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Maharashtra’s timely decision to protect cotton growers’ interest

The Maharashtra government’s decision to safeguard cotton growers interest in the state by offering them a price of Rs 2500 per quintal for their ‘kapas’ (seed cotton) under the state’s cotton monopoly procurement scheme has come not a day too soon. For some interested circles had already started the game of tossing about exaggerated estimates of the current season’s cotton crop in the country to depress prices and thus make farmers part with produce at such subdued rates. These circles seemed to be aiming at a repeat performance of the last year’s happening when the cotton Advisory Board (CAB) put up a highly inflated estimates of cotton crop for the 2002-03 season at 152 lakh bales of 170 kg each, in complete disregard of the acute drought conditions in several parts of the country and a sharp drop in acreage. The depressed cotton prices made growers part with their produce at lower prices. After they had done so, the CAB gradually lowered its crop estimates, benefiting the middle men who were thus enabled to buy cotton from growers when prices were thus artificially subdued. The timely decision taken by the Maharashtra chief minister, Mr Sushil Kumar Shinde is bound to nip such game in the bud this year.

Of course, it is often argued that when the Union government itself is fixing minimum support prices for cotton, there should be no need for any state government to announce its own support prices. Had the Union government been discharging this function honestly, there should be no such need but ground realities tell a different story. For instance, when the price for LRA (Maharashtra) cotton was ruling at the start of the current season around Rs 2,350 per quintal and the price trend seemed to be upward, the Union government’s minimum support price for that variety stood at Rs 1,600, implying that the Central authorities saw nothing wrong even if prices dropped to that level. Cotton growers were thus prevented from getting the benefit of the prevailing extremely tight demand supply position of cotton worldwide. Currently, this cotton is priced in the market at Rs 2,537 per quintal. The Union government possibly did not see any injustice being done to growers of this cotton by keeping its minimum price nearly 29.05 per cent lower than the market price. Actually, a fall of this order in the price of cotton could spread panic among cotton growers. It has taken the right step of fixing its procurement prices at a realistic level which is slightly lower than the prevailing market price.

Critics of this policy have, of course, argued that the World Bank wanted the Maharashtra government to abolish its cotton procurement policy intended to protect cotton growers’ interests. It is, however, a moot point whether the World Bank retains any moral right to press the state government for such a course, when it is unable to prevent the USA and some other countries from taking steps to protect interests of their cotton growers. Some other critics have also argued that a state which is nearly bankrupt, cannot afford to adopt such a scheme to help its farmers. However, no bankrupt family can be expected to throw its children to wolves because of its financial difficulties. It is also argued that the Union Finance Commission wanted the state government to give up this scheme. Unfortunately, the Finance Commission did not offer any alternative to protect cotton growers’ interests. It would perhaps been much better, if it had simultaneously told the Union government to fix its minimum support prices at not than 10-15 per cent below the initial rates at the start of the season, or evolve some more rational system to protect cotton growers interests in the country.

The step taken by the state government will not only help in halting the game of pulling down cotton prices in the state through exaggerate crop estimates but will also indirectly protect growers interests in other parts of the country as well. The Maharashtra State Cooperative Cotton Growers Marketing Federation (Mahafed) will always be there to buy seed cotton at the stipulated procurement of Rs 2500 per quintal. Other agencies which were allowed to buy cotton in the state, if allowed to do so even this season, may also be active. Cotton producers in the state might thus get even better prices than Rs 2500 per quintal, particularly in view of the globally tight demand supply position of cotton this season.

One may do well to remember that Maharashtra is one of the largest produces of cotton in the country. This year its crop is expected to touch nearly 43 lakh bales against 24 lakh bales last season. Had all this cotton moved into the market at once, that could have pulled down prices in other states as well. If the Mahafed actively buys up substantial quantities of the state cotton crop at revised procurement prices that would prevent any rapid flow of this cotton into the market. This may benefit cotton growers in other states as well. Under the prevailing tight demand supply position of cotton in the world, it is quite likely that Mahafed, the state procurement agency, might be able to realise much better prices for cotton to be procured by it at the new procurement prices fixed by the state government. In that event, the Mahafed might not be put to any loss on account of this hike in procurement prices though the state government has shown its readiness to bear, if necessary, any additional burden by applying expenditure cuts elsewhere.

- M D Dewani