Financial Daily from THE HINDU group of publications
Tuesday, Jun 14, 2005
Agri-Biz & Commodities
Maharashtra seeks subsidy for cotton purchase under monopoly scheme
Mumbai , June 13
SADDLED with 30 lakh bales (of 170 kg) of cotton, the Maharashtra Government has written to the Union Ministry of Textiles seeking financial assistance to the tune of Rs 400 crore. It has sought Rs 1,000 on every bale of cottonbought from farmers in the State under the cotton monopoly scheme 2004-05.
The State Government procured 43 lakh bales totally during 2004-05 but could sell only 13 lakh bales. Exports orders are yet to take off.
Maharashtra has sought such assistance for the first time from the Centre as the Maharashtra State Co-operative Cotton Growers' Marketing Federation (MSCCGMF) is making heavy losses.
A formal letter was sent to the Textile Ministry, a senior Government official said.
In the cotton season October 2004-September 2005, farmers had a bumper crop but international prices collapsed by 30-35 per cent. However, MSCCGMF, the nodal body for cotton procurement in the State, bought cotton at Rs 2,500 a quintal, which was higher by Rs 800 than the prevalent market rate.
Total cotton procurement in the season was about 212 lakh quintals at the cost of Rs 3,664 crore.
The State could not pay the farmers in time. It led to acrimonious debate in the legislature; the opposition parties exerted immense pressure on the Government for payments.
The Government had to borrow from banks to make the payments.
"For political compulsions cotton is bought at much higher price, but Government cannot continue for long with these measures. Maharashtra cotton farmers cannot remain insulated from outside world," said a commodity analyst.
The Government may have to consider crop diversification or take up better crop management and agronomical practices.
"The money spent on buying cotton at an inflated rate could have been spent for irrigations system in region like Vidarbha," the analyst said.
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