The government is believed to have allowed the National Agricultural Cooperative Marketing Federation of India (Nafed) to sell cotton at a price lower than minimum support price (MSP). This will help the agri co-operative ease stocks as about 1 million bales are lying in open in Maharashtra due to space crunch.
The Cabinet last Friday discussed the issue of allowing Nafed to offer discount on selling cotton in bulk and approved the proposal of the agriculture ministry, a government official said. The Centre has already allowed Cotton Corporation of India (CCI) to sell cotton at cheaper rate from MSP. The MSP is the rate at which the government procures a particular commodity from farmers.
According to the proposal, government would have to provide additional subsidy of Rs 50 crore to Nafed for the bulk discount. Without the discount, the government would have to bear about Rs 1,300 crore subsidy. Nafed had procured 3.6 million bales of cotton worth Rs 5,139.33 crore this year at the MSP following a direction from the agriculture ministry as market price of cotton was lower than the MSP.
The cooperative had sold 528,000 bales worth Rs 512.92 crore so far, and the estimated loss was Rs 171.72 crore. The agriculture ministry had also contended that Nafed was paying Rs 130 a bale as carrying cost and at least 1 million bales were lying in open in Maharashtra due to shortage of space in warehouses.
It also said that Nafed would find it difficult to dispose of the cotton since it was at a disadvantage of not following the CCI pattern. In February, the government had allowed CCI to sell its cotton procured at MSP, by offering discounts for bulk purchases, as the market rates were below the benchmark prices.