COTTON unfazed by synthetics

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1 By: Dr P. CHENNAKRISHNAN COTTON unfazed by synthetics Cotton exports from India are on a steady rise year after year. In fact, recently, the Indian government had to ban cotton exports to ensure steady supplies for the local textile industry. India had already exported 8.5 million bales, higher than the export quota of 8.4 million bales the government had set in January, due to strong demand from China. Cotton is one of the principal crops of India, playing a vital role in the country s economic growth by providing substantial employment and making significant contributions to export earnings. Cotton cultivation not only engages around 6 million farmers but also about 40 to 50 million others in work relating to cotton cultivation, cotton trade and its processing. There are four major species of cultivated cotton, of which two are diploid (Gossypium arboreum and G. herbaceum) and the other two are tetraploid (G. hirsutum and G. barbadense). India is the only country in the world which grows all these four species. In addition, hybrid cotton, which is produced from crossing the tetraploid species, is also cultivated in the central and southern zones. The diploid species, which is referred to as the desi cotton, has a low productivity and low quality. It contributes per cent of the country s production. The tetraploids variety contributes the remaining 70 per cent of the cotton harvested in India. These varieties have fine-quality fibre, and are normally used by the textile industry. India was known as the cradle of the cotton industry for over 3000 years (1500 BC to 1700 AD). It has produced some of the finest and most beautiful cotton fabrics since time immemorial. Being the first country in the world to cultivate cotton and manufacture its fabric, India continues to lead the world cotton market. It has the highest acreage under cotton cultivation and is second in production among all cotton producing countries in the world, next to China (as per production records in ). In 2008, the textile sector contributed about 14 per cent of industrial production and 4 per cent of GDP. It also provided direct employment to over 33 million people, making it the second largest provider of employment after agriculture. During , mostly short and medium staple cottons were produced in India. Today, India produces the widest range of cottons. Till April 2012 FACTS FOR YOU 27

2 , the import of Egyptian and Sudanese long and extra-long staple cotton was a regular phenomenon. But today, India has not only become self-sufficient in its cotton requirement but also a leading exporter of cotton globally. In India, cotton yarn accounts for more than 75 per cent of the total fibre consumed in the spinning mills and more than 54 per cent of the total fibre consumed in the textile sector. Table I World Cotton Scenario (million tonnes) Particulars Production Consumption Exports Ending stocks Source: International Cotton Advisory Committee The main cotton producing states are Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Punjab, Haryana, Rajasthan, Karnataka and Tamil Nadu. During the last five decades, the production of cotton increased from three million bales (170 kg equals to 1 bale) in to 24.4 million bales during There has also been a substantial rise in the area under cultivation from 5.9 million hectares in to 9.3 million hectares in The average yield also rose from 88 kg/hectare in to 467 kg/hectare in The state-wise area, production and yield of cotton in India for the period to are given in Table II. The demand for cotton in Tamil Nadu is 6.5 million bales but the production is only 400,000 to 500,000 bales. The deficit is sourced from Gujarat, Maharashtra, Karnataka, Andhra Pradesh and imports from USA and Egypt. The hosiery units of Tamil Nadu have the unique requirement for the Shankar-6 variety of cotton, which comes from Gujarat and Maharashtra. Due to high freight charges (Rs /bale), procurement from Punjab is on the decline. The major markets for cotton are Tirupur, Villupuram and Theni. Regulated markets and co-operative marketing societies facilitate cotton marketing in Tamil Nadu. The success of the cotton price forecast by the Domestic and Export Market Intelligence Cell has won the confidence of cotton farmers, traders and exporters. This allows farmers to hold stocks or decide to sell to their advantage based on the forecasted cotton price movements across the year. Table II State-wise Cotton Scenario in India (Area in million hectares, production in million bales of 170 kg, yield in kg per hectare) State Area Production Yield Area Production Yield Area Production Yield Area Production Yield Area Production Yield Punjab Haryana Rajasthan North total Gujarat Maharashtra Madhya Pradesh Central total Andhra Pradesh Karnataka Tamil Nadu South total Orissa Others Total Loose Lint Grand total FACTS FOR YOU April 2012

3 For instance, in 2006, the Centre for Agricultural and Rural Development Studies (CARDS) of the Tamil Nadu Agricultural University analysed the monthly data of market prices of the previous twelve Table III Area, Production and Productivity of Cotton in India Year Area in Production in Yield in kg million hectares million bales per hectare Table IV Area, Production and Yield of Cotton in Tamil Nadu Year Area Production Yield (hectares) (bales) (kg/ha) , , , , , , Source: Cotton Corporation of India years at the Tirupur regulated market for the variety LRA The results of the analysis showed that cotton kapas prices would increase very marginally over the following three months. The price in October 2006 was expected to be around Rs 2050 per quintal of LRA5166 up from around Rs 1950 per quintal in the previous months. The analysis factored in the arrival of the new crop from North India that enters the market from October onwards, resulting in a slight temporary decline in prices, which would then go up from January 2007 onwards. Hence farmers can decide to sell immediately or store cotton taking into account the cost of storage, interest on stocks and the like. Table III shows cotton production in India during the period to In Tamil Nadu, cotton was one of the important cash crops but the area under cotton declined from 239,000 hectares in the 1990s to 75,000 hectares in , whereas from the area under cotton has been increasing. The reasons for the expansion are contract farming, good yields and reasonable prices. The pace of expansion is slow because of land availability, the higher cost of cultiva- tion and the like. Cotton is cultivated throughout the year in Tamil Nadu in four seasons, namely, winter-irrigated, summer-irrigated, rain-fed and rice follow. Among this, the area under winter-irrigated is the largest (Masipattam). The major varieties cultivated in Tamil Nadu are MCU5, RCH and LRA Market sources confirm that the area under Bunny and RCH cotton is increasing. The area under Bt cotton is also going up. India produces a large number of cotton varieties and hybrids. Although there are more than 75 varieties in cotton cultivation, 98 per cent of the crop is contributed by about 25 varieties. As of , India was the second largest cotton producer and consumer. The textile industry accounted for 14.4 per cent of the country s export earnings during The Government of India fixes the minimum support price for cotton. At this price, several government agencies like the Cotton Corporation of India and Maharashtra State Co-operative Cotton Growers Marketing Federation procure cotton. The total production of cotton mainly comprises medium staple and medium long staple varieties followed by long staple. The share of short staple cotton is about 7 per cent, while medium and medium long staple varieties account for more than 50 per cent. The remaining are long and extra-long staple varieties. International polyester prices have been higher than cotton prices since , which should encourage cotton use in the mill sector. In addition, the impact of the elimination of quotas in the international trade of textiles and clothing from January 2005 has led to a higher demand for cotton worldwide. Consumption of cotton has been increasing over years. As against a total consumption of mil- April 2012 FACTS FOR YOU 29

4 Table VI Annual Average Prices of Kapas for Important Varieties (Rs/quintal) Year Table V Average Cotton Consumption by Organised Sector Textile Mills (Non-SSI Mills) and Small-Scale Spinning Mill (SSI) Units Varieties Bengal Desi J-34 LRA H-4 S-6 DCH * (in million bales of 170 kg each) Year Non-SSI mills SSI mills Cotton Monthly Cotton Monthly consumption consumption consumption consumption * *Estimates; lion bales during (mill and non-mill), the consumption levels, including consumption in spinning units in the small-scale sector and Table VII Cotton Imports in India Year Quantity Value (million bales (Rs million) of 170 kg) , , , , , , , NA Table VIII Cotton Exports from India Year Quantity Value (million bales (Rs million) of 170 kg) , , , , , , , NA non-mill consumption, touched a record maximum of 19.5 million bales in In the following year ( ), cotton consumption increased to 21.5 million bales. India s imports reached 520,000 tonnes in , but dropped due 30 FACTS FOR YOU April 2012

5 to the heavy expansion of the domestic cotton industry. However, in July 2008, the Indian government abolished the duty on cotton imports. This boosted imports to 130,000 tonnes in India is the second largest exporter of cotton after the US. Its exports reached 751,000 tonnes in ; 994,000 tonnes in ; 1,531,000 tonnes in , 514,000 tonnes in Coloured cotton threads 09 and 1,481,000 tonnes in as per USDA. Major export destinations are Bangladesh, Pakistan, China (Mainland) and other Far-eastern countries. Cotton is a traditional and important commercial crop that has been in cultivation in India for more than 5000 years. Though synthetic/ man-made fibre has made inroads into the turf of this ancient crop, cotton deserves the prime position not only in India but also in the world. The Northern hemisphere accounts for more than 90 per cent of the total world production, whereas countries like China, US and India together account for 50 per cent of the global output. In India, cotton farming provides livelihood for over four million farm families. Various allied activities like ginning, spinning, weaving, textile processing, garment manufacturing and marketing provide employment to several more million people. The author is assistant professor in Economics & NSS Programme Officer, Department of Economics, Thiruvalluvar University, Serkkadu, Vellore, Tamil Nadu April 2012 FACTS FOR YOU 31