Cotton production in 2016-17 will be adequate to meet the demand of the textile industry of India
Cotton Corporation of India (CCI) is a cotton trading organisation under the administrative control of the ministry of textiles, engaged in diverse activities related to procurement, trade and export of cotton. In an exclusive conversation with Fibre2Fashion, CCI's CMD (I/C) MM Chockalingam talks about the major problems with the cotton sector of India and its performance in the current crop season.
Please tell us about the CCI cotton supply scheme that was recently approved by Union textiles minister Smriti Irani.
After discussions with various stakeholders in the textile industry, the ministry of textile directed CCI to offer a uniform sales policy, particularly for helping the small scale industries. Accordingly, CCI worked on its sales terms looking at the commercial aspects and revised the same by considering the interest of the Micro Small and Medium Enterprise (MSME) unit mills.
Accordingly, CCI offers its cotton stock throughout the season through e-auction without any hoarding and speculation so that textile mills including MSME units do not face any problem for supply of cotton. For making the sales system more transparent and market driven, CCI commenced the sale of FP cotton bales through e-auction by way of Yankee auction where the buyer has the choice to bid for the required quantity out of the total quantity offered. As of now, aggressive buying is not required by CCI as textile mills and traders are purchasing after giving very good price for cotton bales in turn farmers are getting attractive price for their kapas. The salient points of revised sales terms are as under:
- Mill buyers will have to pay a refundable security deposit of Rs 2,00,000 and cotton traders will have to pay a refundable security deposit of Rs.4,00,000 for participation in e-auction of CCI. However, MSME units enlisted with Office of Textile Commissioner, NTC and Co-op Spg. mills are exempted for paying security deposits for participation in e-auction.
- Except MSME units, other buyers are required to pay a minimum amount of 15 per cent of the value of cotton towards deposit for sale quantity up to 2,999 bales and 20 per cent of the value of cotton towards deposit for sale quantity of 3,000 bales and above. However, for MSME units, a minimum amount of 10 per cent of the value of cotton is required to pay towards deposit irrespective of sales quantity.
- The total free period will be 45 days from the date of contract irrespective of the quantity purchased, as against earlier policy of quantity linked free period and MSMEs getting lesser than 30 days free period.
- The buyer or its representative shall select the cotton under this contract within a period of 15 days from the date of sale confirmation irrespective of quantity purchased.
What needs to be done to further improve the quality of cotton produced in India?
With the efforts of Government of India through various measures like technology mission on cotton, integrated cotton cultivation, high density planting system, instrument based quality evaluation etc., India has become one of the largest cotton growing states with reasonably good quality of cotton. With enhanced research efforts made by the government, basic fibre parameters as well as quality of ginning and pressing have shown tremendous improvements except the issue of contamination. Due to this contamination issue, Indian cotton is sold on discounted rates in comparison to equivalent foreign cotton. The problem of contamination is significant at farm level due to small land holdings by the farmers, manual picking and different climatic condition in different states. Besides this, Indian cotton is also contaminated with various foreign materials like jute twine, dust, plastic, fibre, varietal admixture etc. due to poor handling at farm level and during processing of cotton in ginning and pressing factories. To produce contamination free cotton is now the biggest task for India.
The ministry of agriculture is making various efforts for providing necessary training to cotton farmers and issuing advisory notice at farm level to avoid contamination. In addition, the ministry of textiles is also taking this issue very seriously and proposed various measures in its 12th five year plan by reviving the Mini Mission (MM) III & IV under Technology Mission on cotton-II in such a way so that the least contaminated cotton may be available to the textile industry and farmers may get remunerative prices for their produce. Under MM-III besides developing the infrastructure of market yards, the focus is on providing training to farmers on modern farm practices and handling indigenous technology for plucking kapas faster without adding contamination through prototype kapas plucker machine. This will not only help farmers in reducing their input cost of labour, but will also prevent contamination at farm level. Under MM-IV, besides modernisation of ginning and pressing factories with sensors for removal of contamination, the focus is to introduce bale-by-bale third party testing/ certification system. Once it is implemented, these measures will ensure removal of contamination at all stage and Indian cotton will fetch better price and compete at world level with quality as per International standards.
What are the major challenges faced by cotton growers across India? What needs to be done to overcome these challenges?
Major challenges faced by cotton growers across India and possible remedy for the same are as under:
1. Vagaries of nature: About two-third area under cotton in the country is rain fed with poor irrigation facilities exposing production to monsoon fluctuations. Thus, dependency on weather vagaries is the biggest challenge for Indian cotton farmers.
Possible remedies for this problem are -
- Improving irrigation facilities and water harnessing is considered imperative for enhancing production and lowering its dependence on monsoon. Drip irrigation system may be popularised for better water management.
- Initiatives may be taken to increase awareness among farmers for adoption of rain water harvesting, soil moisture conservation techniques and suitable agronomic practices in order to increase the utilisation of rain water.
- Farmer crop insurance is another remedy for this problem.
2. Small land holdings: Most of the farmers in India have small land holdings. These Farmers are generally capital starved and cannot make major investment in land improvement and modern inputs due to rising cost of production of seeds, fertilizers, labour i.e. input costs.
Possible solution for this could be -
- Land pooling and contract farming on the basis of 'one village, one variety' concept will not only decrease the input costs, but will also increase the quality and yield of cotton and thereby income of the cotton farmers.
- Besides above steps, introduction of mechanical picking system will further reduce cost of production.
3. Non availability of quality cotton seed at reasonable prices: More than 7,000 varieties of cotton seed hybrids are available in India and farmers are not aware which is better for sowing in their farm causing sometime crop failure problems and increase in input costs.
This problem can be tackled using below solutions -
- Cotton seed distribution act should be amended in such a way that farmers may be able to get only certified seeds at reasonable prices.
- As there was no uniformity in pricing of cotton seeds across the country, the government, ministry of agriculture and farmers welfare (Department of Agriculture, Cooperation And Farmers Welfare) intervened in this matter and issued a Cotton Seed Price (Control) Order, 2015 under section 3 of the Essential Commodities Act, 1955 in order to safeguard the interests of the farming community and to regulate Bt cotton seed prices. Besides this, some state governments had also passed legislations to ensure supply of truthful cotton seeds to farmers.
4. Pest attack: Over the past 40 years, the cotton crop in India suffered the most due to insect attacks. A range of insects such as aphids, jassids, whiteflies, mealy bugs, thrips, armyworms, hairy caterpillars, semi-loopers, Spodoptera, American bollworm, pink bollworm, spotted bollworm etc. have been ravaging cotton again and again, causing hardship to the cotton farmers.
Possible remedy is -
In order to control the problem of pests and insecticide usage, National Centre for Integrated Pest Management (NCIPM) of Indian Council of Agricultural Research (ICAR) are making essential and pragmatic efforts for promoting environmentally sound integrated pest management technologies with the help of all India coordinated crop improvement programmes, crop research institutes; SAUs; environment and bio technology departments of the government for implementation of its programmes. The effort needs to be extended to avoid hardship to cotton farmers.
5. Technical know-how: Farmers did not know the technical know-how to produce cotton and market cotton with minimum trash and contamination. Among nations growing cotton, cotton picking is completely manual in India which leads to contamination at farm level. Labour cost for picking cotton from the farm has increased causing cotton farming less remunerative.
Possible solutions for this problem are -
- Steps may be taken to provide necessary support to cotton farmers through training for best farm practices and promotion of indigenous technology for fast cotton picking.
- Cotton Research Institutes under the ministry of agriculture are doing various R&D activities, high density planting, production of desi hybrids etc. Besides this, Mini Mission-I & II of Technology Mission on cotton is being implemented by the department of agriculture & cooperation (DAC) with extension and development activities related to cotton research and transfer of technology, which helped the cotton farmers in improving the production and quality of cotton, besides increasing the yield per hectare by reducing the cost of cultivation.
- The ministry of textiles is also taking this issue very seriously and proposed various measures in its 12th five year plan by reviving the Mini Mission (MM) III focusing on training to farmers on modern farm practices and handling indigenous technology for plucking kapas faster without adding contamination through prototype kapas plucker machine.
6. Financing: Unavailability of right time financing for cultivation of cotton causing involvement of money lenders who exploits the farmers by charging high interest and supply their produce to them with lower price.
The possible remedy to this problem is -
Necessary credit facility with lowest interest may be available to farmers to avoid involvement of money lenders. Recently, the government has started Kisan credit card yojana which will also be helpful to uplift the Indian cotton farmers.
What are your suggestions for improving the cotton sector of India?
Due to the sweeping changes in textile machinery and modern processing systems, the textile industry demands highly clean and contaminant-free cotton, while the only major problem in Indian cotton is contamination due to which it is sold on discounted rates in comparison to equivalent foreign cotton. Thus, with the objective to put Indian cotton at par with international standards, following measures can be undertaken
- Training at farm and ginning level: Training can be provided to farmers to avoid contamination at farm level from soil management until picking and transporting the kapas to APMC for selling. Training to the ginning and pressing factories to make their contribution to quality by selecting and segregating good kapas maintain the quality parameters, keep and maintain his machinery in top condition and use of sensors to remove contamination during processing.
- Classification of cotton: Cotton classification includes the cotton quality determinations of colour grade, fibre length, length uniformity index, fibre strength, micronaire, trash content and extraneous matter identification. Classification of cotton may be implemented through a third party bale by bale certification system. Third-party certification includes comprehensive material reviews, testing and inspections, which will ensure 100 per cent uniform testing to avert the confusion regarding quality parameters between buyer and seller. This concept of 100 per cent bale-by-bale third party certification is also proposed in 12th plan of TMC-II.
- Branding of Indian cotton: Variety-wise branding of Indian cotton will uplift its image amongst foreign buyers. For this purpose benchmark study may be undertaken, which will include brand strategy and market approach study along with brand touch points analysis. Thereafter, possible marketing strategy for brand positioning in the form of a brand assurance may be undertaken.
- Uniform code of conduct for contract compliance by the buyers irrespective of price volatility is also required.
How is the cotton sector of India performing in the current crop season?
During current cotton season 2016-17, the acreage under cotton cultivation is expected to decrease by around 12 per cent to 105 lakh hectares as against 118.77 lakh hectares during previous year due to delayed rains, fear of pest attacks like white fly in northern zone and pink boll worm in the Gujarat region, switching over to other crops like guar, soybean, pulses, groundnut etc. However, due to above normal rains and favourable agro-climatic conditions, it is expected that yield will be better in comparison to previous year and production may increase by about 4 per cent to 351 lakh bales in comparison to 338 lakh bales of cotton season 2015-16. Whereas total cotton consumption in the country is expected to increase to 313 lakh bales as against 312 lakh bales during previous year.
As consumption is increasing, India's dependability on cotton export will reduce substantially. After including import and opening stock, the exportable surplus availability of cotton in the country is getting concentrated and it is expected that during cotton season 2016-17 cotton export may reduce to 48 to 50 lakh bales as against 69 lakh bales during cotton season 2015-16. As a result of demand and supply balance, domestic prices of cotton may not touch the MSP level and expected to remain stable throughout the year.
The Cotton Association of India has opposed textile industry's request to the government of directing CCI to procure cotton in the peak season and retain it as buffer stock. What is your take on this?
The Cotton Association of India (CAI) and other agencies oppose buffer stocks by CCI as India is a cotton surplus country where production is more than consumption and in such a scenario, buffer stock is not at all required in India to ascertain cotton security in the country. The ministry of textiles took this issue of CAI positively and discussed it thoroughly. During the discussion, it was observed that in India, big and financially sound mills maintain at least two months inventory to cover their lean season requirements and also have the option to import cotton as per their requirement.
However, small mills depend on Indian stocks and consume as per their immediate requirement. In this regards, it was concluded that instead of creation of buffer stock a strategic procurement under commercial operation can also work as an instrument for price stabilisation. Thus, the ministry allowed CCI to purchase 15 to 20 lakh bales under viable commercial operation. Besides this, it also advised CCI to keep close watch on market situation and intervene to arrest any price distortion to stabilise the market by offloading these strategic stocks. Accordingly, looking at the bleak chance for undertaking MSP operation during 2016-17, CCI has started procurement under commercial operation from December 17, 2016.
I feel that commercial buying of cotton has helped the cotton farmers by purchasing their produce at prevailing market rates continuously on one side and to provide the quality cotton security to the textile industry including MSMEs during lean season on the other side. CCI will offload these commercial stocks for the domestic textile mills including MSMEs as per market situation. This will help in reducing price distortion and maintaining the kapas rate reasonably higher than Minimum Support Price to help cotton farmers.
What are the major objectives of CCI?
The broad objectives of CCI are -
- To undertake price support operations, whenever the market prices of kapas touch support prices announced by the Government of India, without any quantitative limit
- To undertake commercial operations only at CCI's own risk
- To purchase cotton to fulfil export commitments as per its MoU targets with the ministry of textiles.
Which countries import cotton from India? How much cotton does each of them import?
Up to cotton season 2013-14, China was the biggest importer of Indian cotton and imported about 55 to 60 per cent of total cotton export from India. Thereafter, due to changes in import policy of China for lesser import up to bare minimum requirement as per WTO agreement and huge unsold stock, export to China started reducing and reduced to 9 per cent of total export by India during 2015-16. During this period, i.e. after cotton season 2013-14, demand of Indian cotton by other neighbouring countries i.e. Bangladesh, Pakistan, Vietnam, Indonesia, Turkey, Thailand etc also increased due to increase in their consumption and establishment of numerous newly constructed spinning and weaving mills.
How has demonetisation affected the cotton sector of India?
Demonetisation affected the cash flow of the textile industry and led to drive a constraint in the demand for the entire textile value-chain for a short period of time. The impact was significant on the unorganised segment, which forms a large part of the domestic textile sector where cash transactions are more prevalent, as reduction in currency circulation temporarily affected their routine business transactions.
As per the past practice, the majority of payments to the farmers are made in cash by the private buyers. However, on account of demonetisation due to money supply tightness, farmers also opted to wait till the position normalises. Besides this, due to the curbs imposed on the daily/weekly cash withdrawals, farmers were also hesitant for cheque payments. As a result, kapas arrivals were affected. As market arrivals of cotton take a hit on account of cash shortages due to the demonetisation of high-value notes, prices of the fibre crop in domestic market also shot up. Besides this, business was also affected due to demand of cash payment by the labourers and transporters. The above situation affected the off-take of yarn and resulting thereby accumulation of inventory in the mills.
As time progressed, slowly the farmers are accepting payment through cheques and the kapas arrivals have also started picking up. Further, the problem related with cash payment to labour/transporters is being diluted more rapidly with the efforts of the government for promoting the digital mode of transactions viz - unified Payments Interface (UPI), plastic money - debit/credit cards, net banking - online fund transfer, Aadhaar card - Aadhaar enabled payment system etc. Slowly, yarn market has also started picking up. Thus, the effect of demonetisation will be liquidated in due course of time completely.
How much cotton is likely to be produced in India during the crop year 2016-17? Will it be adequate for the textile industry of India?
During the current cotton season, cotton production in the country is estimated at 351 lakh bales as against estimated total consumption including mills, SSI and non-textile consumption of 313 lakh bales. After adding import and excluding export, the closing stock in the country is expected to be 48 lakh bales, which is equivalent to about two months consumption of domestic textile industry. Thus, the likely cotton production in 2016-17 will be adequate to meet the demand of the textile industry in the country. However, there should be continuous watch on cotton exports during the entire cotton season and the government should intervene whenever the export exceeds more than expected.
What are your responsibilities as the chairman and managing director of CCI?
As CMD(I/C) of CCI, I am responsible for the efficient functioning of the corporation for achieving its corporate objectives and performance parameters by managing both short and long term corporate plan, purchase/sales policies and other programme and activities of the corporation within the broad framework of guidelines laid by the Government of India.
After setting up of CCI in July 1970 and appointment as nodal agency for undertaking price support operations in cotton in 1985, the responsibilities of CMD has changed manifold in current era. Earlier, CCI was enjoying a sort of monopoly in its all activities of purchase and sale of cotton. Government was allocating special quotas to CCI for export of its cotton. CCI was exporting cotton with good margin against their allocated quota. Over the years, quota systems were abolished and entry of MNCs in cotton business in the country made the market more competitive. Today, the cardinal rule for the businesses is to undertake business activities in a more transparent way on market driven rates with maximum speed and efficiency. As a result, the responsibilities as a CMD of CCI has become more challenging to sustain in most competitive environment by undertaking commercially viable operations to earn the overheads and making the corporation profitable.
In addition to achieve the main objectives of the corporation, as CMD CCI, is responsible to keep close watch on the market situation for taking decisions on strategic purchase of cotton with limited infrastructure to protect the interest of large section of cotton farmers and offloading of these stocks to curb price distortion and ensure cotton security to the domestic textile industry including MSMEs on market driven rates at most competitive sales terms at right time.
What measures have been adopted by CCI to help the cotton farmers of India?
As per the directions of the ministry of textiles, CCI has adopted various measures to help cotton farmers in the country:
- Being a nodal agency of the government, CCI undertakes MSP operation in the event when prices of seed cotton (kapas) touches the MSP level to procure entire quantity of kapas offered by the cotton farmers in various APMC market yards at MSP rates without any quantitative limit. CCI has opened sufficient number of centres all over India to cover maximum cotton arrivals and remain active in the market from the beginning till the end of cotton season to keep the market situation on close watch and remain in readiness with necessary infrastructural arrangements to meet any eventuality to undertake MSP operation to ensure remunerative prices to the cotton farmers.
- It has always been the endeavour of the CCI to propagate the cotton farmers for selling their produce directly to CCI through APMCs whenever cotton prices touch the minimum support level. Besides this, with a view to enable the cotton farmers to avail the full benefit of MSP, CCI also disseminates necessary information through advertisements in the newspapers and displaying the banners in APMC yards in local languages to avoid distress sale of cotton by farmers. CCI ensures timely payment of kapas purchased by the farmers through RTGS directly into their bank account to avoid involvement of middlemen.
- When it came to the notice of CCI that middlemen are selling cotton in APMCs in the guise of farmers, it initiated modification in the systems and procedures of MSP operation by insisting state governments to introduce the bar-coded identity cards for farmers particularly in the state of Telangana and Andhra Pradesh to ensure transfer of benefits to real farmers and avoid involvement of middlemen. This system has become a model for other states also.
- CCI helped the farmers by undertaking a number of developmental activities to increase the cotton yield and income to the farmers through contract farming, front line demonstrations, supply of mechanised handheld kapas plucker machine to farmers under CSR activities, sale of cotton bales and cotton seed through market driven e-auction in such a way that it does not adversely affect domestic cotton market.
- As different stakeholders were giving different feedback for cotton area and production in the country, it was very difficult to assess the actual supply position of cotton in India. Thus, as per directives of the ministry of textiles, CCI is actively coordinating with National Remote Sensing Centre (ISRO, Hyderabad) for implementation of space technology based tools for scientific assessment of cotton crop through real time data. After successful implementation of this system in all the states, the actual position of cotton crop could be ascertained and necessary policy decision may be taken to balance the demand and supply position in the country, which will help in maintaining a balance in cotton prices and farmers will be able to get much more remunerative prices than MSP.
Can you share with us the facts and figures of cotton production and consumption in India for the last two years?
Facts and figure of cotton production and consumption in India during the last two years on the basis of data finalised by the Cotton Advisory Board are as under:
During cotton season 2014-15, receipt of good prices in the previous year and favourable agro-climatic conditions at the time of sowing motivated the cotton farmers to increase the acreage under cotton by switching over from other competing crops. As a result, the overall acreage under cotton has been around 128.46 lakh hectares, which was the highest ever cotton acreage. While due to crop damage in northern and central region owing to untimely rains, cotton production in the country reduced to 386 lakh bales as against 398 lakh bales in 2013-14. Whereas total cotton consumption in the country increased to 309.44 lakh bales as against 299.55 lakh bales during previous season and the closing stock was 66 lakh bales.
During cotton season 2015-16, the acreage under cotton was 118.77 lakh hectares i.e. lower by 8 per cent in comparison to 128.46 lakh hectares in 2014-15. The reduction in acreage was due to damage by white fly pest attack in northern region, pink boll worm attack in Gujarat, delayed rains in central and southern region, deficit of rains all across the cotton growing areas and switching over to other competing crops. Based on the above agro-climatic conditions; production decreased by 12.5 per cent to 338 lakh bales as against 386 lakh bales during 2014-15. Whereas total cotton consumption in the country increased to 312 lakh bales and the closing stock was 43 lakh bales.
