The Hindu Business Line : Cotton's problem of plenty

FROM ACUTE SHORTAGE to large surplus in just three seasons, the country's cotton scene has witnessed a transformation any agrarian economy can be proud of. Thanks to huge increases in output since 2003, reaching a record 240 lakh bales in the current season (almost unchanged from the last), the country can now export 25-30 lakh bales, in stark contrast with its having to import 20 lakh bales (15 per cent of indigenous output) to meet the domestic industry requirements three years ago. The success in increasing the output of this commercial crop can be attributed to a combination of favourable weather in many parts of the country, expectation of remunerative prices, rising consumption demand and widespread adoption of technological input — Bt Cottonseed. As a result of the major output boost, imports will be down this season to just about 5 lakh bales — of extra-long staple (ELS) cotton, a variety the country does not produce in sufficient quantity. Since last year, textile mills, the main users of the fibre, have little to complain about availability of cotton. Yet, there is cause for concern.

Consistently large production not commensurate with indigenous demand and quality needs of the export market could lead to an inventory overhang and depressed domestic prices. There is apprehension that cotton this season is heading towards precisely such a situation. Global cotton prices are firm — Cotlook A Index (the principal measure of international cotton prices) is 56-57 cents a pound, making exports attractive. Yet India can, at best, ship 25-30 lakh bales because of produce quality and infrastructure constraints. As a result, by April, the country is expected to carry a huge and unwieldy inventory of 100 lakh bales, with disastrous consequences for market prices. A serious exercise is necessary to avoid recurrence of mismatch between demand and supply, and create an environment conducive to promoting export of genuine surplus. Scientific estimation of demand is the key to managing supplies.

In the euphoria generated by this heartening development, the plight of cotton growers in parts of the country has receded into the background. There are continuing reports of crop failure and farmer suicides. Worse, the turf war between pro- and anti-GM technology lobbyists has gone to such ridiculous lengths that there is more fudging of facts than a fiction writer can come up with. It is worth noting that, of the nine major States that grow cotton, Maharashtra is the second largest, after Gujarat. With dilution of the Maharashtra Government's monopoly procurement scheme and laxity in purchases, cotton growers in parts of the State are reportedly worse-off than before. Their grievances have to be addressed without delay. Indeed, for too long has the near-bankrupt State kept cotton growers cocooned in an artificial world of price and marketing security.

The State, which has suffered monstrous losses in monopoly procurement, must seriously examine crop diversification and encourage cotton-growers to move away from the white fibre, in areas where agro-climatic conditions permit. Except for seeking higher prices season after season, farmers' organisations have done precious little to educate cotton-growers about crop diversification. Instead of whining about the problems, solutions have to be discussed. Maharashtra's cotton economy needs non-price and non-trade initiatives to deliver benefits to all the stakeholders.