Date:03/05/2005 URL: http://www.thehindubusinessline.com/2005/05/03/stories/2005050301681000.htm

Back Mills furnish Rs 1-cr guarantee for contract cotton farming

G. Gurumurthy

Coimbatore , May 2

THE multilateral contract farming model for cotton formulated this year by the Tamil Nadu Government's Commissionerate of Agriculture (CoA) provides for a performance guarantee commitment from the textile mills, whose raw cotton requirement is met through this model.

The memoranda of agreement (MoUs) for cultivation and procurement of raw cotton (kapas) under contract farming, signed separately by two textile mills recently with CoA, explicitly state that both the user industries have to furnish Rs 1 crore each towards the performance guarantee to CoA.

In the event of these mills failing to buy the agreed quantity of cotton from the contracted farmers, the guarantee money could be realised.

According to the MoU, Royal Classic Mills of Palani (RCM) and the Coimbatore-based Super Spinning Mills Ltd (SSML) have agreed to furnish the performance guarantee of Rs 1 crore each through Corporation Bank and State Bank of India respectively.

These banks, along with Indian Overseas Bank and Bank of India, figure among the supporting agencies involved in the contract farming model for the 2005-06 cultivation cleared by the CoA.

Being the chief co-ordinating agency for contract farming of cotton, the CoA will, among other things, network all the stakeholders in the project.

It will identify cotton farmers in cluster villages, extend all support to the cotton farmers provided under the Government's technology mission on cotton (mini-missions), and evolve ways of administering the subsidies through banks.

SSML, which has agreed to contract 21,000 acres for cotton farming in 2005-06, has specified five cotton varieties - Surabi, MCU-5, Sara-2, RCH-20 and Suvin - for procurement at specified rate per quintal or at the prevailing market price (arrived at through the weighted average price in the nearest regulated markets).

These prices are linked to the specific quality parameters.

Similarly, RCM - which has agreed to contract 20,000 acres for 2005-06 - would buy back 50,000 quintals; the variety earmarked for procurement is RCH-2Bt.

The company has fixed the procurement price at Rs 1,850 or at the prevailing price to be arrived at by taking into account the weighted average price of kapas in the nearest regulated market in the previous week.

The CoA-promoted cotton contract farming model will enable distribution of quality cotton seeds to the project farmers by the procuring mills and their networking agencies, such as seed suppliers, at 10 per cent discounted rate.

This rebate would partly go towards meeting the premium payout to the crop insurance cover to be provided to the farmers under the national agriculture insurance scheme.

The banks signatory to the CoA's contract farming model will offer their crop loan to the farmers at half a percentage point less than the existing rate of interest.

Accordingly, farmers will get loan up to Rs 50,000 at eight per cent interest and between Rs 50,000 and up to Rs 1 lakh at nine per cent.

In the event of the State Government considering the waiver of one per cent market cess currently being levied on cotton purchases made in the local markets, the waiver benefit would be passed on to the farmers as bonus.