Govt agencies’ cotton procurement dips on Gujarat bonus announcement

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Published: December 25, 2015 12:50:01 AM

Procurement by government-appointed agencies — Maharashtra State Cooperative Cotton Growers Marketing Federation (MSCCGMF) and the Cotton Corporation of India (CCI) — has decreased drastically soon after Gujarat announced a bonus for cotton farmers.

Procurement by government-appointed agencies — Maharashtra State Cooperative Cotton Growers Marketing Federation (MSCCGMF) and the Cotton Corporation of India (CCI) — has decreased drastically soon after Gujarat announced a bonus for cotton farmers. The two agencies have purchased some 2.5 lakh quintals and 6 lakh quintals of cotton, respectively, while private traders have procured over 70-75 lakh quintals of cotton in Maharashtra this cotton season.

According to industry experts, soon after Gujarat announced a bonus for cotton farmers, prices have shown a firming trend in Maharashtra. Cotton, which was earlier selling for R4,100-4,200 per quintal, is now selling at R4,400-4,500 per quintal. The Gujarat government recently declared a bonus of R650 per quintal on the produce sold through Cotton Corporation of India (CCI) centres.

Gujarat has already witnessed cotton being poured-in from neighbouring states including Rajasthan, Maharashtra and Madhya Pradesh. This flooding is expected to further escalate as farmers from other states are expected to be lured by the higher prices. According to the announcement, cotton farmers will get an additional R110 on the minimum support price (MSP) of R810 per 20 kg when sold to the Cotton Corporation. Only those farmers selling cotton at CCI depots will be entitled to this bonus.

According to N P Hirani, chairman, MSCCGMF, since the market prices are higher than the MSP fixed by the Centre, at R4,100 per quintal, procurement has been reduced to almost zero. Some 200-250 quintals have been arriving in the purchase centres since the announcement of the bonus. “But it is a happy situation for us as well as the farmers, since they are getting better prices and we are meant to step in only in times of distress,” he said. Around 50% of the cotton produced in the Vidarbha region goes to Gujarat, he said.

The Maharashtra Cotton Growers Federation has opened some 64 purchase centres in the state, which include 25 centres in Nagpur and 29 in Aurangabad. The federation, which operates as a sub-agent of the CCI in Maharashtra, will purchase cotton from farmers at R4,100 per quintal. Senior officials who did not wish to be quoted pointed that farmers can benefit only if cotton prices are in the range of R5,500-6,000 per quintal.

The cost of production today is R5,000 per quintal and prices are hovering around R4,500 per quintal.According to industry experts, the bonus announcement has worked more to the advantage of traders. Those who have holding capacity have earlier purchased cotton at R3,2000 per candy and are currently selling it at R34,000 to R35,000 per candy, making a profit of R2,000-3,000 per candy. It is the farmer who did not have the holding capacity who did not benefit, some industry experts pointed out. Activists in Maharashtra have been urging the government to follow the ‘Gujarat model’ for compensating cotton growers. Other cotton growing states such as Karnataka, Andhra Pradesh and Telangana are also expected to raise similar demands.

The Cotton Association of India expects total supplies of 46.3 million bales (of 170 kg each) during the current 2015-16 season, including a domestic crop of around 37.5 million bales. India’s overall domestic consumption is estimated at 32.4 million bales and exports likely to be around 5 million bales. The cotton production is estimated at 335 lakh bales this year as against 376.6 lakh bales of last year, lower by 11%.

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