaimer
This document is for information purpose only. Certain information herein has been acquired from various external
sources believed to be reliable. While we have taken reasonable care during compilation of this document, we
assume no responsibility for any error or discrepancy in the information herein. You must make appropriate
judgement without any prejudice or compulsion.

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© Multi Commodity Exchange of India Ltd. Page 19