MSP hike hits Punjab ginning factories

Cotton ginning factories in Punjab are battling with very high input costs. There are over 340 cotton factories in the state. Of these, 170 are owned by the Cotton Corporation of India.

The 40 per cent hike in the minimum support price (MSP) this season has hit bottomlines of private ginning factories and most are now struggling for survival.

Bhagwan Bansal, president, ginning factories, Punjab, said: “The minimum support price of Punjab cotton at Rs 2,800 per quintal has rendered the business unviable for us.” He added that Punjab was the only state where there were multiple taxes on cotton and ginners pay 12.5 per cent tax on the cotton MSP.

Bansal added they pay about Rs 3,150 for one quintal of cotton after paying the taxes. Punjab charges 2 per cent market fee, 2 per cent RDF (rural development fund), 2 per cent cess (Punjab infrastructure development fund), 2.5 per cent kaccha ahrtiya commission and 4 per cent VAT (value added tax). “As compared to other states, we pay Rs 165 per quintal more as the tax is 7 per cent in other states,” Bhagwan added. The ginners have been waiting for the notification of the waiver of the Punjab Infrastructure Development fund from April 1, 2005 to March 31, 2008. The waiver was announced byChief Minister Prakash Singh Badal on October 6, 2008 in Bhatinda. The local officials from the taxation department ask the owners of the ginning factories to deposit the outstanding dues and the factory owners get harassed as they do not wish to deposit the amount pertaining to the time period announced by the chief minister.

Rajinder Garg of Chirag Cotton factory said most of the ginning factories in the Bhatinda belt were working below capacity as the spinning mills did not lift cotton at the revised rate. “We cannot store cotton as it is perishable. Power is already an issue for industry in Punjab and the government has shown a callous disregard for our problems,” he added.

The ginning factories anticipate closure in the near future as the global financial meltdown undermines exports orders of Punjab textile units.