MULTAN, Nov 22: The role of Trading Corporation of Pakistan in the cotton market this year has become a subject of heated debate that who is the actual beneficiary of its intervention being carried out in the name of facilitating the farming community.

The federal government had fixed the minimum price of phutti (seed cotton) at Rs925 per 40 kg for the year 2004-05 after calculating the growers' cost of production added with a minimal profit through the Agriculture Price Commission.

The TCP had been directed to remain geared up so that it could be involved within no time in the procurement operation as the official intervention to not let the phutti price fall below the minimum fixed price of Rs925 per 40 kg in the wake of an expected sizable crop both in terms of domestic and international production.

Cotton is an international commodity and, therefore, price trends in the world market have an effect on the price pattern in the local cotton market. Last year, cotton prices broke all the previous records of recent years because the global cotton production was less than its demand. And Pakistan was no exception as the lint prices surged to Rs3,600 per maund (37.32 kg) and of phutti to Rs1,600 per 40kg.

The distinctive feature of the local cotton market is that it is more or less ruled by a single buyer in the form of powerful lobby of the All Pakistan Textile Mills Association.

Analysts say that the millers' cartel manages to dictate terms in the cotton market, particularly whenever there are prospects of a bumper crop. They reminded the year 1999-2000 when the cotton prices went down to the all time low level of Rs1,200 per maund of lint and Rs450 per 40 kg of phutti only because of the manipulation by the buyers.

The cotton season this year though had started with phutti prices maintaining a level well above the minimum fixed price of Rs925 per 40 kg, soon it fell down to the echelons that warranted immediate public sector intervention to stabilize the prices. According to a latest report of the Pakistan Cotton Ginners Association, the TCP had procured 285,000 bales of cotton by November 15, 2004.

However, despite the active public sector intervention, the government has so far failed to ensure the minimum fixed price of phutti to the cotton growers, while the ginners apparently seemed to be the beneficiaries of the TCP's procurement operation.

To ensure the minimum fixed price of Rs925 per 40 kg of phutti to the growers, the TCP has been procuring Grade-III lint from the ginners at Rs2,160 per maund against its prevailing prices ranging from Rs1,950 to Rs2,000 per maund.

The ginners, however, are giving the growers against their produce only a price synchronized to the open market prices. In this way, the ginners are making an extra profit of Rs50 to Rs100 on per 40 kg of phutti while dealing with the TCP.

When contacted, TCP Chairman Syed Masood Alam Rizvi agreed that the ginners were not passing on the 'fruit' of TCP intervention in letter and spirit to the growers. But he said the corporation was handicapped on this front because it had to do its procurements from the ginners with a hope that they would share the benefit with the growers as well.

He insisted that the TCP's intervention in the cotton market was tantamount to subsidizing the growers because the corporation was procuring lint at a price Rs150 to Rs200 higher than the prices prevailing in the market. Mr Rizvi said but forecasting that the TCP was doing only a business of losses while procuring cotton would be premature to say the least.

Mr Rizvi said the cotton procured by the TCP could fetch even better prices in case of a rise in international market prices as happened in the year 1999-2000 when the corporation procured half a million bales at a price higher than the local market and later the same stocks were sold out at high profit ratio.

Federal Agriculture Secretary Ismail Qureshi told Dawn that the government's policy to stabilize cotton prices through the TCP intervention had created an overall competitive atmosphere to withhold the domestic market from becoming a "win-win" situation for any of the stakeholders.

He said besides the TCP, there were other forces, including textile millers in the market that also played their role to determine the cotton prices. "What we assure the (cotton) growers is that they are being given a price higher than the export parity," he claimed.

Mr Qureshi said that it would be better to evaluate the profit and loss statement of the TCP at the end of the season. Khwaja Muhammad Shuaib of Farmers Vision Forum said the government should have ensured the international parity price to the growers rather than the export parity.

He said the question of export parity came up in case of a surplus crop while for the current year the textile sector had projected its demand for cotton to 13m bales against the estimated crop size of 12.1m bales.

He said at present the cotton prices both in New York and Liverpool markets were around 48 cents per pound, which meant that the lint price in the local market should not be less than Rs2,350 per maund.