New Delhi: Fearing a curb on raw cotton exports, agriculture minister Sharad Pawar has written to finance minister P. Chidambaram that any such action will affect millions of cotton growers. The letter was in reaction to the withdrawal of import duty and the possibility of quantitative export restrictions on the commodity.
An official with the agriculture ministry, who is closely involved with the issue, said any trade restrictions at this stage would discourage farmers, following a weak forecast of rainfall which will impact production targets. “The minister in his letter has said that a lot of effort has gone into improving cotton production. With the introduction of Bt cotton, productivity has improved and farmers are finally getting the much needed relief through higher prices,” said the official who requested not to be named.
At 31.5 million bales last year, India is the world’s second largest cotton producer. It exported about 7 million bales last year. A bale is equal to 170kg.
Domestic cotton production has nearly doubled from about 15.8 million bales in 2002-2003, when Bt cotton, a genetically modified variety developed by US biotechnology company Monsanto Co., was introduced. Prices have jumped 35% in the last one year due to global shortage, a situation unlikely to change as supply remains tight as more cotton farmers in the US, the biggest exporter, are moving to more profitable wheat, soya bean and maize. This month, India scrapped a 14% import duty and withdrew a 1% export incentive to check inflation.
Meanwhile, a proposal to impose quantitative restrictions on raw cotton was moved by the textiles ministry earlier this month. “We want to encourage value-addition in the country and generate employment rather than export just raw supply. While we don’t want a blanket ban, we’ve asked the commerce ministry to furnish day-to-day data on exports and check on registrars of forward contracts to figure out how much quantitative restriction should be imposed,” said a textiles ministry official who also requested anonymity. Easing of imports, said the official, has softened prices by Rs1,000 a candy, which is equivalent to 356.62kg.
The price boom has sent an encouraging signal to cotton farmers who have been reeling under crop failure for years. They now see the move to control prices as bad economics.
“We will now see huge imports from China and the US which are heavily subsidized, and an export ban will end the good run,” says P. Chengal Reddy, secretary general of the Consortium of Indian Farmers Association, a lobby group with a presence in 20 states.