Supply Chain Council of European Union |

Mahacot, CCI concerned over difference between procurement cost, sale price

Mahacot_1  H x



By Kartik Lokhande :


Also, Mahacot has to let go of Rs 85 crore ‘profit’ due to clause for reimbursement of commission and expenditure ‘whichever is lesser’ 


Maharashtra State Co-operative Cotton Growers’ Marketing Federation (Mahacot) and Cotton Corporation of India (CCI) are in a tricky situation owing to difference between cost of procurement of cotton from farmers at minimum support price (MSP) and prevailing market/sale price of cotton bales. Besides, due to a clause in agreement, Mahacot has to let go of what could have been its ‘profit’ after a long gap. Mahacot, as sub-agent of CCI, procured total 93.90 lakh quintals of cotton from 3,45,277 cultivators. Though the procurement started initially at a few centres, the process got disrupted due to COVID-19 lockdown and restrictions thereof.


Still, owing to pressure from farmers and political leaders, Mahacot had to start more centres and resume procurement during lockdown. As Mahacot did not have adequate manpower and there were issues with availability of graders, special training sessions were conducted to make available extra graders to carry out extended procurement of cotton. The procurement for 2019-20 season concluded recently, slightly ahead of the new procurement season 2020-21 that is all set to begin after Dussera. However, owing to good rainfall and good yield, Mahacot registered a record procurement of cotton. The total worth of procured cotton was Rs 5,025 crore.


However, there is a glitch in the story. For, Mahacot and CCI both procured cotton at MSP, which was higher than the market price. Anantrao Deshmukh, Chairman of Mahacot, told ‘The Hitavada’ that there was a difference between MSP offered to farmers and prevailing sale price of cotton bales. The price at which cotton was procured from farmers, is higher than the market price. As a result, the sale price of cotton bales for Mahacot or CCI will be lower than the procurement cost. Deshmukh said that Mahacot being sub-agent would not be at loss on this count, but CCI as main agency would have to seek Government aid to bridge the gap. Asked about the amount of difference, he said that due to inadequate manpower available the accounts were yet to be finalised. Some bales were sold earlier, and more bales may be sold at price higher than the previous one, depending upon prevailing market rates. So, he added, it would take time to arrive at a figure of difference.


However, Deshmukh said, despite record procurement, Mahacot would have to let go of what could have been a ‘profit’ after a long gap. As sub-agent of CCI, Mahacot gets 2 per cent commission on cotton procurement done. In 2019-20 procurement season, which concluded recently, Mahacot incurred expenditure of Rs 15 crore. As per the norms, it would get either Rs 15 crore or 2 per cent commission, ‘whichever is lesser’. In the given situation, 2 per cent commission on total procurement value of Rs 5,025 crore works out to be over Rs 100 crore.


As against this, it would get only Rs 15 crore of expenditure incurred, under ‘whichever is lesser’ clause. So, it would have to let go of ‘profit’ of Rs 85 crore, Deshmukh said. In 2018-19 procurement season, Mahacot could procure only 35,000 quintals of cotton, said Mahacot Chairman. Obviously, that year, the amount of commission was lesser than the expenditure incurred. “That year, we had to incur loss as amount of commission was reimbursed to us despite higher expenditure,” he rued. 


Mahacot to start lesser number of procurement centres post-Dussehra Usually, Mahacot begins cotton procurement for Kharif season around Dussehra when the crop is harvested. This year, it is planning to start cotton procurement after Dussehra as adequate manpower is not available. “The Government has not made available adequate manpower to us. So, we have planned to start only 30 centres and have identified 75 ginning factories too.


This is a lesser number compared to the previous season. In 2019-20 season, we had started 92 centres and had roped in 193 ginning factories,” said Anantrao Deshmukh, Chairman of Mahacot. Interestingly, Mahacot is expected a bumper yield of cotton in 2020-21 Kharif season. With cotton cultivation in 42.07 lakh hectares, yield of around 450 lakh quintals is expected. “Though we will be starting lesser number of centres, we plan to register higher quantum of procurement compared to previous season.


We have decided to rope in lesser number of ginning factories as we have chosen them on the basis of various parameters including availability of sheds to prevent procured cotton and lint from getting wet,” said Deshmukh. Further, said Mahacot Chairman, Cotton Corporation of India (CCI) used to get centres at good locations with lesser distance from main roads to ensure better road connectivity. Mahacot used to get centres at odd locations at a distance from main roads. Now, CCI will give no objection certificate to Mahacot if the latter decides to start procurement centre at a location where CCI has its centre, he added.


Related posts

GT Gold files Technical Report for Saddle North project maiden Mineral Resource estimate for its Tatogga property in British Columbia, Canada


Micro Linear Actuators (product) Production Hindered by Difficulties in Raw Material Procurement by Prominent Manufacturers amid COVID-127


Global Procurement Analytics Software Market 2020 Demand, Growth, Technology Trends, Key Findings, and Forecasts by 2026


Leave a Comment