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By
Raghav Narsalay
A short case study for Oxfam GB
India accounts for 16% of global cotton production and is the third largest producer
of cotton in the world after the USA and China. Approximately 25% of the world's
total cotton area lies in India. Cotton provides a livelihood to more than 60
million people in India, by way of support in agriculture, processing and use
of cotton in textiles and garments. It constitutes 29.8% of India's agricultural
gross domestic product. Nearly 9 million hectares of land in the country are used
to produce 14.2 million bales of cotton lint. Given that India has the
highest surface area under cotton production, one would have expected yields also
to be very high. It is here that the sorry story of the Indian cotton farmer begins.
With a per hectare yield of around 322 kg, India stands 17th amongst the first
19 major cotton producers of the world. This paper examines why cotton
production in India has failed to reap rich rewards for its cotton farmers. The
research centres on the state of Maharashtra, the largest cotton-growing state
in the country, which accounts for 17% of total Indian cotton production. Both
domestic and international factors work against India's cotton farmers. Domestically,
three factors determine cotton production: the type of seed sown, the market in
which the farmer sells his produce, and the price at which he can sell.
The most important decision a farmer
has to make is choosing the right seed to sow. He can choose from more than 25
varieties of hybrid cotton seed of traditional and improved variety, and over
20-odd local varieties (varieties that have been developed within villages and
families, based on the system of local exchange of best seeds). The costs for
these range from Rs 65 a bag to Rs 600 a bag for the best variety hybrid seed.
Pest and disease attack can significantly affect yields. Recently, therefore,
four varieties of transgenic Bt cotton seed that is resistant to American bollworm
-- the most destructive of pests -- have been introduced. Bt seeds cost Rs 1,600
for 450 grams, much more than other varieties. Farmers who can ill afford this
high cost are nevertheless buying these seeds in the hope that they will be rid
of devastating pests. The paper argues that in opting for high-cost seeds,
farmers are acting out of insufficient knowledge. Though the Genetic Engineering
Advisory Committee (GEAC) within the Ministry of Environment and Forests has given
its approval to the use of the seeds, it has done so based solely on data furnished
by the seed companies. Indian agricultural universities are still conducting trials
into claims made in favour of Bt cotton. A report prepared by the Office of the
Agriculture Commissioner, Government of Maharashtra, on trials in various locations
does not show Bt cotton to have any significant advantage over non-BT varieties.
This report has not been widely disseminated.
Cotton farmers face all sorts of restrictions when
it comes to selling their produce. Under the Maharashtra Raw Cotton (Procurement,
Processing and Marketing) Act 1971 they cannot sell their produce outside the
state.
Procurement, processing, storage and sale of cotton are controlled
by the Maharashtra State Cooperative Cotton Growers Marketing Federation (MSCCGMF)
Ltd, under the Cotton Monopoly Procurement Scheme. While the scheme insulates
farmers against price fluctuations, it also constrains them from taking advantage
of a higher selling price when demand for cotton exceeds supply in different parts
of the country. It is therefore the state and private ginners and traders who
benefit from demand-supply mismatches of cotton, and not the farmers. Indian
cotton farmers are shackled when it comes to exports as well. To ensure that cotton
is available at a cheap price, especially when cotton prices move northwards,
cotton mills' associations lobby the Ministry of Textiles to restrict the export
of cotton from India. The suppression of domestic cotton prices over the last
two decades is a major reason for stagnating cotton yields in the Indian context.
There are
three farmers' representatives on the committee within the MSCCGMF that decides
prices. These representatives are chosen by the state government. Hence, farmers
have hardly any say in what the price of cotton should be.
In 1997-98,
the government suddenly slashed import duty on raw cotton from 45% to 0%. As a
consequence, in 1998-99, cotton imports, particularly from the US, which heavily
subsidises its cotton industry, jumped 12 times. In succeeding years, import duty
was re-imposed and now stands at 10%. But it did not stop cheap imports from flooding
in. This is because cotton is bought from farmers in Maharashtra at Rs 2,500 per
quintal. At existing international prices, the landed value of cotton imported
from the US of the same or similar variety is approximately Rs 1,500 per quintal
as it is subsidised to the tune of Rs 3,800 per quintal. The farmer is
caught between not getting a good enough price for his produce and having to pay
a higher price to cultivate it. The higher cost of Bt cotton seed that farmers
are encouraged to buy also leads to higher costs in working the crop. A
study of farmers in some districts of Vidarbha showed that poor irrigation, spurious
pesticides and the growing immunity of pests even to high-quality pesticides (for
pests other than bollworm) have adversely affected cotton farming. The high cost
of hybrid seeds has not been compensated by lower costs in other areas. With the
state government not buying the cotton, and often delaying payment, many farmers
are forced to incur debts. To pay off these debts they have had to sell their
crop to traders or moneylenders.
The growing clout of international
seed companies such as Monsanto, that has a firm grip on hybrid Bt cotton, is
an alarming development. The company has now sub-licensed the Bt technology to
other companies that are producing and marketing hybrid seeds to Indian farmers.
There is no independent verification of the claims made by these companies
for their seeds. In allowing them to carry out and assess their own research,
a precedent has been set for other companies to do the same. Farmers rely on the
literature and advertisements that these companies provide. Owners of seed centres
have also been co-opted by the seed companies. They are given incentives to push
hybrid varieties over other seed varieties. The US and the EU have repeatedly
been hauled up before the WTO for their high cotton subsidies. In September 2004,
a WTO dispute panel found that US$ 3.2 billion in annual cotton subsidies and
US$ 1.6 billion in export credit paid by the US in cotton and other commodities
were illegal under WTO rules. The case was brought by Brazil and supported by
some West African cotton-producing countries (Benin and Chad). The US went in
appeal in October 2004, but lost and has to implement the ruling. Developing
countries like India must have the political strength to continue to push for
the cutting of subsidies in the EU and US during future negotiations, and ensure
that the ruling is implemented. Bilateral free trade agreements are another
way in which trade is carried on. India is involved in several such agreements
with various South Asian countries. Cotton farmers, however, have no knowledge
of the agreements and have no say in framing the terms and conditions. While these
agreements could open up new markets for Indian cotton, they may have an adverse
impact on the livelihood of Indian farmers. Adequate precautions must be
taken in the area of rules of origin and, more importantly, in terms of listing
products under various categories (those where tariffs are brought down quickly;
those where tariffs are brought down more slowly; and those exempted from tariff
slashing).
The paper
makes a strong case for empowering the marginal cotton farmer. He must be better
informed and more involved in the production and trading of his crop. Very few
small farmers in the Vidarbha region even keep records of how much they actually
invest in cotton cultivation. Records of income and expenditure must be kept.
If a farmer is unable to understand the economics of her/his farm, decisions
about future sowing and cultivation will depend on random calculations, or on
the basis of what is seen to have worked on the farms of neighbours or relatives.
Many farmers admit that they bought expensive hybrid seeds because they saw good
results on a neighbouring farm, though the conditions may be dissimilar. When
farmers are sold bad seeds they have no way of getting compensation. If gram sabhas
are invested with the authority of a seed court, they will provide an accessible
grievance redressal system for farmers, and also a well informed one since they
know the local conditions. Civil society organisations must play a role in
helping farmers understand these issues so that they can make informed decisions.
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