The present compulsory cotton procurement scheme which the state government operates through the Maharashtra State Cooperative Cotton Growers Marketing Federation (Mahafed) will expire on June 30, 2000. While sanctioning its one year extension the Union government had stipulated last year, as on earlier such occasions, that no further extension of the scheme will be allowed and that the state government should put in motion an exercise to wind it up by the time of its expiry on June 30, 2000. The state government is reportedly seeking sanction for its modified scheme for five years.

According to analysts some new factors have come in. The state government has realised that guaranteed prices at which it has been procuring compulsorily cotton from growers in the state has reached a stage where it can not be sustained any longer without further losses on top of accumulated losses of about Rs 2,000 crore. The idea behind the introduction of guaranteed prices to growers was to offer immediate better returns to farmers and to enable them to participate in marketing profits as well.

However, under competitive populism indulged in by every political party in opposition, the state government was always pressurised to step up guaranteed prices from time to time, irrespective of much lower price levels prevailing in the market. Even when cotton prices remained depressed in the open markets, the Mahafed was required to pay much higher prices to growers for its procurement of their produce and had often to sell in the local market at lower than procurement costs as export outlets were kept more or less choked.

Under this situation, the scheme had already piled up huge losses and the Mahafed was sitting on a huge stock estimated at 24 lakh bales. The state government has been unable to find funds to support any more stocks.

This, according to analysts, explains the compulsion for the state government to introduce the modified scheme under which a cooperative, instead of Mahafed will procure cotton from growers, not at any guaranteed prices which could be much higher than support prices or even market prices, but at support prices to be fixed by the Union government.

This may take away at once the benefit of guaranteed prices which the state growers enjoyed even when market prices were much depressed. It remains to be seen how farmers react to such new scheme.

It might be difficult, perhaps even legally, to make it compulsory, and to force cotton growers to sell only to the government sponsored agency at prices which might be much lower than the prevailing market prices. While the CCI which also is supposed to buy cotton at procurement prices retains marketing profits for itself, the state agency can of course offer to growers a share in such profits, but it may be very difficult to force growers to part with their produce at support prices and wait for about a year, for a share in the marketing profits from the state agency.

Such a compulsion may induce farmers to take their produce, albeit surreptitiously, to the adjoining states where prices might be higher and full payments can be immediate. After all they too have to meet their financial obligations. If this happens on a large scale, it might be difficult to prosecute all of them and earn unpopularity among them. Such an action might prove politically self-defeating.

Another problem that may arise, according to analysts, is that the government may find it difficult to maintain the staff of the Mahafed or to absorb it elsewhere.

If the proposed cooperative is made to absorb such staff, it may not have the wherewithal to maintain such costly bureaucratic setup. The state authorities seem to be in dilemma.

They can not openly renounce to scheme nor can they offer an attractive alternative to growers.