Cotton subsidies in India are mainly realized through MSP (minimum support price). The Indian government issues a new MSP before the start of each year. The Cotton Corporation of India (CCI) and its branches in Maharashtra purchase the seed cotton. After processing, the cotton seeds and lint are auctioned separately. CCI sells the lint to Sold to textile mills or exporters, the loss will be borne by the state.
In 2019/20, the Indian government’s MSP was 5,500 rupees/quintal, a year-on-year increase of 1.9%, which is approximately equivalent to 100.20 cents/pound. The total MSP acquisition volume was 2.1 million tons, more than one-third of that year’s production. CCI has sold a total of 1.14 million tons of cotton purchased by MSP, and the remaining MSP inventory is 980,000 tons. The sales caused CCI to lose US$100 million. This money can be regarded as a subsidy from the Indian government.
In 2020/21, the Indian government’s MSP is 5,775 rupees/quintal, a year-on-year increase of 5%, which is approximately equivalent to 104.5 cents/pound. Since the domestic cotton price in India was only lower than the MSP in the early months of the year and has been higher than the MSP since then, the MSP purchase volume was only 1.69 million tons. Since then, CCI has sold a total of 1.63 million tons of MSP cotton, leaving only 53,000 tons of MSP cotton. Since the domestic cotton price in India has been higher than MSP in the latter part of the year, MSP sales did not suffer losses that year, but made profits, so the MSP cotton subsidy in 2020/21 is zero.
In addition to MSP, Indian cotton farmers also enjoy debt waivers and fertilizer subsidies. According to official Indian data, fertilizer subsidies for Indian cotton farmers increased from 43.9 billion rupees ($700 million) in 1990/91 to 800 billion rupees ($11 billion) in 2019/20. In 2020/21, the Indian government spent a total of 713 billion rupees (US$9.7 billion) on fertilizer subsidies, of which nearly 70% was paid to cotton farmers in the form of urea, and the remaining 30% was used for nutrient fertilizers. In 2020/21, India’s fertilizer subsidies for cotton production accounted for 10%, approximately US$1 billion.
In addition, the Indian government provides subsidies for crop insurance, but the exact amount is unknown.
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