With just three per cent of the area under cotton being irrigated, Maharashtra farmers need help through different channel rather than raising the minimum support price (MSP) for the natural fibre to Rs 6,000 a quintal.

A discussion paper by the Commission for Agricultural Costs and Prices (CACP) has said that hiking the MSP from the current Rs 3,300 for long staple cotton is not a solution since exports will become unviable, leading to accumulation of stocks in the domestic market. The MSP for medium staple cotton is Rs 2,800 a quintal.

Besides, high costs could render the domestic textile industry sick, resulting in large-scale unemployment, the paper “Pricing ‘crisis' in cotton”, authored by the CACP Chairman, Dr Ashok Gulati, and Ms Surbi Jain, said.

The discussion paper, part of a series by CACP in an attempt to encourage unbiased discussion on critical issues affecting agricultural sector and food security, does not necessarily reflect the view of the commission.

The problem with Maharashtra is that growing genetically modified or Bt cotton in rainfed areas is fraught with risk. The State's productivity is the lowest in the country, almost half of that in Gujarat, while production costs are higher making returns the lowest.

“No wonder, cotton farmers in Maharashtra have not gained as much as their counterparts in Gujarat or Rajasthan have from the Bt crop,” it said.

Farmers in Maharashtra have been agitating for a higher cotton price after domestic rates dropped to Rs 32,000 a candy of 356 kg for the Shankar-6 variety during November-December. Prices had touched a record Rs 59,700 in March last. One of the demands made by farmers and supported by political parties is to raise the MSP.

The Maharashtra Government had asked the Centre to raise the MSP to Rs 4,285 a quintal but it was turned down.

Stating that the 2010-11 season (October-September) was an unusual boom year, the paper said that a higher MSP would artificially raise the price of cotton and interfere with the normal functioning of the demand-supply dynamics of the market.

The MSP for 2011-12 had been fixed at Rs 3,300 a quintal taking into account the weighted average cost of production in various states plus a reasonable profit margin. Since the cost of production varies from region to region and from State to State, and even from farmer to farmer, the benefits of selling at MSP could be marginal in areas such as Vidarbha in Maharashtra. Given high variance in costs of different farmers, it is also possible that some farmers in Vidarbha are even getting negative returns.

Cotton production costs across the country are the highest in Maharashtra, at Rs 2,960 a quintal, due to poor irrigation infrastructure and lower yields. In contrast, the cost of production in Gujarat is Rs 2,216 a quintal, as irrigation facilities cover more than 50 per cent of the total cotton acreage and productivity is almost double.

Stating that the demand of Maharashtra farmers for a higher MSP is understandable, the CACP does not recommend State-wise support price that is also not desirable, the paper said. Spelling out their stand, Dr Gulati and Ms Jain say the way forward is to come out with a short-term or quick fix solution such as a relief package for Maharashtra that does not have any relation to the price. The package could be in the form of loan subvention or direct income support based on per hectare basis or some such measure that would not disturb the cotton market.

A sustainable long-term solution could be found through a special and large package focusing on irrigation investments in Maharashtra.

This could take time and the Centre may have to pitch in with larger programme of Integrated Watershed Management with ample resources of about Rs 30,000 crore and dovetailing it with agriculture.

The programme could cover Maharashtra as well as other drought-prone areas and create irrigation facilities for dry land crops such as cotton, pulses, and oilseeds, the paper said.

> mrsubramani@thehindu.co.in

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