High taxes and prices, and competition from the Cotton Corporation of India (CCI) are coming in the way of private traders procuring cotton in Punjab.
Since its entry in Punjab on October 8, the CCI managed to procure 195,876 quintals of cotton, while private traders only 69,000 quintals.
Before the CCI came, private traders dominated procurement and growers were distressed, because in the absence of any government agency, private buyers were offering them prices lower than the minimum support price (MSP). Earlier, the average price in cotton markets in Malwa (one of the cotton belts) was quoted much below the MSP of Rs 2,800 quintal. This forced the farmers to go to the markets in Haryana and Rajasthan, where they were getting Rs 100-150 more per quintal.
The farmers are reportedly unhappy with some commission agents who had been conniving with the private companies in allegedly keeping the official agencies out. But with the arrival of the CCI, the farmers were paid better remuneration.
The main reason behind the little procurement by the private traders is high taxes coupled with soaring prices of cotton in Punjab. The state is charging 12.5 per cent tax on cotton, as compared to 7.6 per cent in Rajasthan and 10 per cent in Haryana.
The CCI is paying Rs 2,700-2,800 per quintal, which is much higher than what the private traders are offering. The state’s 12.5 per cent tax includes 4 per cent value-added tax (VAT), 2 per cent each as Rural Development Fund cess, market fee, and Punjab Infrastructure Development Fund
(PIDF) cess, and 2.5 per cent arhatiya commission.
According to state government data, cotton production in Punjab is likely to touch about 2.1 million bales during this kharif season, compared to 2.355 million bales in the last season. The reason for the fall in production is decline in area under cultivation, which fell by 12 per cent this season.
Overall, 791,975 quintals of cotton was procured from different mandis of the state up to October 14. Of the total, private traders procured 606,099 quintals of cotton while the CCI 195,876 quintals.
