New Delhi: The government on Wednesday said lower global demand and a slowdown in domestic consumption have resulted in surplus of cotton, bringing down its price.

"The slowdown in domestic consumption coupled with reduced international demand of Indian cotton has resulted in a significant glut of cotton in the country bringing down prices," Minister of State for Textiles Panabaaka Lakshmi said in a written reply in the Rajya Sabha.

The country's natural fibre production has increased to 356 lakh bales (of 170 kg each) in the 2011-12 cotton season from 325 lakh bales in the last year, while domestic consumption is projected to decline to 210 lakh bales this year from 240 lakh bales last season, she said.

She added that domestic mills are operating with only 15 days inventories. The cotton crop year runs from October to September.

The natural fibre exports have been sluggish and till end November 2011 only 7.5 lakh bales have been exported against 39 lakh bales during the same period last year, Lakshmi said.

With arrivals likely to increase to 3 lakh bales a day in the 2011-12 season from 1 lakh bales a day last year and no rise in domestic/international demand, sharp price moderation has taken place, she said.

"Cotton prices have declined to Rs 34,500 per candy in December 2011 from Rs 62,400 per candy in April 2011. Indian cotton at USD 86 cents/ib is the cheapest available cotton in the world," Lakshmi said. One candy equals 3.6 quintal of cotton.

Replying to another query, she said, the government has received proposal from the Maharashtra government to further revise cotton Minimum Support Price (MSP) to Rs 4,285 per qunital, keeping in view the actual expenditure incurred by farmers.

For the 2011-12 season, the government has announced an increase in MSP prices of Rs 300 per quintal. For medium staple length cotton, it is Rs 2,800 per quintal and long staple length Rs 3,300 per quintal, she said.