According to ICRA, the recent decision of Cabinet Committee on Economic Affairs (CCEA) approving an increase in the minimum support prices (MSPs) for kharif crops (including cotton) for the Cotton Year 2020-21 is likely to be unfavorable for the domestic spinning sector.

The CCEA recently hiked the MSP for the medium-staple variety by Rs 260 per quintal to Rs 5,515 per quintal, while that of long-staple variety by Rs 275/quintal to Rs 5,825/quintal, translating into an increase of 5 per cent over the level fixed for CYi2020.

According to Jayanta Roy, senior VP and group head, Icra Ratings, this move may heighten challenges for the domestic spinning companies, as this comes at a time when the COVID-19 pandemic has resulted in severe demand-side pressures in the international textile markets.

Though increased MSP, timely onset of monsoon and expectation of normal monsoons augur well for cotton sowing in India, cotton crop remains highly vulnerable to pest attacks, and output/yield expectations remain contingent on these. In this context, the locust swarm which has hit several parts of western and northern India including Rajasthan, pose a looming threat for the crops as these insects feed on a large variety of crops.