The Hindu Business Line : Quandary of cane, cotton and onion

Farmers were promised policies that eliminate price-depressing moves and lighten the burden of loans and interest. But the Maharashtra Government is trying to revive the Cotton Monopoly Procurement Scheme, the zone bandi system for sugarcane and a pointless liberalisation of onion trade. Are these policies really farmer-friendly, wonders Sharad Joshi.

DUSSEHRA, in Maharashtra, marks the auspicious day for launching enterprises. The Maratha armies used to celebrate the festivities of Dussehra at home and then proceed northwards for conquests. The tradition still continues.

The rival forces of the Congress(I) and the Nationalist Congress Party (NCP) mutually agreed upon a ceasefire in the fight for the chief ministership of Maharashtra. Chief ministers might come and go, but October 23 will certainly not be remembered as the day the Congress and the NCP resumed hostilities. It is more likely to be remembered as the day on which the State Government resumed purchase of cotton, ostensibly under the Maharashtra State Cotton Monopoly Procurement Scheme (CMPS), which lay in suspension since last year. In fact, the purchase will be under the aegis of Cotton Corporation of India (CCI). The farmers will be paid by CCI at the minimum support price (MSP), as in any other State.

There is no clear indication if private traders will be allowed to make purchases from the farmers. If it is presumed that the orders issued last year remain in force till they are formally revoked, the private traders will be legally permitted to enter the market, though under the present situation of depressed market prices, they may have little economic incentive to do so.

The joint manifesto of the Congress and the NCP, for the Maharashtra Assembly elections, had announced that the new government would resuscitate the CMPS and had even a guaranteed a minimum price of Rs 2,700 per quintal.

There are two evident contradictions here. The National Common Minimum Programme (NCMP) of the United Progressive Alliance (UPA) clearly promises that all measures that have the effect of depressing prices of agricultural commodities will be eliminated. The assurance of resuscitating the CMPS goes contrary to the letter and spirit of this element of the NCMP.

Further, last time the Centre granted a fresh lease of life to the CMPS, it had clearly stipulated that the guaranteed minimum price under the CMPS should not exceed the MSP fixed by the Centre.

Many critics had then raised the point whether it made any sense to continue the CMPS and if it would not be much simpler to wind it up and allow both CCI and the private trade to operate as in all other States. CCI intervenes in the market to ensure the MSP all over India. If that is all the CMPS in Maharashtra was allowed to do, it had lost all the justification for its existence.

Last season, the Maharashtra Government stopped making the Cotton Monopoly Procurement a prestige issue and permitted the entry of both CCI and the private traders, and the latter offered a hefty Rs 1,000 above the MSP. The assurance of a price of Rs 2,700 in the electoral manifesto of the Congress-NCP alliance goes against the Centre's directives that the guaranteed minimum price should not exceed the MSP, which stands at Rs 2,010 a quintal this year.

It may be recalled that last season's guaranteed minimum price was Rs 2,500 a quintal when the private traders were offering as much as Rs 2,900-3,000. This season, the market price appears stuck at less than Rs 2,000. The new government will have to bear a loss of anywhere between Rs 5,000 crore and Rs 6,000 crore if it complies with the electoral promise. If it does not, the political price might be heavier. In Vidarbha alone, over 500 farmers committed suicide last year. The figure might double if the cotton prices are allowed to fall with the market. So much for the white gold — cotton — situation in Maharashtra.

Now, for the pungent gold. A few days earlier, the Central Cabinet announced that onions were deleted from the list of commodities that come under the purview of the Essential Commodities Act. The Finance Minister, Mr P. Chidambaram, who made the announcement, said the move would benefit exporters and farmers.

The liberalisation of the onion market is some indication of the government's intention to go back on the policies followed for over a quarter century of banning export of onion immediately after the harvest and lifting it four-five months later after the stocks pass into the hands of the traders. During this quarter century, much water has flowed under the bridge.

The WTO regime frowns upon all quantitative restrictions in international trade. And, restrictions on export of onions are contrary to the spirit of the new rules of the WTO game. The Centre has removed onions from the list of essential commodities not in pursuance of any reformist policies in agriculture or in pursuance of the NCMP; it was forced to do so as, otherwise, its restrictions would have invited complaints from other nations.

Finally, the issue of sugarcane — the sweet gold. The Statutory Minimum Price (SMP) of sugarcane is Rs 730 per tonne for a recovery of 9 per cent with a premium of Rs 8.6 per tonne for additional 0.1 per cent recovery. In the prime sugarcane-producing region of southern Maharashtra, the recovery is, generally, above 12 per cent.

That should earn them Rs 900 per quintal. This is subject to deductions on account of harvesting and transport costs as the factories carry out these operations at their own cost. All told, the farmers have been demanding a net price of, at least, Rs 1,000 per tonne.

The State government persists with a State Advised Price of Rs 560 per tonne. Sugar factories across the border, in Karnataka, are offering Rs 1,050 per tonne with no deductions on account of repayment of loans or contributions to diverse funds. The Assembly elections in Maharashtra had stopped the sugar cooperative factories from moving against this encroachment across the border.

Soon after Dussehra, once a new Chief minister assumes charge, the sugar barons of South Maharashtra — all NCP loyalists — will surely move to stop the transport of sugarcane to Karnataka factories.

In fact, they will urge the Maharashtra Government to bring back the despised zone bandi system to protect their fiefdoms by imposing monopoly procurement.

The Congress-NCP feud over the chief ministership coincided with the prime sugarcane harvesting season. Maharashtra's sugar barons were worried that, by the time the new chief minister is sworn in, the Karnataka factories mayhave taken away much of the harvest and have, thus, start declaring prices well above Rs 1,000 per tonne, braving the wrath of the new Government and Mr Sharad Pawar. The UPA Government at the Centre has promised to take pro-farmer measures by eliminating price-depressig policies and lightening the burden of loans and interest. On the ground, it is trying to bring back the defunct CMPS and the zone bandi for sugarcane and tom-tomming about a pointless liberalisation in respect of onions.

Clearly, the Government lacks a policy on the subject. It would be forced to give up its second misadventure in CMPS under pressure of international market forces. In any case, the State fisc cannot bear the burden of cotton monopoly purchases. Similarly, the market forces will, sooner or later, drive the rickety cooperative sugar factories in Maharashtra to bankruptcy.

Mr Sharad Pawar and the Centre are aware that liberalisation is good for agriculture and the economy. They know equally well that liberal policies will hurt the cooperatives, which provides their political stay.

The position of the Left on the economic reforms in agriculture is not known as yet. Whoever the new chief minister of Maharashtra, he/she cannot escape this quandary of the white, sweet and pungent gold in the State.

(The author, a Rajya Sabha MP, is founder of the Shetkari Sanghatana. He can be reached at sharad@mah.nic.in)

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