G. Chandrashekhar

Mumbai , Dec. 8

ALARMED by the continued steep fall in cotton prices and discontent brewing over ineffective Government intervention, ministers in the Union Government have been trying to talk the market up, but in vain. They have stated on more than one occasion that prices would be supported through procurement as also by allowing cotton exports at subsidised rates.

This talk has been going on for almost a month now; but the policy package to encourage export is nowhere in sight. Even the procurement operations of Cotton Corporation of India have proved ineffective so far. Reports from producing regions as far and apart as Madhya Pradesh, Gujarat and elsewhere suggest that offtake at the marketing yards is rather limited.

Notwithstanding a bumper crop registered by the country and attractive prices, purchases by textile mills and traders have been rather tardy. It is conceivable they want the prices to go down further; and prices would, if there are no buyers. This is where the importance and urgency of procurement lies.

There is one school of thought that asserts output has registered a quantum jump this season because of higher yields and therefore, farmers' take-home income would not be any lower despite falling prices. This may be a correct statement if one looked at the country's cotton output and prices as a whole.

At the micro-level the realities are different. The assumption that all the cotton growers across the country have realised higher yields and are therefore not worse-off is incorrect. The reality is that there are regional variations in yields. There are also variations in the quality of produce.

In addition, it is said that input costs were higher this season.

Cotton growers in many regions are sure to feel thoroughly disillusioned because despite their excellent performance, there is an avoidable price collapse coupled with tardy and ineffective support operation. The Government, on the other hand, seems to be moving at a snail's pace in rescue efforts.

Early this week, the Union Minister for Textiles, Mr Shankersinh Vaghela, said the Government was likely to allocate Rs 100 crore towards export subsidy and that the Finance Ministry would have to clear the proposal. The Minister for Agriculture, Mr Sharad Pawar, too, had talked about grant of some financial assistance for cotton exports and sought a proposal from the trade association.

Obviously, no one knows what's happening in the Government in so far as support to cotton growers is concerned. If export subsidy is announced after the marketing season is over, the benefit will not flow to growers at all because they would already have been forced to market the crop at low prices. Trading houses will walk away with the financial benefits, leaving the grower in the lurch.

There are lessons to be learnt from this season's cotton episode. The Government has to be pro-active and not reactive in meeting the emerging situation. The policymakers' commercial intelligence needs to be sharpened.

It is not as if no one knew about the big crop size or it developed overnight. It is simply that no one in the Government really bothered to feel sufficiently concerned about the emerging situation.

Delay in support means denial of justice. Since assuming office over six months ago, this Government has been tirelessly talking about support to farmers; but action is lacking.

It is also believed that the crop figure of 213 lakh bales for 2004-05 is grossly over-estimated.

The Cotton Advisory Board (CAB) first announced the crop estimate sometime in September and in the last meeting held end-November reaffirmed the number, despite widely-spoken about trade reports that the crop size would be less than 200 lakh bales, possibly around 195 lakh bales.

There is possibly a need to review the methodology of crop estimation by CAB as also the composition of the board itself.

Needless to add, the crop estimation process has to be transparent and not guided by business interests.

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