The textile industry in India may be made to buy cotton and jute from farmers at least at the minimum support prices. This move is part of efforts to ensure a 50 per cent profit to farmers over their cost of production. The proposal — fraught as it is with serious implementation challenges — could spell trouble for the labor-intensive textile and garment industry.

MSP for cotton will increase by at least 28 per cent in 2018-19 from the current level. Cotton accounts for roughly 60 per cent of yarn costs and yarn makes up for 50 per cent of fabric costs. Fabric, in turn, makes up for 50 per cent of garment costs. So higher cotton prices will push up costs in the entire value chain and jeopardise its competitiveness.

The idea is being mooted at a time when garment production has dropped for 11 months in a row and exports have contracted for a seventh straight month through April, with most units reeling under elevated costs.

Garment production dropped 11 per cent in 2017-18 and exports contracted almost four per cent even though the country’s overall merchandise exports rose 9.8 per cent. Also, the proposal will potentially render the Cotton Corporation of India irrelevant.