COTTON: INDIA s WHITE GOLD

Transcription

1 By: Dr S. Maheskumar COTTON: INDIA s WHITE GOLD In spite of having one of the lowest yields per hectare in the world, overall, Indian cotton is doing well, both domestically and globally. This is primarily because of technology upgradation on the manufacturing front, which has enabled Indian exports to compete high on the value chain. growing and processing industry have a vital bearing on the overall development of the Indian economy. The global scenario Of the 70-odd countries that now grow cotton, 24 countries account for about 94 per cent of the world s cotton production and about 87 per cent of the world cotton exports. Of these 24, the ten leading ones are China, USA, India, Pakistan, Uzbekistan, Turkey, Australia, Brazil, Syria and Egypt, which together account for as much as 83 per cent of the world s cotton production. It can be safely assumed that these ten will continue to maintain their present status in the coming years. The Indian scenario Cotton is one of the principal crops of India and major raw material for the domestic textile industry. Millions of farmers, as well as workers involved in the cotton processing and trading sectors, depend on it for their livelihood. The Indian textile industry consumes a diverse range of fibres and yarn, but is predominantly cottonbased. Apart from providing one of the basic necessities of life, the textile industry also plays a pivotal role through its contribution to industrial output, employment generation and export earnings for the country. It contributes about 14 per cent to industrial production, 4 per cent to the GDP and 11 per cent to the country s export earnings. Textile sector is the second largest provider of employment after agriculture. Hence growth and allround development of the cotton India is the second largest producer of cotton in the world after China, accounting for about 18 per cent of the world s cotton production. It has the distinction of having the largest area under cotton cultivation in the world, in the range of 12.2 million hectares, which constitutes about 25 per cent of the world s cotton cultivation land base. The yield per hectare is, however, the lowest in the world. Thankfully, developments over the last two years August 2013 FACTS FOR YOU 9

2 have shown a potential to reach the world s average production level in the near future. Growth of Indian cotton Apart from meeting the increased demand for cotton from the domestic textile industry, India may have sufficient surplus cotton to meet the cotton requirements of importing countries. Progress with regard to the area, production and yield in the country over the last 10 years is shown in Table I. Over the years, India has significantly increased its cotton production. Till 1970s, the country used to import massive quantities of cotton, in the range of 800,000 to 900,000 bales per annum. However, after the government launched special schemes like intensive cotton production programmes through successive five-year plans, cotton production received the necessary impetus. This resulted in an increase in the area under cultivation and the sowing of hybrid varieties of cotton. Since then, the country has become self-sufficient in cotton production, barring a few years in the late 1990s and early 2000s when large quantities of cotton had to be imported due to lower output and the increasing cotton requirements of the domestic textile industry. Since the launch of the Technology Mission on Cotton by the government of India in February 2000, significant achievements have been made in increasing yield and production through the development of high-yielding varieties, appropriate transfer of technology, better farm management practices, increased area under cultivation of Bt cotton hybrids, etc. All these developments have resulted in a turnaround in cotton production in the country since the last six to seven years. The yield per hectare, which was stagnant at about 300 kg/ha for more than 10 years, has increased substantially and reached a level of 554 kg/ha in Cotton production and productivity Cotton is produced in India in three zones: the northern zone comprising the states of Punjab, Haryana and Rajasthan; the central zone comprising Maharashtra, Madhya Pradesh and Gujarat; and the southern zone covering Andhra Pradesh, Karnataka and Tamil Nadu. Besides these nine states, cotton cultivation has gained momentum in the eastern state of Orissa. With increased acreage and the introduction of Bt cultivation, the country has once again retained the position as the second largest cotton producing country in the world, after China. As Table V shows, the cotton yield during the year was 491 kg per hectare as against 496 kg per hectare in Export and import of cotton The government of India decided to allow the exports of cotton under open general licence (OGL), subject to prescribed registration procedures, from October 1, 2012, for the cotton season There was no export demand in the initial months of the cotton season for Indian cotton, due to global overstocking by countries like China. As a result, cotton exports from the country during the year have been projected to be 8 million bales as against million bales in the previous year. Under the OGL, since April 1994, the government of India had abolished the import duty of 10 per cent along with the countervailing duty of 4 per cent on cotton imports. Thus Indian mills now import cotton without any restrictions from anywhere in the world. Table I Cotton Production and Yield Year Area Production Yield (million (million (kg per hectares) bales) hectare) * *Approximate Source: Cotton Advisory Board Table II Cotton Supply and Demand (quantity in million bales of 170 kg) Item Supply Opening stock Crop size Imports Total availability Demand Large mill consumption Small mill consumption Non-mill consumption Total consumption Exports Total disappearance Carry forward FACTS FOR YOU August 2013

3 Imports during the cotton season are estimated to be one million bales. These mainly comprise extra India s cotton long staple cotton. The details of India s cotton exports and imports are given in Table VI. Cotton Advisory Board The Cotton Advisory Board (CAB) is a representative body of government agencies, growers, the industry and trade. It advises the government on matters pertaining to the production, consumption and marketing of cotton, and also provides a forum for liaisoning between the cotton textile mill industry, the cotton growers, the cotton trade and the government. The tenure of the CAB is two years. The CAB draws up the Cotton Balance Sheet. It was reconstituted on 9th January, 2013, for a period up to 31st December, Table III Farmers Involved and Villages Covered Year Area Number of Number of (hectares) farmers involved villages ,810 12, ,044 11, ,837 15, ,272 15, ,649 19, ,246 16, The Board operates on a two-tier mechanism, i.e., the board through a consultative committee seeks inputs from the cotton textile mill industry, the cotton growers and cotton traders. The consultative committee meets prior to the formal meeting of the CAB, and its recommendations are considered by the CAB. Organic Cotton Advisory Board The Organic Cotton Advisory Board (OCAB) was constituted on October 14, Headed by the Textile Commissioner, it is a representative body of the Central and state government agencies, certifying agencies, agriculture universities/research institutes, ginning and pressing sector, textile industry and other non-official members. The role and functions of the Organic Cotton Advisory Board are listed below: 1. Assess the demand and supply situation 2. Recommend subsidies for the production practices to be followed in cultivation of organic cotton 3. Evolve guidelines for the basis of certification, delineation/identification of production areas and the varieties suitable for organic farming 4. Constant analysis (comparative studies) of organic and inorganic farming on a long-term basis 5. Coordination with Agricultural and Processed Food Products Export Development Authority (APE- DA) and National Organic Farming Institute (NOFI), Faridabad, along with its regional station at Jabalpur and Nagpur 6. Coordination with other certifying agencies International Cotton Advisory Committee The International Cotton Advisory Committee (ICAC) is an intergovernmental organisation composed of countries that produce, consume and trade cotton, and is designed to promote cooperation in the solution of cotton-related problems, particularly those of international scope and significance. The ICAC is working with the WTO to facilitate international trade discussions. It is a scientific and economic organisation devoted to the improvement of the world cotton sector and is not a political body. Cotton Corporation of India The role assigned to the Cotton Corporation of India (CCI) under the Textile Policy of June 1985 was: Table IV World Demand and Supply Situation (quantity in million metric tonnes) Year beginning August * * World beginning stock World cotton production World cotton consumption World cotton exports World ending stocks As per the latest ICAC release dated May 1, 2013; *Approximate August 2013 FACTS FOR YOU 11

4 1. Undertake price support operations whenever the market prices of kapas touch the support prices announced by the government of India, without any quantitative limit; 2. Undertake commercial operations only at CCI s own risk; and 3. Purchase cotton to fulfill export quotas given to CCI. The above role of the CCI continued under the New Textile Policy of However, the last stated function is no longer relevant as export of cotton is now free and the government is releasing no quotas. Nevertheless, CCI purchases cotton even now to undertake exports. In the cotton season of , large scale minimum support price (MSP) operations were undertaken by CCI in Andhra Pradesh by operating in 100 procurement centres. Table V Area, Production and Yield (Area in million hectares; production in million bales; yield in kg/hectare) State * 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 Grand total *As per CAB dated 17th April, 2013; *Projected Cotton consumption Textile is one of the largest industries in India and it has witnessed phenomenal growth in the last two decades in terms of installed spindlage and yarn production. Significant features of this growth include installation of open-end rotors and setting up of export-oriented units. Technology-wise, the Indian spinning industry has been able to keep pace with the international technology trends to a fair degree and this pace of modernisation received a fillip after the launch of the Technology Upgradation Fund by the government of India in April Mushrooming of the spinning industry and its modernisation have led to sustained growth in cotton consumption, especially during the years when the country harvested a good crop. Domestic cotton consumption in the last few years has been increasing steadily. The last two years, however, witnessed a small fall in consumption. The Indian textile industry is extremely varied, with the hand-spun and handwoven sector at one end of the spectrum, and the capital-intensive, sophisticated mill sector at the other. Decentralised powerlooms/hosiery and knitting forms the largest section of the textile industry. Close linkage of the industry to agriculture, and India s ancient culture and traditions, make the Indian textile sector unique. This also provides the industry with the capacity to produce a variety of products suitable for different market segments, both within and outside the country. The major sub-sectors that comprise the textiles sector include the organised cotton/man-made fibre textile mill industry, the man-made fibre/filament yarn industry, the wool and woollen textiles industry, the sericulture and silk textiles industry, handlooms, handicrafts, jute and jute textiles industry, and textiles exports. Technology Upgradation Fund Scheme The Technology Upgradation Fund Scheme (TUFS) was launched on April 1, 1999 for a period of five years, and subsequently extended up to March 31, The scheme provides for interest reimbursement/capital subsidy/margin money subsidy and has been devised to bridge the gap between the cost of interest and the capital component, to ease up the working capital re- 12 FACTS FOR YOU August 2013

5 Table VI Production, Export, Import and Stock in India ( kg or 480-pound bales) Year Beginning stocks Production Imports Total supply Mill use Exports Ending stocks SUR , ,224 14, % , ,214 16, % , ,104 18, % , ,229 18, % , ,104 17, , % ,644 23, ,924 19, % , ,224 20, , % ,174 27, ,274 19,750 11, % , ,144 22, % , ,894 23, % Source: National Cotton Council of America Table VII Cotton Consumption by Textile Industry (million bales of 170 kg) Year Cotton consumption Source: Cotton Advisory Board quirements and to reduce transaction costs. The scheme is an important tool to infuse financial support to the textiles industry and help it capitalise on the vibrant and expanding global and domestic markets, through technology upgradation, cost effectiveness, quality production, efficiency and global competitiveness. During its initial years, the progress of the scheme was moderate and it gained momentum only from onwards. The scheme was further extended till 2012 with modified financial and operational parameters, which focus on additional capacity building, better adoption of technology, and a higher level of assistance to segments that have a larger potential for growth, like garments, technical textiles and processing. The scheme is administered through three nodal agencies and 36 nodal banks. Since inception, it has led to the investment of more than Rs billion. An amount of Rs billion has been released towards subsidies under the scheme as on January 31, The Planning Commission has approved an allocation of Rs billion under TUFS for the 12th Five Year Plan. Export Promotion Councils There are eleven textile Exports Promotion Councils representing all segments of the textiles and clothing sector readymade garments, cotton, silk, jute, wool, powerloom, handloom, handicrafts, carpets, etc. These councils work in close cooperation with the Ministry of Textiles and other ministries to promote the growth of their respective sector in the global export markets. The Councils participate in textiles and clothing fairs and exhibitions in India and abroad, as well as conduct standalone shows in India and abroad to enhance the markets of their respective sectors. These councils are: 1. Apparel Export Promotion Council (AEPC) 2. The Cotton Textiles Export Promotion Council (Texprocil) 3. The Synthetic & Rayon Textiles Export Promotion Council (SRTEPC) 4. Wool & Woollen Export Promotion Council (S&WEPC) 5. Wool Industry Export Promotion Organisation (WOOLTEXPRO) 6. Indian Silk Export Promotion Council (ISEPC) 7. Carpet Export Promotion Council (CEPC) 8. Export Promotion Council for Handicrafts (EPCH) 9. Powerloom Development & Export Promotion Council (PDEX- CIL) 10. Handloom Export Promotion Council (HEPC) August 2013 FACTS FOR YOU 13

6 11. Jute Product Development Export Promotion Council (JP- DEPC) Exports India s textiles and clothing industry is one of the mainstays of national economy. It is also one of the largest contributors to India s exports worldwide. The report of the Working Group constituted by the Planning Commission on boosting India s manufacturing exports during the 12th Five Year Plan ( ) envisages India s exports of textiles and clothing at $64.11 billion by the end of March The textiles industry employs 45 million people. Modern outlook needed Coloured cotton threads Use of latest techniques and equipment in the processes has enabled India to increase manufacturing of finer fabrics in a variety of mercerised, bleached, dyed and pre-shrunk textiles. With the increasing demand from overseas countries, a growing population, and the emergence of sophisticated ideas, all possibilities are being explored to include the widest range of finished fabrics such as twills, drills, satin prints, drapery fabrics, poplins, towelling, and the whole range of materials right down to industrial garments. The textiles and cotton industries constitute the largest organised sector in India. It uses more than 34 million spindles and 2 million looms. Indian textiles are exported all over the world. The traditional gray goods have gradually given way to meet the colourful demands of the modern consumer. In fact, marked increase in the export of finished goods and garments is the most noteworthy and encouraging feature of the Indian cotton industry s emergence on the world map. The author is head, department of Commerce, K.S.R. College of Arts and Science (Autonomous), Tiruchengode, Tamil Nadu 14 FACTS FOR YOU August 2013