• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Sharad Joshi

All parties demand vociferously better returns for farmers when in opposition and resort to brutal repression once in power... The Maharashtra Chief Minister does not wish to let go of the hen that has laid golden eggs for politicians for three decades. He wants to continue the cotton procurement scheme without any price premium. This cannot be, says Sharad Joshi.

"NOT a paisa will be paid to the farmers above the minimum support price (MSP) fixed for cotton by the Central Government." This was the declaration by Dr N. P. Hirani, the Chief Administrator of the Maharashtra Cotton Producers' Marketing Federation — the supreme body presiding over the ill-famed Maharashtra Cotton Monopsony Procurement Scheme.

The scheme came to be called Maharashtra Cotton Monopoly Procurement Scheme due to penury of economic diction on the part of its architects. The Central Government has not as yet announced the MSP for this season, though the cotton sowing is long over in Maharashtra. The MSP per quintal for the standard variety H4 last year was Rs 1,850; the current market prices in Madhya Pradesh vary between Rs 2,150 and Rs 2,300; the futures quotations both in India and in New York show an ascending trend.

It is evident that a marketing scheme working on commercial principles will be able to pay a price much above the MSP. It would appear that the government is calculating to make up for a substantial chunk of losses accumulated over the last three decades.

Mr Jayant Patil, the Maharashtra Finance Minister, had announced in his March 26 Budget the State Government's decision to wind up the monopoly (monopsony?) procurement Scheme. The Chief Minister has apparently rolled back that decision and proposes to continue the scheme with two changes.

One, the entire operation will be carried out at the MSP and nothing but the MSP. Two, technically it will no more be a monopsony as the Government intends to authorise certain traders, spinning mills and the Cotton Corporation of India (CCI) to purchase cotton as agents of the Federation on identical terms and conditions. There is one difference. The Federation has not completed payments for the last year's purchases, but the agents will be under obligation to make payments within 48 hours of delivery.

The persecution of the cotton producers in Maharashtra is going to become worse as they will continue to struggle under a virtual monopoly without any advantage in consequence of conceding monopsony.

Cotton producers of Maharashtra have suffered for the last three decades under a tyranny called monopoly. In fact, it is a monopsony scheme which forbids free market, storage and transport, and the Government has the exclusive right; no one else, no trader, not even the Cotton Corporation of India (CCI), which is entrusted with the responsibility of ensuring that the market price does not fall below the minimum support price (MSP) fixed by the Central government, is permitted to enter the cotton market.

The scheme was launched in 1971, when the prices in the international markets were comparatively much higher than in India, with the objective of ensuring ready availability of lint to the Textile Mills in Mumbai at the world's lowest prices without exposing themselves to the vicissitudes of the cotton market or incurring substantial inventory costs. The scheme succeeded eminently in achieving this objective, albeit concealed.

Corruption and inefficiency ran rampant in the scheme. It employed huge staff full-time round the year for an essentially part-time and seasonal exercise and, consequently, incurred astronomical administrative costs. Throughout the three decades of its existence, it achieved consistently low cotton/lint conversion ratio.

Its grading staff, which enjoys the discretionary authority to fix the quality grade and, hence, the price payable to the farmers, lives in lavish ostentation that would put to shame even a minister or a major industrialist.

The ruling party machinery milks the scheme of crores of rupees. Those on the Lint Sales Committee are still more opulent and manage to show in accounts sale prices substantially lower than those obtained by even petty traders.

No wonder the scheme has consistently failed in achieving its formally stated objective of ensuring for cotton producers the highest possible share of the lint price and prices higher than in other parts of India. For 27 of the 30 years it was in operation, it paid farmers prices that were substantially lower than those prevailing in neighbouring Gujarat, Madhya Pradesh and Andhra Pradesh.

The cotton marketing centres at Barhanpur in MP and at Adilabad in AP prospered through massive arrivals from Maharashtra. The cotton producers of the Vidarbha region preferred to transport their cotton in bullock carts or hired trucks to Barhanpur in the hope of obtaining better prices and escaping the compulsory deductions on account of the Price Fluctuation Fund (25 per cent), the Capital Cess (5 per cent) and repayment of loans from co-operative institutions (40 per cent) that together could be as much as 70 per cent of the sales proceeds at poor monopoly (!) prices.

The transport across Maharashtra's border was treated as smuggling, and police personnel extorted huge amounts of money from the farmers. So lucrative were the postings at the check-posts that they carried price tags of lakhs of rupees.

So much for the oppression caused by this notorious scheme. It was also stupid because it did no good to the Government either. The State fisc had to carry a whopping burden of hundreds of crores of rupees every year. The State has lost over Rs 2,300 crore till date.

The non-Congress Opposition demanded, at one point, that the scheme be scrapped and supported agitations with that objective. The BJP and the Shiv Sena, when in the Opposition, wanted it scrapped but changed their stand and convinced themselves of its virtues soon after they came to power in Maharashtra.

The BJP-led NDA wants the monopoly scheme abolished; the Maharashtra BJP and Mr Bal Thackeray want it to continue. All parties demand vociferously better returns for farmers when in the Opposition and resort to brutal repression once in power. The farmers' movement has agitated for the termination of the scheme; thousands have gone to jail and several have died in unprovoked police firing.

The PDF Government under Mr Sharad Pawar had conceded that the guaranteed price under the Monopoly (!) Scheme — the price paid at delivery — should be at least 20 per cent higher than the Minimum Support Price, which stood last year at Rs 1,850 for the standard H4 variety. The principle was generally observed till 2000-01.

Last year, the Maharashtra Government suddenly decided that the guaranteed price would be 20 per cent less than the MSP. The decision was simply illegal. But the Government protested fiscal incapacity. The payment of even the MSP for the cotton delivered has not been completed to date.

Everyone thought the State government had learnt the lesson, however belatedly, and would wind up the multi-folly scheme at the first possible opportunity. As mentioned earlier, the Finance Minister had even made an announcement to that effect. Now the Maharashtra Chief Minister, Mr Vilasrao Deshmukh, has possibly started seeing some political and financial advantages in continuing with the scheme. The situation has improved since last Diwali. Most of the unsold stocks of lint have been disposed of and the lint prices are climbing.

The Chief Minister does not wish to let go of the hen that has laid golden eggs for politicians for three decades. He wants to continue the monopsony without any price premium. This cannot be. It is clear that the farmers will be forced to organise Rythu Bazaars for cotton in Maharashtra or take their cotton to the neighbouring Andhra Pradesh, where Mr Chandrababu Naidu is going in for Rythu Bazaars in a big way.

(The author is Founder, Shetkari Sanghatana. Feedback can be sent to sharad@mah.nic.in)

Send this article to Friends by E-Mail

Stories in this Section
Cricket and commerce

Copyright © 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line