The Hindu Business Line : Maharashtra facing cotton glut

THE Maharashtra Government is worried over the huge stock of raw cotton lying at various warehouses. The offtake of cotton has been very low this season.

According to Government officials, the State cotton marketing agency is nursing a stock of 27 lakh bales.

"The agency has been able to sell only seven lakh bales in the last couple of months," a senior official said.

The Maharashtra State Co-Operative Cotton Growers Marketing Federation (MSCCGMF), which is implementing the cotton monopoly scheme, has an inventory of over 27 lakh bales with hardly any takers for the commodity. Mills have stopped purchase with the onset of monsoon, said a cotton trader.

According to Mr Kishore Jhunjhunwala, President, East India Cotton Association, following a bumper crop in the country in the last season, there is a glut in the cotton market. The demand from the textile industry has already been fulfilled.

"The Maharashtra Government should have taken steps to export cotton in bulk, at the beginning of the season (September 2004), now there are no takers. Moreover, the buyers are cautious about MSCCGMF cotton, as it has not been properly segregated," Mr Jhunjhunwala said.

The total cotton procurement by MSCCGMF in the season was about 212 lakh quintals at the cost of Rs 3,664 crore. The State agency procured cotton at Rs 2,500 per quintal, which is Rs 800 higher than the prevalent market rate.

With such a huge investment and low returns, Maharashtra is now seeking Central assistance to reduce the burden. In June, the State Government wrote to the Union Ministry of Textiles seeking Rs 400 crore subsidy on the cotton procured from the State farmers.

Maharashtra has requested for such a subsidy for the first time from the Union Government, as the cotton monopoly scheme has been making heavy losses.

Mills are also not currently buying cotton, as they have sufficient stocks and do not want to take the risk of transporting cotton in monsoon season. The State Government raised Rs 3,664 crore from public sector banks for paying the farmers.

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