The proposal to make the provision in the supplementary demands, to be tabled in the winter session of the state legislature, was made by the state marketing department.

The accumulated loss incurred by the federation, which implements the CMPS, has reached Rs 1,152.02 crore in 1997-98. The federation had incurred a loss of Rs 120 crore in 1993-94, which rose to Rs 160 crore in 1994-95, Rs 522.90 crore in 1995-96, Rs 377.95 crore in 1996-97 and Rs 209.45 crore in 1997-98. The CMPS was launched during the 1972-73 season under the Maharashtra Raw Cotton Act 1971 with a view to making available proper price to the cotton growers.

In all 9.96 lakh cotton bales valued at Rs 800 crore have remained unsold, following which the federation has nofunds to start the procurement. Moreover, it also has no funds to pay the guarantee money for cotton to the Maharashtra State Cooperative Bank for the sanction of loan.

Mantralaya sources told The Financial Express that the state cabinet, which met on Tuesday, has taken a serious note of the federation's failure to repay a Rs 200 crore loan provided by the Mumbai Metropolitan region Development Authority (MMRDA) in 1995-96. It is also yet to repay Rs 319 crore to various district banks.

The federation has also to pay back loans worth Rs 742.57 crore sanctioned by the state in the past. Of this, the government had sanctioned Rs 455 crore through a contingency fund which was to be repaid before March 1996. However, the federation failed to repay the amount and interest.

The state planning and finance departments had strongly opposed making available Rs 409 crore to the federation. These departments said that the loss incurred by the federation was mainly due to the state government's policy to pay bonuson the centre's interim price. The centre had announced a price of Rs 1,400 per quintal and the ruling Shiv Sena-BJP government had sanctioned Rs 700 as bonus per quintal. Farmers were paid Rs 2,100 per quintal at the time of procurement.

The planning and finance departments made it clear that the federation should have procured the cotton at the interim price announced by the centre as done in Gujarat.

The departments also said that the Rs 409-crore provision for such non-planned expenditure will affect implementation of planned projects. "In view of the present financial condition, it will not be possible to sanction this amount," these departments added.