The Indian cotton textile industry is going through a very difficult phase despite a bumper cotton crop. Typically whenever a country has a good cotton crop, the local industry is said to be a major beneficiary due to better availability, quality and reasonable costs of raw materials. However due to some special Government policies exclusively for the cotton crop, the whole industry and the common man is losing out in a very big way.
As we all know, agricultural crops in India are largely dependent on the weather conditions, hence the quantity and quality varies from season to season leading to high volatility in prices. The Indian Government has always put the interest of the country people in the foremost and accordingly developed balanced policies. The last few years are proof to the same, where the Government banned exports of rice, wheat and sugarcane to ensure that the country had sufficient buffer stock and prices were kept within check so that common man didn't suffer due to inflation. Even the Government went to the extent of allowing free imports of edible oil and sugarcane to correct anomalies and reduce the suffering of the common man. However despite such measures, inflation of food still reins above 10% - imagine what would have happened if the Government had allowed free exports!!!
However for some strange reason the Government has made an exception for one particular crop - COTTON. Hence we don't need to imagine what would have happened, as we can see what is happening in the prices of cotton - in one year prices have moved up from `23000 a candy to `40000 a candy, a mind blowing 75%. And this is not because we have a shortage of cotton crop as was the case of sugar, pulses or rice. It is simply because the Government allowed it to happen and is still allowing it to happen. As a result the prices of yarn have moved up by 50% and so have the prices of fabric and garments which are a basic necessity of the "poor". Roti, kapada aur makkan i.e. food, cloth and shelter are the 3 basic necessities of mankind. When the Government has created policies to bring down prices of basic essential items like rice, wheat, sugar and edible oil then why is it doing the reverse for raw cotton fibre??
Why is the Government not concerned about a poor man's clothing need?
The Government is concerned about roti - they not only think of current requirement but also strive to create a sufficient buffer stock. However when it comes to clothing, they have turned a blind eye for some strange reason. In case of other crops like rice, wheat and sugarcane despite having bumper crops and good buffer stocks, the Government has decided not to allow exports - however they seem to be in a big hurry to allow cotton to be exported to other countries while the home industry is starving for cotton and prices are hitting the common man in an unprecedented way.
Why the hurry to allow cotton exports?
An important question that comes to mind, as to why is there hurry??? Why can't they wait for the crop to actually arrive, and then allow for local consumption and creation of minimum required buffer stock and then think of exporting the surplus cotton if any. The only person gaining out of this move is either the people who are exporting or the countries who are buying i.e. Pakistan, China, Vietnam and Bangladesh etc. It is a commonsense, that all agriculture products fetch better prices in off season when supply is low, then why are we in a hurry to sell our cotton fibre to outsiders in the peak of season? Cotton isn't a perishable commodity, then why hurry sales and sell at lower prices. Cotton Corporation of India was formed to ensure sufficient buffer stock of cotton and reasonable prices for farmers, why aren't they used to buy and stock cotton like FCI is doing for food grains. The cotton can be sold in off season to Indian users or internationally at better prices once, plus the objective of maintaining buffer stock would also be achieved.
Today India's closing stocks of cotton are at an all time low of 40 lac bales. It is even lower than the Government own stated objective of 50 lac bales. The stock to use ratio is 15% against the world average of about 40% (which is an all time low level). Further the growth in Indian textiles is 10% plus, which means the requirement is growing every year. However despite this the Government decided to allow exports of raw cotton even before the crop arrived. Rains have delayed the crop by 3-4 weeks and arrivals are yet to start in any significant way. But registrations have started and the crop will be allowed to move out of the country from November 1, 2010. They have also decided to allow export of a minimum of 55 lac bales - please read minimum not maximum. (in first 5 days of registration 28 lac bales i.e. 50% of the annual quota has been applied). The Agriculture Minister has gone on record that in December they may increase the quota to 80 lac bales leading to further fuelling of prices.
Why throw away our competitive advantage in textiles?
We are always worrying about us losing out to these countries in value added exports of garments as they have certain advantages against us like lower wages, lower power costs, lower interest rates etc. We would not need to worry so much and face falling garment exports if we were not exporting our competitive advantage raw cotton at lower than international prices. Even for basmati rice, Government allows exports at a Minimum Export Price, but in cotton exports have no price or quantity barrier as such. Last season a mind boggling 83 lac bales were exported-even after the Government put cotton on restrictive list in April 2010, licenses were issued and 10 lac bales were further allowed to be exported-why put it on restrictive list if licenses are to be issued anyways!!!
China is the largest producer of cotton in the world - have we ever heard them exporting cotton!!! The Chinese Government manages the surplus cotton by buying it from farmers and then releasing it to the industry in times of shortage. Even now, the Chinese Government has been selling cotton to the local textile industry.
Are cotton farmers really losers today?
Recently heard interested lobbies justifying this move by saying that farmers would suffer if exports were not allowed. Well on date cotton farmers are selling their produce at 50% over the Minimum Support Price (MSP) set by the Government. Is that enough or not? Or should the farmers need more, while the common man pays exorbitant prices to cover his body in the burning sun or chilling winters. MRP prices of basic textile items like vests, underwears etc have gone up by 25% over the last one year and are expected to go up further unless there is brake to cotton prices.
What about millions of other farmers?
Further a very basic question that comes to one's mind is: What about farmers growing rice, wheat and sugar? There number is much larger than the cotton farmers - they would also earn more if exports were allowed. Further poor rural farmers don't need to buy food grains, they can consume their own produce, but all need to buy cloth to cover their bodies. Why this step motherly treatment for such a large section of farmers growing food grains and this special treatment for cotton farmers? Why are food grain farmers made to sell at MSP levels to FCI and other Government bodies while cotton farmers are considered to be at a loss even at a 50% premium over MSP.
Are exports being really allowed for cotton farmers interest?
Friends, the motives are much deeper and the farmer card is just being used to further the interests of the selected few involved in exports of cotton. Its further not surprising that amongst the bigger exporters are the large international cotton traders who rule global cotton trade. Cotton Corporation of India can easily ensure that farmers get a reasonable price for their produce; you don't need to allow exports for that. Further if cotton farmers concern is so important then why was import duty removed from edible oils. Why isnt edible oil seeds exports allowed? This has lead to a fall in cotton oil seed prices (which comprise 65% weight of the seed cotton sold by the farmers). Cotton farmers would be able to sell at a much higher price if cotton oil seed prices went higher, which is possible if import duty is re-imposed on edible oils or exports are allowed. However the same is not being done on the pretext that local edible oil prices would go up leading to discomfort for the Indian masses. But what about the discomfort caused to common man due to cotton prices??
We need to save the value added textile industry!
An appeal to the policy makers, please save the textile industry who is largest industrial employer in the country (the livelihood of millions of workers in textile industry is at stake). Let not the country go back to pre-independence era where raw materials were exported and the finished product was imported back into the country. We need to use the strong raw material base of the country to develop a vibrant and strong value added garments industry to not only cloth the country but also cloth the world and earn much higher foreign exchange for the country. This philosophy was practiced even by our Honourable Father of the Nation, who inspired people to weave their own fabric rather than export raw materials and import value added fabric/garments from the Developed World. Export incentives for all value added cotton products from yarn to fabric to garment have been reduced, but incentives on cotton exports are the same - please don't try to find logic in this, because like other policies this also is beyond comprehension.
We need to save the common man who is already fighting the double digit inflation. Let's not stoke the inflationary fire any more by pre-empting exports of something which is yet to come. Why should the common man suffer a 50% inflation just to feed the factories of competing countries? Is it not our foremost responsibility to provide reasonable clothing to the teeming millions to protect them from the burning sun and chilling winters?
The author is Joint Managing Director, TT Ltd: &sec=article&uinfo=<%=server.URLEncode(2993)%>" target="_blank">http://www.tttextiles.com/
Views presented here are those of the author
Image courtesy: http://earth911.com