By Linu Mathew Philip, Centre for Trade and Development

Cotton is an important cash crop and source of livelihood for nearly 15 million farmers in 10 Indian states. At the end of 2006, the total area under cotton crop in the country was 9.10 million hectares (mha), which accounts for 6% of the net cropped area (Economic Survey 05-06, GoI 2006). Cotton production is expected to cross 30 million bales in the current financial year 2007-08, which will be the country's highest ever. (http://www.commodityonline.com/newnews.php?id=2294, visited August 10, 2007)

India is the third largest producer of cotton in the world, after China and the United States. It accounts for 25% of the world acreage, but only 14% of production. Despite being one of the largest cotton growers globally, cotton yield in India is one of the lowest in the world because of severe pest attack, and because cotton is predominantly cultivated under rainfed conditions (irrigation coverage is 63%).

The major cotton growing states in India are Maharashtra, Gujarat and Andhra Pradesh, which account for 67% of the country's acreage under cotton. Cotton has a problem unique to the crop: it can only be grown under specific soil conditions and is very sensitive to insects and pests. This makes cultivation risky, and any inputs to mitigate the risk are costly.

Another problem is poor market support, which is trade-linked making recovery of costs difficult. From the estimates available, of the total pesticide consumption of Rs 2,800 crore in Indian agriculture, more than 50% is on cotton (C D Mayee, P Singh, A B Dongre, M R K Rao and S Raj: ‘Transgenic Bt Cotton', Central Institute for Cotton Research, Nagpur, July 20, 2002).

Heavy use of pesticides has been a major concern not just because it increases the financial burden and reduces profit margins but also because of the health and environmental risks involved.

It was hoped that the introduction of Bt cotton would be a solution to this problem, as Bt cotton is resistant to bollworm pest infestation.

Despite the bio-safety and environmental controversies surrounding Bt cotton, its coverage has improved both in India and all over the world. In 1996, worldwide, Bt cotton was sowed over 3 mha; now it is over 50 mha. In India, unofficial estimates reveal coverage of over 40%, which is around 4 mha. Bt cotton cultivation was allowed in April 2002, and growth estimates clearly indicate the link between the use of Bt cotton and yields in the period 2000-2007 (Table 1).

Table 1: Growth rate of cotton production and yield in India (% per annum)

NB: Figure in parenthesis indicates level area in mh (million hectares), production in mb (million bales) and yield in kg/ha (kilogram per hectare)

Experimental and field survey results are coming in from different regions. A study by A Narayanamoorthy and S S Kalamkar, ‘Is Bt cotton cultivation economically viable for Indian farmers: An empirical analysis', published in the Economic and Political Weekly, June 30, 2006, did a comparative analysis of Bt and non-Bt cotton, in two districts each of Maharashtra, Buldhana and Yavatmal. The study revealed that the cost of cultivation of Bt cotton is substantially higher than that of non-Bt cotton, largely because farmers growing Bt cotton spent more on pesticides. This is contrary to seed companies' claims that pesticide consumption for Bt cotton would be reduced. However, the study showed that productivity was much higher for Bt cotton (Figure 1).

Figure 1: Comparison of yield from Bt and non-Bt cotton

The results of the study show that Bt cotton performs better than non-Bt cotton. However, the districts selected for the study were better irrigated, so the findings may not represent the full story of Bt cotton cultivation in Maharashtra.

The current increase in area and production is from the two states of Gujarat and Punjab that have more than twice the all-India average yield -- 604 kg/ha and 731 kg/ha, respectively. These states have also recorded the highest coverage of Bt cotton.

Andhra Pradesh and the rainfed regions of Maharashtra, which also grow Bt cotton, have not shown similar yields. Thus, Bt performance has not been even or uniform.

Bio-safety has been a worry, and the findings of the Central Institute of Cotton Research (CICR) show that toxin expression varies significantly across different hybrids into which the genes are inserted. And, that the safety aspects need to be critically examined. Owing to the recent controversy over genetic contamination following field trials and commercial cultivation of genetically modified (GM) crops in the country, the Supreme Court of India has directed the Genetic Engineering Approval Committee (GEAC) to limit the genetic contamination to a level of 0.01%.

Even though Gujarat has shown rapid increases in cotton productivity, which seem to be attributed to the use of Bt cotton, there have been reports of farmer suicides which the state underplays. The official figures indicate that 148 farmers committed suicide in 2006; news reports quote a much higher figure. There are also reports of a large exodus of cotton farmers to urban pockets such as Surat on account of debt and disillusionment. Village estimates reveal that farmers spend between Rs 7,000 and Rs 16,000 for an acre, and get around Rs 13,000-Rs 16,000 for the crop harvested per acre. Inflation in input costs on account of commercial farming explains the misery and current status of cotton farmers.

One of the important factors contributing to the increase in costs is the rising cost of seeds by multinational companies trying to make huge profits. India's Monopolies and Restrictive Trade Practices Commission had to step in to order Monsanto to charge “reasonable prices” for Bt cotton seed. Monsanto responded by lowering its technology fee by an insignificant Rs 20, which had no major impact on Bt cotton seed prices that continued to be sold by the company and its licensees at between Rs 1,200 and Rs 1,300 per 450 g pack. Such interventions have not helped poor cotton farmers in Andhra Pradesh and Maharashtra.

Frontline magazine (June 15, 2007) quoted a 30-year-old widow, Vajubhen Dhakada, living in a small village in Gujarat, as saying: “For the past two years our crops have failed. We had a debt of Rs 50,000 and my husband kept worrying about looking after our three small children with no money with which to buy seeds.”

Her plight was echoed by Kanubhai Ganniya of Malak village: “Not a single small farmer is doing well; we are all starving,” he said. “Many people are leaving the village or getting into other businesses. The cost of seeds and pesticides is rising every year. But the price of cotton has not increased as much.”

An unfair system of trade wherein ‘a pair of jeans that weighs around 500 gm sells for Rs 500-Rs 1,700 in the designer stores when 500 gm of cotton received by farmers is just Rs 13' (Frontline, June 15, 2007) has worked against the cotton farmer.

The problem is made worse by the poor cotton marketing network, which explains the differences in pricing. The figure below illustrates world trade prices for cotton carded, and domestic prices for raw cotton. The difference is attributed to the processing involved, which adds better value. But, in general, domestic prices have been lower than the normally traded price.

The price difference is due to lack of proper marketing techniques that would enable cotton farmers to get a more equitable price, comparable with international standards. Even at the international level, the price situation is unfavourable and is worsening.

The chief reason for this is China's high level of production, which is weakening the movement of cotton prices. The distortion arising from subsidies is another reason. According to the latest figures, the cost of producing cotton in the United States is $ 1.70 per kg, but US cotton is sold at $ 1.18 along with an additional export subsidy of $ 300 million. Chinese support to cotton is also equally strong -- $ 750 million annually. Indian farmers get no support and have to struggle both with the weather and the market.

Although many state-supported cooperatives and federations do exist in India, they do not receive the necessary support and therefore are unable to assist farmers. MahaCot is an autonomous body instituted by the Maharashtra government for procuring cotton from farmers and selling it to traders. But it has slowly been withdrawing from the process of procurement. It has also been associated with various scams. “Rather than help the farmers get a better price in the market, the Federation has been accused of tinkering with it in order to help only a handful of traders,” says a report in India Today (May 28, 2007).

The misery of the cotton farmer starts with the procurement of seeds and continues until the time he sells the crop in the market. The current Technology Mission of Cotton (TMC) is supposed to improve the level of cotton production, but the Mission's performance in the Tenth Five-Year Plan has been inadequate. Less than 50% of the TMC-III and TMC-IV projects, that were supposed to create better market yards and factories for processing cotton, are complete.

Such delays adversely affect farmers who are unable to realise the full price of their labour. There is no credible technology that supports them; commercial methods of cultivation are pushing them to higher costs and indebtedness. With production set to shoot above 30 million bales this year, prices will surely take a beating, pushing cotton farmers into deeper crisis.