Cotton fields at home put Deshmukh govt in a bind

MUMBAI: Populist promises made in the ’04 assembly election manifesto have come to haunt the Congress-NCP government in Maharashtra.

In the backdrop of a spate of suicides by farmers in Vidarbha, Maharashtra’s cotton constituency, and forthcoming elections to a host of municipal bodies and zilla parishads have revived debate on one prominent electoral promise — the procurement price of cotton.

The manifesto assured Rs 2,700 per quintal, but so far it has remained just that — a promise. Chief minister Vilasrao Deshmukh has braved two tough seasons by refusing to increase the procurement price.

“But it’s pretty difficult to continue buying cotton at a minimum support price now. Suicides in Vidarbha have reached a new high and several municipal bodies there are going to polls. The pressure to pay more to cotton growers is enormous this time,” a senior Congress functionary said. The state is under pressure either to announce a higher price for cotton or a special monetary incentive for cotton growers per hectare, in case the price falls below the MSP.

NCP leader and deputy chief minister RR Patil said in Nagpur on Sunday that the government would think of giving some monetary assistance to cotton growers if the prices in the open market fall.

The president of the state co-operative cotton growers’ marketing federation, NP Hirani, who is also from the NCP, admitted that the DF government is under “particularly high pressure” on the cotton pricing issue this season. “The demand from China, which earlier estimates projected as very high, could drop due to expectations of a bumper yield there. So far, US and India have been the biggest cotton exporters to China. If there is a fall in demand from China, prices in the global and domestic markets could fall,” Mr Hirani said.

The state federation will start cotton procurement for an MSP of Rs 1,900 per quintal from November 15. Chief minister Vilasrao Deshmukh has announced that the state estimated to purchase around 100 lakh quintals, for which a loan of Rs 1,285 crore would be drawn from lending institutions. The state will also have to allocate Rs 320 crore as margin money for drawing the loan, Mr Deshmukh said.

“If the state hikes the price either by adding bonus or giving some additional monetary incentive to offset the fall in prices, it will be an additional burden,” a bureaucrat said.

Mr Hirani said it would be premature to work out calculations assuming that the government hikes the price. “It depends on the additional incentive that the government decides to give,” he said.

In the ’03-04 season, the then Sushil Kumar Shinde government had purchased cotton for Rs 2,500 per quintal, which was Rs 500 more than the MSP that year. “But the state had to incur a deficit of around Rs 2,000 crore on account of this,” a bureaucrat said.

Knowledgeable bureaucrats feel the state is unlikely to go in for a price hike. “There is credible evidence to the fact that a price more than the MSP actually benefits private traders and cotton growers from the neighbouring states.

Cotton growers from the neighbouring states sell their crop to local traders. The traders sell the crop to the federation and avail of the bonus. The bonus, hence, does not reach cotton growers in the state,” a bureaucrat said.

Another reason why the state is unlikely to announce a bonus in surplus of the MSP is that the federation deducts 50% money from payment due to cotton growers as recovery of debt. “An overwhelming majority of cotton growers is debt-ridden. Deduction of the debt component means cotton growers get only 50% of the procurement price.

So, even if the price is hiked, farmers don’t stand to gain,” officials said. This leaves the state with only one populist option — announce a special monetary incentive for cotton growers independent of the procurement price.