Across ten countries, Government support to cotton has continued to be high. Subsidies include direct support to production, border protection, crop insurance and minimum support price mechanism.
In the 2013-14 season, such support totalled an estimated $6.5 billion (roughly ₹40,000 crore), down from a record $7.4 billion in 2012-13, Washington DC-based International Cotton Advisory Committee, an inter-governmental body, said in a report. Subsidies averaged 26 cents a pound in 2013-14, unchanged from the previous year.
The Cotlook A-Index average price in 2013-14 was 91 cents a pound which means that cotton subsidies accounted for close to 30 per cent of the price.
The strong negative correlation between subsidies and prices is well-known. In a year when prices are high, subsidies tend to decline and vice-versa. The decline in subsidy in 2013-14 can be attributed to a rise in price compared with the previous year when the index averaged 88 cents a pound.
And, for the same reason, in countries such as Brazil, India, Pakistan and Mexico, prices were higher than the minimum support price in 2013-14, ICAC said. In addition, in India, the Government made no direct purchase.
Cotton producers in the US receive support in various forms including direct payments, counter-cyclical payments, loan deficiency payments, marketing loan gains and crop insurance. The US cotton producers received about $593 million in direct payments during 2013-14 ($580 million), the report said.