The Maharashtra government has announced on May 12, 1999, an increase in the procurement price for cotton in the state to Rs 2300 from Rs 2100 per quintal of unginned cotton, effective from November 1999. Evidently, this will apply to cotton to be procured in the next season, if the scheme is extended beyond June 30, 1999 its present expiry date.

Sources point out that when global cotton prices are depressed and prospects for improvement look dim, an arbitrary increase in the procurement price for cotton by the state government cannot be justified on economic grounds, particularly when the textile industry is passing through one of its worstcrisis.

One can, therefore, presume that the decision to increase procurement prices for cotton for the next season might have been taken keeping in view the forthcoming elections.

Political parties in the state spare no opportunity to demand a hike in cotton procurement prices in order to win over cultivators to their side.

Earlier when the Congress was in power in the state, the opposition cried for a rise in procurement prices. Now when the Shiv Sena-BJP alliance is in power, the Congress has been demanding that the procurement prices for cotton should be raised to Rs 2500 per quintal.

No one explains, or asks how the figure of Rs 2500 per quintal is arrived at. In order not to be left behind in making such demand, Shiv Sena supremo Bal Thackeray had announced at a rally in Akola that the government would pay a price of Rs 2500 per quintal to cultivators for the purchase of cotton under the monopoly procurement scheme.

However, the BJP section of the government was somehow not prepared to agreeto this unless the Shiv Sena agreed to some of its demands. So the price of Rs 2300 per quintal can be taken as the outcome of a compromise between the two main partners of the state government.

It is difficult to say whether the opposition will now give up its demand for a price of Rs 2500 per quintal. It is equally difficult to say what will be the response of the government in that case. Secondly, it is uncertain whether the scheme will be extended beyond June 30, 1999 when its present term expires. This is because when the last one year extension was allowed for the scheme, the union government had told the state government to prepare for its winding up as no further extension was going to be allowed.

Of course, Maharashtra chief minister, Narayan Rane has, while making an announcement of the price rise has stated that prime minister has agreed to the extension of the scheme but did not commit to the period of extension.

It looks strange that prime minister himself did not make any suchannouncement at the recent pre-election rally in Mumbai.

The hike is expected to impose on the Maharashtra State Cooperative Cotton Growers Marketing Federation (Mahafed) an additional burden. When the scheme is already incurring losses, such addition to the same can hardly be economically justified, unless one sees chances of improvement in the world markets.

Mahafed is holding a huge stock of cotton.It is no surprise if it was obliged a few days ago to prune prices for its new as well as old cotton.

Any irrational increase in the procurement prices for cotton is likely to make the scheme, top heavy and economically unviable. It might be against the long-term interest of the scheme, to go on increasing procurement prices payable under it arbitrarily, regardless of domestic and international market conditions.