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Indian cotton growers face massive losses

Kisans cultivating cotton in the country have been put to massive losses amounting to about Rs 500 crore in less than two months of the current season. Surprisingly, this has happened at a time when the Union government is expressing its concern for the farming community and proposes to set up a national commission to protect them. It is, however, not clear as to who will compensate these unfortunate farmers for their losses.

It appears that a committee that met at the textile commissioner’s office on November 22, 2003 has been the root cause for these losses. It had announced that cotton production in the country for the 2003-04 season would be of the order of 175 lakh bales of 170 kg each and that the season would end up with a substantial surplus of about 31.1 lakh bales.

According to observers, it was because of such apparently highly-inflated and misleading estimates that cotton prices in the country started declining, despite buoyant conditions in the overseas markets. This unnerved many cultivators and made them part with their produce in the depressed domestic market. This no doubt have enabled domestic consumers of cotton to get their requirements at lower than global prices. Surprisingly, however, that also made it possible for foreign buyers to buy Indian cotton at lower than international prices at the cost of Indian farmers. No one seems to be worried about this.

A number of Indian cotton farmers were thus misled into selling their produce at substantially lower prices for nearly two-month period after the announcement of that crop estimates.

As daily arrivals started falling by the middle of January 2004 and it was generally felt that the current season’s Indian crop could be much lower, cotton prices rose substantially but those who had already parted with their produce, were deprived of such benefits. It is estimated that cotton cultivators who sold their produce in the artificially depressed market might have lost nearly Rs 500 crore. As the government has not yet even enquired into this affair, it is not yet clear whether these duped cultivators will be compensated for their losses.

It is not known who had authorised this committee to usurp the function of the Cotton Advisory Board (CAB) to assess periodically the demand-supply position of cotton in the country and to convey it to the government to enable it to take, if any, policy decision based on such information.

It appears that when this committee met on November 22, 2003, it had before it the cotton crop estimates from at least four organisations. The state owned Cotton Corporation of India (CCI) and the East India Cotton Association (EICA) had both placed their crop estimates for the 2003-04 season at 168 lakh bales, while the Indian Cotton Mills Federation (ICMF) had placed it a bit lower at 167 lakh bales. On the other hand, All India Co-op. Cotton Federation (AICCF) had predicted a crop of 175 lakh bales. It is not quite clear what prompted the committee to dump the majority view and accept the view of the lone AICCF.

Of course, when the unauthorised committee was meeting, it apparently created an impression on illiterate farmers that the estimate given out by it had an official sanctity. That perhaps played an important role in misleading a number of cotton cultivators in the country and induced them to part with their produce in the depressed market that followed this announcement.

Around the middle of January 2004, when new crop arrivals at upcountry stations suddenly slowed down, cotton prices shot up by about Rs 2,000 per candy. If these farmers had not been misled into selling their produce, they could have realised such higher prices. They were, however, deprived of such opportunity. On the arrival of cotton that took place during this period, these cultivators are estimated to have lost about Rs 500 crore.

It is not that the CAB estimates are more objective or more reliable — far from it. It is also seen to be joining anti farmer games from time to time. For instance, cotton acreage for the 2002-03 season was drastically reduced due to the failure of rains in several cotton growing areas. On the basis of this shrinkage of acreage, it was abundantly clear to many observers in the country that the crop for the season might not reach even 140 lakh bales. However, the CAB chose to place its first crop estimate for that season at 158 lakh bales. That depressed the market for cotton and cultivators were put to heavy losses. Only after most of them were thus forced to part with their produce at lower prices, the CAB started lowering its corp projection, placing it ultimately at 136 lakh bales. As the crop estimates came down, cotton prices continued to move up, but the benefit of better prices that could have gone to cotton farmers was thus mischievously diverted to other agencies. None raised even finger at CAB for its action. This might have prompted the unauthorised committee that met on November 22, 2003, to have a repeat performance of that episode. It is pity that the country has been unable to create an agency which can independently and objectively estimate not only the cotton corp but all other crops as is being done in some other countries.

As the situation stands at present, it is difficult to say as to how much lower can be the actual crop, compared with the misleading estimate of 175 lakh bales. It might be worth noting that the International Cotton Advisory Committee (ICAC) has placed its estimate of cotton crop for the country at 167.6 lakh bales. According to some observers, actual crop might be still lower. It might, therefore, be proper to wait for some more precise projections.

- M D Dewani