Cotton's cool, players are buying
The Maharashtra government’s plan to start cotton procurement from November 15 for the ‘06-07 season has set the stage for competition between the state agencies and buyers from the open market.
By Abhiram Ghadyalpatil, TNN |
MUMBAI: The Maharashtra government’s plan to start cotton procurement from November 15 for the ‘06-07 season has set the stage for competition between the state agencies and buyers from the open market.
An estimated record yield — close to 26m quintals — has made the cotton scenario all the more interesting, market sources and government agencies associated with the cotton economy told ET.
This would be the fifth consecutive season when Maharashtra’s cotton purchase policy would compete with private buyers. Maharashtra cotton growers’ co-operative marketing federation, a government agency designated to procure cotton, would purchase the crop at a minimum support price (MSP) of Rs 1,900 per quintal.
Chief minister Vilasrao Deshmukh said on Monday that the federation expects to purchase around 10m quintal during the initial phase.
NP Hirani, president of the federation, told ET that the government would continue to be a player in the market but only as a “deterrent” against exploitation of farmers. “It’s not government’s job to be in the cotton purchase business. Yet, the government would stay in the market to ensure that the private buyers don’t force farmers into selling the crop at a price lower than Rs 1,900 per quintal”.
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The MSP should serve as the rock-bottom price. “If private players want to buy the crop, they will have to offer more than Rs 1,900. If they don’t, farmers are welcome to sell the crop to the government. The government wants to ensure a win-win situation for farmers,” he said.In ‘02, Vilasrao Deshmukh, in his first term as chief minister, took a politically bold decision of allowing farmers to sell the crop to private buyers which resulted in government’s buying dropping to 2m quintals from 15.5m quintals previous year.
In ‘03-04, however, an election-bound government, headed by Sushilkumar Shinde, preferred politics to economics and announced a higher price of Rs 2,500 per quintal much against the market price. Obviously the government purchase shot up to 21m quintals, with the political decision costing the state exchequer a huge Rs 1,500 crore.
In ‘04, Mr Deshmukh, in his second term now, reversed the decision and declared that the federation would offer only MSP to farmers. This again restored cotton to market forces and the federation could purchase only 3.5 lakh quintals.
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In ‘05-06 season also, cotton growers preferred private buyers to the federation that has bought only 1.8m quintals which constitutes only 10% of the total cotton yield. Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
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