The Hindu Business Line : Save the cotton

THE PROSPECT OF a record harvest notwithstanding, a crisis is brewing for cotton farmers. The preliminary crop estimates doing the rounds are more damaging to farmers than rewarding. Reports of the upcoming bumper crop (for the second year in a row) have sent prices crashing. Over the last three weeks the market has declined by 10-15 per cent, with sentiment weakening by the day. Crores of rupees worth stocks of harvested crop, a part of which is damaged by late-season rain, are building up in places as far apart as Rajasthan and Karnataka. Market arrivals, now at 15,000-20,000 bales per day, are expected to gather momentum, and further pressure the already weak farmgate prices. Unlike last year, cotton export possibilities this season are rather limited. Pakistan too has higher production. There seems to be no alternative to a quick market intervention operation by the government, in addition to other grower-supportive measures.

While the four-week dry spell in July, resulting in an overall 13 per cent deficiency in the South-West monsoon, affected several kharif crops, including rice, coarse cereals, pulses, sugarcane and oilseeds, cotton turned out to be an exception. This important commercial crop performed well thanks to copious rains in August/September. Higher area coverage this season was encouraged by last year's attractive prices resulting from supply tightness in the global market. However, the situation is different this year. The world market is flush with cotton following a record production of 23.9 million tonnes in 2004-05 — up a massive 3.3 million tonnes over last year with all major origins reporting higher output. Globally, stocks are mounting with consequential effect on prices. Traditional cotton exporters are expected to `market' aggressively (a euphemism for dumping highly subsidised low-price produce on easily accessible destinations) the huge surplus crop and fiercely compete for market share. India must guard against such dumping with tariff safeguards. The 10 per cent Customs duty is obviously too low to curb inflows. Cotton textile mills, known to resort to the easy option of imports (low prices, long credit period) must learn to contribute to strengthening the domestic production base by establishing backward linkages. Widely suspected planting of illegal Bt cottonseed in Punjab and Haryana (where no genetically modified variety has been approved) needs to be probed too.

It is not unusual for industry and trade bodies to exaggerate the crop picture before harvest, allow the market to decline and mop up the produce at lower prices, only to revise downwards the output number after the farmer has been truly fooled. This is what makes the Cotton Advisory Board crop estimate of 213 lakh bales for 2004-05, up from 177 lakh bales last year, appear over-optimistic. How transparently these estimates are made needs to be examined. Though a part of the crop, albeit small, is yet to be planted in the South, Indian farming conditions do not lend themselves to dramatic increases in crop size from one season to another. It would make sense to revisit the production numbers. The Government has an important role to play in supporting the resource-poor growers.