Maharashtra defers payment to cotton farmers

Govt to pay agriculturists as and when cotton stockpile is sold

For the cotton farmers who sold their produce to the state government, the payback time is still to come.

The Maharashtra government, which has only Rs 1,600 crore at its disposal to pay off cotton farmers, has decided to defer payments and pay the agriculturists as and when its stockpile of cotton is sold.

The payments are due for the produce that was procured under the Cotton Monopoly Scheme at Rs 2,500 per quintal.

The state that has offered a much higher price for the cotton than the prevailing market rate under this scheme (the minimum support price announced by the Union government was Rs 1,960 per quintal) is set to suffer a loss of Rs 2,000 crore in this fiscal.

Confirming this, a senior secretariat official told Business Standard, "We have no other option but to defer the payment as our financial situation is constrained. The state government had promised to buy the cotton from farmers at Rs 2,500 per quintal so we are doing it. We were able to raise Rs 1,000 crore from the Maharashtra State Cooperative Bank (MSCB) at a high interest rate of 13 per cent.

"Another Rs 660 crore is available from the budgetary provision of Rs 460 crore and the additional Rs 200 crore from district central co-operative banks (DCCBs). But the ask is in the range of Rs 4,500 crore."

The official added that the expected cash outgo for the state in the current fiscal on account of cotton procurement would amount to Rs 4,500 crore.

Maharashtra's marketing minister Harshavardhan Patil explained the cash crunch further by stating, "For this year alone the cotton bill for the state will result in a net loss of Rs 2,000 crore. In the last 30 years that the Cotton Monopoly Scheme has been in force, the accumulated losses are pegged at Rs 4,850 only. The mills in the private sector have not indulged in any buying as the state government was paying such a high price for cotton coupled with the fact that international prices of cotton have also fallen."

Patil said that an all party meeting would be convened to arrive at a political consensus in order to review the cotton procurement scheme.