Where Is the Cotton for the Buffer Stock?

Author(s): Nishtar Reviewed work(s): Source: Economic and Political Weekly, Vol. 3, No. 3 (Jan. 20, 1968), pp. 207+209 Published by: Economic and Political Weekly Stable URL: http://www.jstor.org/stable/4358160 . Accessed: 25/01/2013 17:33
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ECONOMIC AND POLITICAL WEEKLY more discriminating and choose only the specific and substantive allegations for redress. Moreover, administrative reform implies reform of the entire fabric and structure of the governmental machinery which comes into direct contact with the public. Success in changing the complex structure of a society in accorclance with a Plan, and in increasing productivity at the village and taluka or tehsil, depends largely on the efliciency with which the lower echelons of the administration function. The image of the nation in the minds of millions of farmers, petty traders and consumers is influenced and moulded by the smallcr officials engaged in field administration. Unless (he structure of administration at the level of the district and its constituent units, viz, taluka or tchsil, is overhauled to suit the requirements of a fast-growing complex community, wc need have no illusions about the coming social order. Reforms confined to a few ministries and secretariats do niot have any practical significance. Men of the Indian Administrative Service and its allied services have received much attention in the past decade as regards training opportunities and facilities; bul men at the levels of the talukas or tehsils have remained in a state of dry rot. A purposeful administrative reform must proceed from the lowest rung of the administrativehierarchy. A top-heavy and bottom-loose structure of administration is unlikely to provide a solid base for a welfare state.

January 20, 19%8

MARKETS

Where is the Cotton for the Buffer Stock?

Nishtar
NEW DELHI's reported move to set up a buffer stock agency for cottojn is both ill-timed and ill-advised. The proposal is by no means new; it has been mooted several times in the past few years. And early in 1966, the Textile Comniissioner actually prepared a blueprint and even let it be knowri that the Cotton Buffer Stock Association would be set up "very soon" with an authorised capital of Rs 5 crores and a paid-up capital of Rs 1 crore. The capital investment was to be shared equally by the State Trading Corporation, the Indian Cotton Mills Federation, the East India Cotton Association and Cotton Growers' Cooperative Societies, the underlying idea being to provide due representation to all the interests concerned. But the proposal did not come through, presumably because the Government realised that there was no cotton for the buffler stock; there was not enough even to feed the industry adequately. The supply position this season is much better than in the last when

so. Punjab and Maharashtrahave already marketed the bulk of their production and the movement of Gujarat cottoni will be in full swing by the end of this month. If existing supplies are to be diverted for building up a buffet stock, it will naturally push up prices which are still on the high side, the recent decline notwithstanding. Ihe move is also ill-advised because handling cotton requires great skill which comes only from experience. It will be extremely difficult to get hold of honest and competent persons to run the buffer stock agency. There is also the question of resources. It will need over Rs 40 crores to manage a buffer stock Towards this end, apart from adminis- of even five lakh bales. trative training, delegation of powers A buffer stock can certainly help and selective admission of only the enforce discipline on an erring market specific charges of maladministration, but the commodity has to be available should help significantly in toning up in plenty before a buffer stock can the administration. be created. The Government therefore will be well-advised to concentrate its efforts on stepping up cotton produetion by organising the supply of necessary inputs to the growers. With the average yield of cotton in India running around 115 to 120 lbs an acre, less than half the world average, the scope for increasing cotton production through higher yield is immense.
HEDGE TRADING

acute shortage forced .he industry to resort to short time working. But it can by no nmeans be described as conmfortable. Output of 60 lakh bales which is about all that the 1967-68 harvest is expected to yield given normal weather conditions, in the second year of the now-defunct Fourth Plan is a miserable performance. Production is still running far behind the Third Plan target of 70 lakh bales, let alone the target of 86 lakh bales set for 1970-71. The outlook for imports is also fai from promising because of the tight world supply position resulting mainly from the drastic fall in US cotton production. And in any case, the country will have to pay very dearly for imports as prices of foreign cottons have risen very steeply. Apart from the continuing chronic shortage which leaves little scope for building up a buffer stock for curbing extreme swings in prices, the move for setting up a buffer stock agency is illtimed because the current season will have passed its peak in a month or

The stage is being set for the early resumption of hedge trading in cotton, after a lapse of over two years. The East India Cotton Association has finalised the terms and conditions of the hedge contract. Khadesh Virnar 197/3 having staple Iength of 27/32 inch will be the basis of the contract and will be tenderable up to 2/32 inch 'on' and 1/32 inch 'off' allowances. All cottons will be tenderable up to 1-1/2 grade 'off'. The delivery months will be March (perhaps too late now), May and July. It is scarcely necessary to go into the other details which are of a technical nature. After the terms and conditions of the hedge contract, along with the amended by-laws, are approved by the general body due to meet on January 25, the Association will seek the official blessings of the Forward Markets Commission which should be only too glad to extend the areas of its activity, unless, of couirse, the Commerce Ministry wishes otherwise.

One might have expected the East India Cotton Association to take up 207

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ECONOMIC AND POLITICAL WEEKLY the issue of hedge trading soon after the announcement of decontrol from the beginning of the season. But quite apparently, the Association had been looking for a more suitable opportunity. This has now been provided by the recent fall in prices. Cotton prices have come down by Rs 75 to Rs 200 per candy from the record high levels reached during the last few months of 1967. Prices are expected to ease further with the progress of the marketing season. The movement of Guijarat cotton will be getting into full swing very soon. Foreign cottons have also started arriving and there have been reports of US short staple cotton being sold at a considerable loss. Whether hedge trading facilitates the smooth marketing of a commoditv remains a moot point. The critic couild easily ask whether the marketing of cotton had been adversely afTected during the last two seasons by the absence of hedge trading. And if the consideration be that of prices, current prices of cotton are still well above the ceilings for 1966-67. But if the Government is reconciled to hedge trading in a nunlber of commodities like castor, linseed, cottonseed, unginned cotton, black pepper, etc, there can be no justification for not allowing futures trading in cotton, especially when it has been decontrolled. Indeed, very few commodities can qualify for hedge trading so well as cotton, groundnut and mustardseed; futures trading is now denied in these very commodities. Strange are the ways of the Government.

January 20, 1968 at the procurement price regardless of the quantity offered caused a big flutter in commodity markets. The Union Minister for Food and Agriculture will have only himself to blame for the likely failure of the procurement drive because of his indiscreet pronouncement. Ard it will indeed be a pity if consumers are unable to enjoy the full benefit of bumper crops and have to pay high prices for food. The oilseeds market has, however, been encountering considerable resistance at higher levels because of the substantially improved supply position this season. If all goes well, the production of the five major oilseeds might well exceed 90 lakh tonnes as against 65 lakh tonnes in last season, Minor oilseeds are expected to yield over 7 lakh tonnes. One can also count on increased supply of cottonseed oil. What is more, increased domestic supply is being supplemented by the import of over 1.40 lakh tonnes of soyabean oil. While there are far too many factors influencing the course of prices and it is not easy to assess their impact, one could say with a measure of confidence that even during the lean months oilseeds prices are unlikely to rise to any where near the highest levels reached last season. But it is also necessary to bear in mind that current price. already reflect to a considerable extent the improved supply position. Even a casual look at the table showing move-

Marking Time
THE oilseeds market has been maiking time recently. The lowest prices recorded towards the end of December have, by and large, been well held. Prices have, in fact, hardened all-round. Castor futures have rallied from Rs 123.50 to Rs 131.87 a quintal, linseed futures from Rs 133 to Rs 143 a quintal and groundnut oil ready from Rs 28.60 to Rs 30.75 per 10 kilograms. *rhe fall in December had been too steep to continue without necessary technical adjustments. Apart from technical consideratioits, trading sentiment was aided by reports of renewed export inquiry in castor oil and the cold wet spell in north India which is feared to have caused some damage to the rabi crops. But it is quite likely that the market's performance might have been very different if Jagjivan Ram had not come to the rescue of bulls. His statement from Poona that under no circumstances would foodgrain prices be permitted to fall below the procurement prices (these are very much higher than the official support prices) and that he had instructed the, Food Corporation to buy foodgrains

OF MOVEMENT OIL AND OILSEEDS PRICES

(Rs)

1966 Low High Close High

1967 Low Close

Jan 12, 1968

Groundnut Karad Bold (100 kgs) Groundnut Oil ( 10 kgs) Linseed Bold (100 kgs) Linseed Oil ( 10 kgs) Castorseed (100 kgs) Castor Oil Commercial (10 kgs) Cottonseed Berar White (100 kgs) Cottonseed Oil (10 kgs) Mustardseed (100 kgs) Mustard Oil (10 kgs)

153 33.70 126 28.25 97 20.75 60 30.25 130 30.0

259 55.75 188 42.75 149 37.50 90 52.50 190 41.40

207 43.60 187 42.75 148 37.25 84 42.25 172.50 40.75

237 47.50 200 46.50 174 39.50 94 47.25 170 46.90

132 28.60 150 31.50 116 25.75 60 23.75 205 38.80

134 29.0 156 32.75 123 28.75 68 27.25 170 39.62

140 28.80 155 33.50 128 30.0 69 26.75 182.50 42.88

209

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