The Cotton Corporation of India (CCI) has emerged as the front-runner for cotton procurement in Punjab.
Since its entry in the Punjab market this year, the CCI procured 1 million quintals of cotton till November 8, while the private traders including millers managed to procure 981,496 quintals of cotton during the period from various mandis of the state.
Whereas during the last procurement season (2007-08), overall private traders procured 2.9 million quintals of cotton, while the CCI procured only 66,286 quintals.
Prior to the entry of CCI in Punjab this year, the procurement was dominated by private traders.
Also farmers were distressed in the absence of any government agency. Private buyers were offering them price lower than the minimum support price (MSP).
Earlier, the average price in the cotton markets in Malwa region (one of the prominent cotton belts) was quoted much below than the MSP of Rs 2,800 (for long staple, 27.5 mm-32.0 mm). As a result, farmers were compelled to explore other markets in Haryana and Rajasthan, where they were offered Rs 100-150 more per quintal.
Also, farmers were reportedly unhappy with some commission agents who had been conniving with private companies in allegedly keeping the official agencies out.
But after the arrival of the CCI, farmers are paid better remuneration. In majority of the cases, the private traders are purchasing stock that is rejected by the CCI.
Since its inception in various mandis of the state this year, the CCI procured 1 million quintals of cotton as on November 8, while the private traders including millers managed to procure 981,496 quintals during the period from various mandis.
Experts in industry are of the view that high taxes coupled with high MSP is acting major hindrance in procurement by the private traders.
It is worth noting that the state is charging 12.5 per cent tax on the cotton, as compared to 7.6 in Rajasthan and 10 per cent in Haryana.
Also, the CCI is paying Rs 2,700-2,800 per quintal, which is much higher than the private traders. The state charges 12.5 per cent as tax on the cotton crop, which comprises 4 per cent
VAT, 2 per cent each as Rural Development Fund (RDF), market fee, Punjab Infrastructure Development Fund (PIDF) cess and 2.5 per cent arhatiya commission.
They stressed that high MSP of cotton is unviable to the ginning mill owners, therefore, they are not purchasing cotton from the mandis. According to the state government data, cotton production in Punjab is likely to touch about 2.1 million bales during this kharif season compared to 2.35 million bales achieved in the last season. The reason is fall in production because of decline in an area that fell by 12 per cent this season.
It is worth mentioning here that overall 2,059,707 quintals of cotton were procured from different mandis till November 8. Of the total procurement, private traders procured 981,496 quintals, Markfed 1,223 quintals, while the CCI procured 1,076,988 quintals.
