Cash gives way to cheque transactions at cocoon markets

The price of cocoon had declined post-demonetisation, but it is stable now.

Demonetisation of high-value currency may have adversely affected different sectors in the country. But, for sericulture farmers of Karnataka, the cash crunch has turned out to be not such a bad a deal after the initial hiccups.

A fortnight after the Centre announced demonetisation, transactions at most cocoon markets had come to a virtual halt due to non-availability of high-value currency. To make matters worse, the prices of cocoon too had started collapsing. But, the Sericulture Department soon took a decision to allow transactions at the cocoon market through cheques.

Now, the price of cocoons has not only stabilised after the reelers began paying for it through cheques, but it has also increased marginally. Apart from cheque transactions, the shortfall in production on account of drought too had pushed the prices up, Deputy Director of Sericulture K. Shashidhar told

The Hindu . “The output has come down by almost 30 per cent. Hence, there is a demand, which has led to an improvement in prices,” he said.

An official at the Cocoon Market in Ramanagaram said that the reelers, who issue post-dated cheques, are also comfortable with the arrangement as it gives them breathing time to arrange for funds. The sericulture farmers, who were staring at an uncertain scenario soon after the Centre announced demonetisation, are satisfied that they are receiving the proceeds of their cocoons, albeit four to five days after the transaction.

Hitherto, licensed reelers visiting cocoon markets to purchase cocoons had to deposit an advance amount with the market authorities.

Before taking away the lot of cocoons after bidding for them, the reelers had to make the complete payment the same day, N.Y. Chigari, Project Co-ordinator for Sericulture Farmers Producers Organisation, a State government initiative to promote sericulture, said. “Now, they find it convenient to issue post-dated cheques to be encashed only four to five days later.”

On an average, transactions worth ₹80 lakh to ₹1 crore take place every day at the cocoon market in Ramanagaram through 400 to 500 transactions, an official said.

“About 90 per cent of the transactions are carried out through cheque. Only a few reelers prefer to make the payment through cash,” the official added. However, the market officials collect the one per cent commission from the reeler as well as the farmer through cash.

Mr. Shashidhar said the officials ensure that the cheques issued by the reelers are honoured. Though they receive about five to six complaints about cheques every day, the officials resolve the complaints by summoning the reelers.