Maharashtra's cotton economy could be taking a hit of between Rs.2,500 crore and Rs.2,750 crore this year. This could not come at a worse time for the embattled farmers of Vidarbha. The amount of cotton being picked up by State agencies is at a dismal low.
Private traders are buying a lot more but often at below the minimum support price (MSP). Total output in the State is down by at least 50 lakh quintals. So there is no relief for the cotton grower.
Last year, there were 411 official centres to procure cotton. This year a mere 141. "But that's because open market prices are better," insists N.P. Hirani. He is chairman of the Maharashtra State Cooperative Cotton Growers' Marketing Federation. But on the ground, his claim is challenged by farmers in Vidarbha. Most say the traders' prices are even lower than the MSP.
Private centres now number 210. "It is a policy move to reduce procurement," says Vijay Jawandia. "The government is pushing farmers towards private traders." The region's foremost farm activist, he warns that "this will mean more losses on the price front. Farmers have already lost Rs.1,000 crore as a result of the 'advance bonus' scheme being shut down. This is forced privatisation of the trade."
Late last year, the State withdrew the "advance bonus" of Rs.500 a quintal. Which brought down what the farmer received to the MSP of Rs.1,700 a quintal. On a likely output of 200 lakh quintals, that is the loss of Rs.1,000 crore Mr. Jawandia speaks of.
That is not all they will lose, though. Costs were up 25 per cent last year because of rising input prices. Many more people went in for the costly Bt cotton. Further, many farmers lost the first sowing due to bad weather and had to sow again. The losses from these problems, says an official source, are not less than Rs.500 crore and could be closer to Rs.1,000 crore.
Steep fall in procurement
The fall in procurement is even more drastic than the fall in the number of Government centres. The Cotton Federation's official chart shows that by February 11 this year, it had procured just 4.83 lakh quintals. A gigantic fall from the 178 lakh quintals picked up by the same date last year. In cash terms the fall is massive. The value of what was acquired from the farmers last year on this date was Rs.3,970 crore. This year, it is a mere Rs.54.73 crore.
Has that been offset by the rise in private procurement? "Not one bit," says Mr. Jawandia. And his view is echoed by farmers at the markets in Yavatmal. At the official centre in Ghattanji, there were over 300 bullock carts with cotton piled up. "The private traders start off in the morning by offering Rs.2,000 a quintal," say the farmers crowding around us. "But in a few hours the price is down to Rs.1,600." They see the initial high offer as a ploy to draw the crowds to the private centre.
"The farmer is getting a price neither from the Federation, nor from the traders," says S.N. Deshmukh. He is a former general manager (sales and procurement) of the Federation. "But you will find a rush to the Federation very soon. So far the grower has held out for a better price. Now he will take it to them as he has few other options." Some 40 per cent of the output is thought to still be with the farmers.
But private traders have bought far more cotton than the official body. "They have purchased close to 100 lakh quintals," says a Federation official. At an average private price of Rs.1,600, "farmers will lose Rs.600 crore at the least," says Mr. Jawandia.
"If the Federation price had been the same as last year," he points out, "not a single trader would have ventured into buying cotton." This seems borne out by last year's numbers. Then, the Federation alone mopped up more than four-fifths of the total production.
Meanwhile, Mr. Hirani of the Federation estimates that production in the State is down. "It could be less by almost 50 lakh quintals this year," he told The Hindu . "Last year it was over 250 lakh quintals." The value of that lost output, estimates Mr. Jawandia, "is around Rs.850 crore."
Sources in the Agriculture Commissioner's office in Pune dispute this. They say last year's figure was misleading. "A lot of that 250 lakh quintals came from neighbouring States," they assert.
"This year that has not happened. We believe yield and productivity have gone up. It is 213 kg per hectare as against 176 kg last year."
That claim is scoffed at in Nagpur. "Output this year will in truth not exceed 160 lakh quintals," says one official source. "Bt cotton was a disaster. Also, the crop was hit by diseases."
As Bt bombed for many, they used pesticides for that too. In a country where cotton is anyway the highest user of pesticides, this further upped the farmer's costs.
"Don't ignore the problem of the small trader, either," says Mr. Deshmukh. "Early on, a few did pick up cotton at prices that might hurt them. And there seems to have been a fall in 'micronaire value' in this crop. That is a technical measure that makes for better spinning. Small traders could be in troubled waters when they sell."
Imports of cotton have further depressed prices over the years. India's cotton imports between 1997-98 and 2004-05 stood at over 115 lakh bales. That is over three times what was imported in the preceding 25 years. In the same 1997-98 to 2004-05 period, exports did not cross 30 lakh bales. In some years, they fell in both number of bales and value earned.
World cotton prices tumbled in the 1990s as the United States pumped billions of dollars of subsidies each year to its 25,000 cotton producers. "And we," says Mr. Jawandia, "have left our millions of cotton farmers to the mercy of traders and the subsidised global market. Now anyone can import or export it. The import duty on cotton is ten per cent. And if you're the textile lobby you don't pay even that. Anyone can buy, sell or trade in it. Private trade is up, boosted by a withdrawing state. Our cotton economy is the closest thing to a 'free market' and see the results."