Tashkent, Uzbekistan (UzDaily.com) - Starting from the 2020 harvest, Uzbekistan will begin to abandon state regulation of the production plan, price and plan for the mandatory sale of cotton. In addition, the plan for the mandatory sale of grain will decrease by 25%. The corresponding decree was signed by the President of Uzbekistan Shavkat Mirziyoyev.

According to the decree, for the development of the economy and the active attraction of investments, starting from the 2020 harvest, the practice of establishing a state plan for the production and mandatory sale of cotton and its price is canceled.

The practice of establishing a state production plan, price and mandatory sale of cotton by the state, ignoring the economic interest of raw cotton producers, leads to overuse and misuse of allocated resources.

Starting from 2020:

- the state cancels the plan for the production and sale of raw cotton;

- the purchase price of raw cotton is canceled;

- producers of raw cotton will have the right to freely choose zoned varieties;

- the delivery system for certification of seeds will be preserved.

According to the decree, in regions where there are no cotton clusters, voluntary cooperation of farms with the participation of ginneries will be organized, the main tasks of which are determined:

- organization of joint use by members of a cooperative, machinery, equipment, vehicles, factories;

- providing cooperative members with agricultural machinery, fuels and lubricants, fertilizers, seeds, as well as chemical and protective equipment;

- organization of production, transportation, storage, processing and sale of finished products;

- the provision of agricultural, accounting, consulting, intermediary and other services to members of agricultural associations.

It should be noted that value added (15-25%) is mainly created by cotton processing enterprises, which, in turn, leads to a decrease in farmers’ incomes (yield by 3%). At the same time, it is noted that farms do not have sufficient knowledge and skills in the implementation of agricultural measures, contract, banking and other services.

For example, in the United States and Turkey, cotton production is carried out mainly on a cooperative basis, and only the processing sector is integrated into clusters.

According to the document, starting from 15 March  2020, a new mechanism will be introduced for lending to the production and processing of raw cotton.

Commercial banks will provide loans for the purchase of raw cotton for up to 12 months for cotton picking and final settlement.

It should be noted that the existing credit system leads to the creation of receivables and payables between farmers and suppliers of goods and services, a decrease in the quality of products and services, and an artificial increase in prices.

The use of soft loans and the lack of free distribution of funds led to a decrease in cotton production by 15-20%.

The purchase price of raw cotton will be liberalized as a result of the refusal to set prices. There will be an opportunity to freely use loans and freely choose service companies.

Farmers’ economic interest will increase. The structure of agricultural spending will be diversified with a focus on areas such as science and seed production.

According to the document, Uzpakhtasanoat JSC will be liquidated. In particular, in accordance with the established procedure, blocks of shares of Pakhtasanoat regional joint-stock companies will be sold to cooperatives and business entities.

Announcement of expected (indicative) prices for the next year’s crop by December 1 of each year based on the analysis of retail market prices, and quarterly adjustments will be made to this price due to market volatility.

In order to ensure the profitability of cotton producers, the recommended amount of 1 kg of raw cotton collected before the cotton harvest will be published in the media.

Also, cotton will be freely sold on the Republican Commodity Exchange at the initial exchange price, without a 10% discount on the initial price of the exchange.

In addition, it is planned to create clusters for the production of sewing and textile products with the participation of Uzpakhtasanoat and its enterprises in the regions of the republic.

The practice of declaring prices to farmers before the start of the growing season will be introduced, which will allow farmers to see the economic effect of growing cotton and, if necessary, draw up their business plan and motivate them to optimize their costs.