Impact Of Agricultural Market Reforms On Smallholder Farmers In ...

Two options for liberalization of the cotton sector are under consideration. In the first, SONAPRA
would be partially privatized with the state retaining 35 percent ownership and the other 65 percent
being distributed among various actors in the cotton sector. The second option, favored by the
World Bank, would involve the complete liberalization of the cotton sector. In the meantime, the
government plans to proceed by making the allocation of cotton seed to the gins more competitive
through an auction system.
Two underlying problems complicate efforts to liberalize cotton marketing. First, installed cotton
ginning capacity (500 thousand tons) far exceeds current production (386 thousand tons), so that
full competition would probably lead to the closure of one or more gins. In addition, the
elimination of the cotton marketing monopoly would jeopardize the system of providing
agricultural inputs on credit. Without a marketing monopoly, it would much more difficult to
enforce repayment of input credit.
Reforms in input markets As part of the first PAS signed in 1989, the distribution of
inputs was to be privatized. The withdrawal of the state from input marketing has been gradual,
with the number of private importer-distributors rising from 2 to 9 over the years. The share of the
market allocated to these approved private firms has risen from 20 to 90 percent of the total, with
SONAPRA reserving for itself 10-20 percent of the market to maintain a buffer stock. Although
private firms handle the bulk of the imports, they do so under a system closely controlled and
managed by the three government agencies linked to the cotton sector:
SONAPRA issues a request for quotations to import and distribute fertilizer, selects the
importers that will participate, determines the types and quantities of inputs that will be
delivered, and specifies the regions that each firm will supply.
Recherche de Coton et de Fibre (RCF), the cotton research institute, recommends the types of
inputs to be imported.
And the Office national de Stabilisation des Prix calculates the cost of importation and delivery,
upon which the payment to the importers is based.
The retail price of all fertilizer and pesticides distributed by approved private firms are set by the
government as part of its cotton promotion policy. These prices are uniform throughout the
country, and they are the same for all types of fertilizer, for all ULV pesticides, and for all EC
pesticides. The importer-distributors are paid on the basis of their calculated costs plus a 3 percent
margin.
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