Cotton from Gujarat and Maharashtra is actually cheaper in Punjab even as local cotton farmers from Punjab prefer to sell their produce in Rajasthan due to an uneven tax structure. Amidst shortfall of cotton in Punjab, the state’s cotton industry is struggling with deficit in supply, forcing it to import cotton from cotton surplus states of Gujarat and Maharashtra.
This actually doubles financial burden. Besides paying for transportation cost of cotton, payment has to be made for carrying the yarn to the ports. Rakesh Rathi, president, Indian Cotton Association Limited (ICAL), said, "The current scenario is disadvantageous for the Punjab industry. Either we shut shop or import cotton from other states. The government can intervene by offering incentives as in case of Rajasthan & lowering the market fee."
"Despite Punjab offering free power to farmers and use of previous ground water, cotton produce is being sold in Rajasthan. This results in the state losing out on value added tax as well," he added. Punjab has consumption of around 85 lakh bales of cotton but the supply is close to 45 lakh bales, leaving a huge shortfall.
The higher price of home grown cotton is prompting the industry to import cotton. "To add to it, Rajasthan has lower market fee at 80 paise per new unit, apart from other incentives, which attracts cotton from Punjab and Haryana. In Punjab, there is market fee plus rural development cess, which comes to Rs 2.20. Rajasthan also has the advantage of not having menacing truck unions.
So if cotton is available at Rs 44,300 per candy in Punjab, it can be got at Rs 43,500 per candy from the cotton surplus states," he added. The Punjab CM has asked the departments concerned to look into the matter, said a member of PHD Chamber of Commerce and Industry. The cotton industry has to shell out Rs 5 per kg extra as transportation charges to get cotton from other states but they still prefer this option to keep their mills running.