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close this book Agribusiness in India: Lessons and visions (1996)
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Market control mechanism in commercial crops

Cotton is one of the major commercial crops in the country. The production of cotton is localised in some parts of Gujarat, Maharashtra, Western Madhya Pradesh and Western Rajasthan. It has been observed that the price of cotton had increased in the wholesale markets due to loss in the crop during the end of 1993 which continued till the first quarter of 1994. The prices of cotton rose abnormally in 1993-94 and the government took various corrective measures in order to arrest the spurt in the prices of cotton in the domestic markets. Some of the major measures taken by the government in controlling the price hike in cotton markets are as under:

1. Cotton exports were restricted and at a point of time all the contracts were kept in abeyance;

2. Duty free imports to the extent of 5 lakh bales of raw cotton during 1993-94 were permitted. This exemption was extended to all units having their own licensed spinning capacity in the country;

3. Cotton hoarders were punished under the Essential Commodities Act and advances against the cotton stocks were banned on the recommendation of the Reserve Bank of India and

4. The government re-introduced the Selective Credit Control measures on cotton.

The production of jute is largely contributed by the states of Assam, Orissa, Bihar and West Bengal. It has been observed that the area under jute crop was declined in 1993-94 by 17.62 percent in Assam, 33.97 percent in Orissa and 3.6 percent in West Bengal as compared to the areas under production during 1992-93. However, there has been an increase of 12.75 percent of net cultivated areas under the Jute crop in Bihar in 1993-93 as compared to the preceding year. The wholesale prices of raw jute during 1993-94 had shown a mixed trend. In absolute terms there had been temporal and spatial variations in the prices in 1992-93. As a measure of price support and commercial operation the Jute Corporation of India (JCI) had attempted to purchase the jute bales but could not perform efficiently due to the paucity of funds. In 1993-94 the JCI could purchase only 7 thousand bales of 180 kgs each as against 9.16 lakh bales purchased during 1992-93.

Market intervention in FCV tobacco has been initiated through the Tobacco Board which allows the sale of FCV tobacco only through auctions with a view to providing better remunerative prices to the farmers under competitive bidding conditions. The Tobacco Board arranged the sale of FCV tobacco worth 31.15 million tonnes in 1992-93 and 32.84 million tonnes in the subsequent year in Karnataka. In Andhra Pradesh during 1992-93, 125.6 million tonnes of FCV tobacco had been purchased at the unit price of Rs. 20.75 per kg while the price in the same year in Karnataka was Rs 27.14 per kg. The price had declined in the following year in Karnataka by 23.43 percent while a marginal increase of 0.96 percent was observed in Andhra Pradesh. Export of tobacco is promoted by the government under Open General Licensing policy under quality control of AGMARK. The FCV tobacco worth Rs 366.97 crores and 324.60 crores has been exported during 1992-93 and 1993-94 respectively.