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Maharashtra withdraws advance bonus on cotton procurement

BS Regional Bureau

After dithering for over a decade-and-a-half, Maharashtra has decided to withdraw the facility of "advance or pre-sale bonus" on procurement of cotton through its cotton monopoly procurement scheme.

The decision has evoked strong reactions from the cotton belt of Vidarbha and Marathwada in the state with cotton cooperatives and politically strong members of the agriculture produce marketing committee prophesying doom for the scheme.

The Maharashtra government on Wednesday extended the cotton monopoly procurement scheme as per the Cotton Monopoly Procurement Act which entails purchasing crop from farmers as per the Centre's minimum support price, but withdrew the added unique facility of advance which it was offering.

Cotton experts say that the state government has effectively sought to terminate the scheme as Cotton Marketing Federation's godowns are already overflowing the last year's stocks.

Maharashtra does a business of Rs 36 billion per annum in cotton crop with most of the produce being purchased by powerful cooperative societies and state owned ginning and spinning mills.

As per the provisions in the existing Act, the marketing federation procures cotton bales from farmers and after selling them distributes 80 per cent of the support price to them. The rest 20 per cent is distributed after three months as is the profit (bonus) earned on the deal.

Narendra Tidke, the Maharashtra cooperatives minister under the Shankarrao Chavan ministry in 1984-85, had brought about a change in the scheme by announcing a support or guarantee price on cotton procurement.

Following this, the federation had to purchase a record quantity of cotton which had to be stored in open fields. It subsequently ran up losses of Rs 3 billion.

Even as Chavan appointed an inquiry committee to identify possible reasons for the loss, the Union government, while granting conditional extension to the scheme, withdrew Maharashtra's freedom of deciding support price of raw cotton.

It asked the state government to agree to the support price announced by the Centre.

The state government wriggled out of the mess by introducing a system of paying advance bonus to cotton growers depending upon the prevailing market conditions in neighbouring states and also in international markets.

A sort of a crude futures trading mechanism was set up and more money than the minimum support price offered by the Central government was given to farmers.

This continued till 1994-95 when Babasaheb Kedar became the chief administrator of the federation and brought down the losses from 1984-85's Rs 3 billion to Rs 900 million.

A change in power equations in the state saw the Shiv Sena-BJP alliance wrest power from the Congress in 1995 and the cotton procurement price was fixed at Rs 2,100 per quintal with the state government absorbing a loss of Rs 5 billion per annum for farmers.

Over the years the scheme ran up losses of Rs 18 billion till the Shiv Sena-BJP government was unseated. Now the losses have reached a staggering figure of Rs 23 billion and the state government has had to review the situation.

To add to its woes out of the 1.5 million bales of cotton procured by the Federation last year, nearly 1.2 million bales are yet to be sold. Farmers are yet to form an opinion over the withdrawal of facility of advance bonus. The trade, notably the apex chamber of commerce in the region, the Nag Vidarbha Chamber of Commerce, has welcomed the decision.

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