The Hindu Business Line : Maharashtra Govt in a fix over cotton procurement

WHEN the Maharashtra Government decided to dilute its hugely loss-making monopoly cotton procurement scheme two years ago, it did two things: it allowed private operators to come and pick up cotton and began to slash the staff strength in its nodal agency which administers the scheme since 1972.

It thought it was a smart move. The result was spectacular.

The outgo on cotton bought dipped because from the 2001-02 level of 153 lakh quintals procured, it declined to 4.97 lakh quintal the next year.

The subsequent year saw a precipitous fall to a mere 3,200 quintals. Simultaneously, as it counted the profit of Rs 50 crore — unheard of since 1993-94 — it offered a voluntary retirement package.

That saw the nodal agency, the Maharashtra State Cooperative Cotton Marketing Federation, cut the staff size down by 4,000 to 875 personnel and the establishment costs slid from Rs 90 crore per year to a notional Rs 4.5 crore.

It thought it did a wise thing but did not reckon with the opportunistic whimsy of politicians, especially at poll times. All of which now means, the Federation is ill-equipped to carry out the mandate given again by the Maharashtra Government, which going by the poll promises of the Congress (I) — the Nationalist Congress Party, has to buy once again from the cotton farmers at prices which are higher by at least Rs 540 to what is offered by Cotton Corporation of India.

Now, the federation, which started opening the purchase centres since November 10 in Marathwada and Vidarbha and would have "110 doing business by this evening," according to one of its officials, is in a fix. It does not have even enough graders to deal with the arrivals of the cotton, which threatens to turn into a flood.

This flood is triggered by the higher prices, of Rs 2,500 per quintal of H4 variety, the most basic and widely cultivated crop when the open market has not been active and offering much lower prices; the private buyers have in fact become scarce.

The arrivals at the purchase centres, which could grow to 250 soon is expected to be about 150 lakh quintals, the same as in 2001-02.

"We need at least 300-350 graders soon and would probably find them amongst those who took the VRS," a source involved in the operations told Business Line.

"Thereafter, we would need manpower to do the backroom work."

This backroom work is quite tricky because delayed payments can cause an outcry from farmers. The politicians pick up from there.

"We will take the call," a well placed official said, "but we did not reckon that the loss making scheme would be revived" otherwise the VRS may not have been pushed through.

In the past, with the full staff strength, the Federation has procured substantial quantities — and made equally substantial losses — as in 1995-96 (131 lakh quintals; loss Rs 523 crore); 1996-97 (150 lakh quintals, loss Rs 378 crore); 1998-99 (1,220 lakh quintals, loss Rs 622 crore) and 1999-2000 (176 lakh quintals, loss Rs 823 crore).

These huge losses stemmed from the difference between the high prices offered as guaranteed price to the farmers and the sale in the market, including export, which had lower realisations.

The "only profit," a knowledgeable source concedes, "has always been political for the exchequer bore the losses." The total accumulated losses are in the range upwards of Rs 5,500 crore.