The Indian government is finalising its preparations to intervene in the cotton market as prices begin to touch MSP (minimum support price) levels in some areas.

Minister for Commerce, Industry and Textiles Shri Anand Sharma has held a review meeting for the early commencement of MSP operations in an effort to stabilise prices after “sharp” declines.

The Government has also revised MSP prices for medium staple cotton from INR2,800 per quintal to INR3,600, and for long staple cotton from INR3,300 to INR3,900 per quintal for the 2012/13 cotton season.

Current estimates suggest an exportable surplus of cotton of 7m bales, based on production of about 33.4m bales and consumption of about 26m bales.

The Ministry said that while domestic cotton consumption was rising, there had been a sharp decline in global trade and an increase in world stocks, creating downward pricing pressure.

Domestic prices had already touched MSP levels in some parts of Andhra Pradesh, and were close to MSP levels in Maharashtra, Punjab, Rajasthan and Madhya Pradesh.

Currently, the Government’s contingency plan is to procure some 9m bales under MSP operations in the current season, via 288 procurement centres in nine states.

The centres will be based in Punjab (20 centres), Haryana (14), Rajasthan (28), Gujarat (47), Maharashtra (55), Andhra Pradesh (17), Karnataka (13) and Orissa (seven).

Meanwhile, the Cotton Corporation of India has raised working capital of up to INR150bn for MSP operations.