The bonus dilemma

UNTIL 1971 the cotton trade in Maharashtra was controlled by a nexus of private traders, commission agents and textile mill owners. In 1972, in order to protect farmers from exploitative middlemen and to ensure that they got a fair price for the crop, the State introduced the Monopoly Cotton Procurement Scheme (MCPS). The scheme was launched by enacting the Maharashtra Raw Cotton (Procuring, Processing and Marketing) Act, 1971.

Essentially, under the MCPS, the State government purchases cotton at the Central government-declared minimum support price (MSP). To that price it adds a bonus. For instance, if the MSP declared is Rs.1,850 a quintal, the State government would pay an additional Rs.400 (average) bonus, taking the total price paid to Rs.2,250. The bonus is paid in advance and is calculated on the basis of the profits from the sale of the procured cotton. About 75 per cent of the profits are distributed to the farmers as bonus. Until 1995, international cotton prices remained high and steady and the scheme yielded profits. When the prices crashed, the scheme began accumulating losses.

The loss as of this year stands at a staggering Rs.3,800 crores. Interest on this liability is Rs.300 crores annually, states the figures released by the Maharashtra State Cooperative Cotton Growers Marketing Federation Limited (MSCCGMFL). It was only in early November this year that the MCPS paid the final instalment of price on last year's crop.

Maharashtra is the only State in the country to have this scheme. Over the years it has become extremely politicised. The predominantly trader-funded Bharatiya Janata Party-Shiv Sena combine tried to do away with it when it was in power in 1988, but Sharad Pawar's intervention foiled the move, says Krishna Khopkar, a member of the All India Kisan Sabha. He adds: "It's ironic that now the BJP-Shiv Sena is demanding that the scheme be retained." More than 30 lakh farmers in the State are dependent on the MCPS. Politicians seem to be looking at those numbers with a vote-bank in mind, and have lost focus of the objective of the scheme," says Khopkar. He believes that it is in times like these that the MCPS should be there to protect the farmers. Otherwise, the situation will revert to the pre-1971 days when they were at the mercy of the open market. "There are ways the government can work out the finances. If they are prepared to take a Rs.700-crore annual hit just to revive the Dabhol Power Company, why can't they find a way to pay the cotton farmers," asks Khopkar. "This has to do with the overall neglect of the farming community."

The MSCCGMFL is the body appointed by the State government to implement the MCPS. The federation is involved in procuring, processing, storage and sale of cotton. It has 12 zonal offices, located in Vidarbha, Marathwada, Khandesh and Western Maharashtra. They operate 523 procurement centres. The procurement is done after grading in ginning and compressing factories, with the help of 157 Agricultural Produce Market Committees (APMCs). Payments to the cultivators are made through 166 taluk sale purchase societies, which act as sub-agents for the federation.