Cotton market in Andhra Pradesh, one of the major producers in the country, has plunged into a deep crisis in the aftermath of demonetisation, as transactions have almost come to a halt and prices have slumped by roughly Rs 1,000 per quintal.

It is almost a month since the Prime Minister announced the move to scrap the Rs 500 and Rs 1,000 notes and one of the worst-hit commodities market in the State is cotton.

The crop is grown widely in Krishna, Guntur, Prakasam, and Kurnool districts and to an extent in the two Godavari districts. The ginning mills, most of them located in Guntur district, supply cotton to textile mills in other states such as Maharashtra, Tamil Nadu, Gujarat and Karnataka.

After demonetisation, the ginning mills are in a crisis and they are unable to purchase cotton through brokers due to liquidity crunch. According to trade sources, almost 70-80 per cent of the transactions have come to a halt and the market has been hit hard.

A month ago, quality cotton was selling in the range of Rs 5,300-5,500 per quintal and the prices have now slumped to Rs 4,300-4,500 per quintal, and farmers are unwilling to sell at these rates.

On the other hand, the Cotton Corporation of India (CCI) has opened more than 40 cotton purchase centres in the State, but the prices offered are much less than the prevailing market price at Rs 4,100 per quintal and farmers are therefore unwilling to sell cotton at CCI purchase centres. The net result is that the cotton market is almost at a standstill after demonetisation.

Trade circles and the farmers are desperately waiting for release of enough cash to revive the market.

sarma.rs@thehindu.co.in

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