Cotton County Woes

Recurring scams, losses and discrepancies between the MahaCot and the Government have milked the state’s cotton industry dry

PICTURE SPEAK

PICKING THE BEST: Traders examining cotton bales Rather than help farmers get the best price, the federation has been accused of helping only a handful of traders.

MahaCot, which came into existence in 1971, is an autonomous body promoted by the state government and is responsible for procuring cotton from farmers and selling it to the traders. But rather than help farmers get the best price in the market, the federation has been accused of tinkering with them in order to help benefit only a handful of traders. It offers farmers Rs 1,980 for a quintal of cotton. This is almost equal to the input cost, which means farmers don’t earn anything. In February 2006, when cotton prices were hovering at Rs 18,600 a bale, the federation lowered its price by Rs 1,000, which only seemed to benefit Manjeet Cotton, a medium-sized trading firm in placing its order.

After opposition from the traders, the federation scrapped the deal. Interestingly, as per the regulations, it cannot cancel any contract after accepting the bid. Defending this act, N. Armugham, managing director of MahaCot, says “The company did not pay earnest money deposit, which is why we cancelled the order. The rate was not abnormally reduced. The East India Association (EIA) had brought its rates down so we had to follow suit”.

The Cotton Corporation of India (CCI) usually determines cotton prices in the state. In this case, the prices by CCI had showed no sign of cooling. The ruling price per bale of cotton, the same day MahaCot reduced prices, was Rs 18,400.

The state machinery, however, sings a different tune. Mar-keting minister and in-charge of MahaCot, Harshwardhan Patil says the federation received too many bids after Manjeet Cotton’s. “Since we could not accept them as we did not have enough stock, we cancelled it,” he says. This discrepancy between the federation’s and the Government’s account only underlines the not-so-transparent working of MahaCot. “Cotton business is dominated by a few brokers and traders who do not want new entrants,” says Manjeet Singh, promoter of Manjeet Cotton. This is not the first time that the federation has been embroiled in a controversy. Last year, it suffered a loss of Rs 25 crore in a seed scam.

While such scams have become the order of the day, it is the poor farmers who are suffering the most. Every year the federation promises a bonus of Rs 300 to Rs 400 per quintal to farmers, in case it makes profit. But, the farmers are left high and dry every-time. “We can’t provide a bonus if there are no profits,” says Patil. Although no trader is supposed to purchase cotton below a fixed minimum price, the farmers end up being underpaid and thus prefer selling to MahaCot.

While cotton production has its own demons in Maharashtra, the federation needs to play an active part in boosting its sale. Every year it is saddled with previous years’ produce even as the cotton market hits a bearish phase. Traders feel MahaCot should price cotton according to the demand in the domestic market and not only co-relate the prices with the CCI. It is only when the federation makes a profit that the farmers will also benefit. For the 26 lakh poor cotton farmers in Mahara-shtra, revival of the federation could be one of the few possible steps towards prosperity.

-By Prerana Thakurdesai

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