Market Reforms and the dynamics Market Reforms and the dynamics of cotton trading in India: of cotton trading in India: A comparative assessment of smallholder cotton A comparative assessment of smallholder cotton producers in Gujarat and Maharashtra producers in Gujarat and Maharashtra P.K. P.K. Viswanathan Viswanathan N. Lalitha N. Lalitha GIDR, GIDR, Ahmedabad Ahmedabad
Market Reforms and the dynamics of cotton trading in India: A comparative assessment of smallholder cotton producers in Gujarat and Maharashtra. P.K. Viswanathan N. Lalitha GIDR, Ahmedabad. Outline of presentation. Backdrop Why this study? Research concerns Objectives Approach. - PowerPoint PPT Presentation
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Market Reforms and the Market Reforms and the dynamics of cotton trading in dynamics of cotton trading in
India:India: A comparative assessment of smallholder cotton producers in A comparative assessment of smallholder cotton producers in
Gujarat and MaharashtraGujarat and Maharashtra
P.K. Viswanathan P.K. Viswanathan
N. LalithaN. Lalitha
GIDR, AhmedabadGIDR, Ahmedabad
Outline of presentation
BackdropBackdropWhy this study?Why this study?Research concernsResearch concernsObjectivesObjectivesApproachApproach
““It is not a good time to be a farmer in Vidarbha and it is It is not a good time to be a farmer in Vidarbha and it is almost suicidal to be a cotton grower”almost suicidal to be a cotton grower” (A farmer leader)
I. BackdropI. Backdrop
Cotton, an important cash crop, though is grown in Cotton, an important cash crop, though is grown in about 100 countries, six countries, viz., US, China, about 100 countries, six countries, viz., US, China, India, Pakistan, Brazil & Uzbekistan share 73% of India, Pakistan, Brazil & Uzbekistan share 73% of world cotton area (35 million ha) and 80% of global world cotton area (35 million ha) and 80% of global cotton output (43 million MT) during 2005 (FAO)cotton output (43 million MT) during 2005 (FAO)
Notable differences across these countries w.r.t the Notable differences across these countries w.r.t the basic crop/ commodity performance indicators, viz.: basic crop/ commodity performance indicators, viz.: area, production, productivity, trade, etc for reasons area, production, productivity, trade, etc for reasons well documentedwell documented
How the majors perform?How the majors perform?
Cotton: performance of global majors
Country Country Area (% of Area (% of million ha)million ha)
Production (% of Production (% of
million MT)million MT)Productivity (Kg/ha)Productivity (Kg/ha)
India, despite having the highest proportion of cotton area (25%), India, despite having the highest proportion of cotton area (25%), occupies only the third position in cotton production (12-15%), occupies only the third position in cotton production (12-15%), and the lowest in terms of productivity and the lowest in terms of productivity
The decade 1995-2005 witnessed tremendous transformation in The decade 1995-2005 witnessed tremendous transformation in the production front as evident from the rise in productivity: 486 the production front as evident from the rise in productivity: 486 kg/ha (1995) to 749 kg/ha (2005)-the impact of technological kg/ha (1995) to 749 kg/ha (2005)-the impact of technological breakthrough brought about by the hybrid cotton cultivars, breakthrough brought about by the hybrid cotton cultivars, followed by Bt technology, especially since 2002followed by Bt technology, especially since 2002
Four major states accounted for 74% of cotton area (of 88.17 lakh Four major states accounted for 74% of cotton area (of 88.17 lakh ha) and 73 % of cotton production (of 41225 lakh MT) during 2005- ha) and 73 % of cotton production (of 41225 lakh MT) during 2005- Gujarat (24,33%), Maharashtra (33, 19%), Andhra (11,12%) & Gujarat (24,33%), Maharashtra (33, 19%), Andhra (11,12%) & Punjab (7, 9%), respectively Punjab (7, 9%), respectively
Area, production, yield of cotton in India-2005Area, production, yield of cotton in India-2005
StateState Area (% of lakh Area (% of lakh ha)ha)
Production (% of Production (% of lakh MT)lakh MT)
All India (ha/MT)All India (ha/MT) 88.1788.17 4122541225 467467
4 states4 states 74%74% 73%73%
Sharp contrasts in performance: Maharashtra, though has the Sharp contrasts in performance: Maharashtra, though has the highest share in area, lags behind Gujarat in terms of highest share in area, lags behind Gujarat in terms of production, productivity being the lowest of all states- much production, productivity being the lowest of all states- much lower than the national averagelower than the national average
Low productivity of cotton has always been a serious concern Low productivity of cotton has always been a serious concern in India in India vis a visvis a vis its counterparts its counterparts
Since the commercial release of Bt varieties in 2002, there has Since the commercial release of Bt varieties in 2002, there has been significant rise in area under Bt cotton, especially in been significant rise in area under Bt cotton, especially in Gujarat, Maharashtra, Andhra and the Punjab, though the Gujarat, Maharashtra, Andhra and the Punjab, though the exact scale and the magnitude of expansion are yet to be exact scale and the magnitude of expansion are yet to be assessed (roughly 4 million ha)assessed (roughly 4 million ha)
Bt ‘cotton faddism’ and the small farmerBt ‘cotton faddism’ and the small farmer However, serious doubts are raised against the Bt technology, as much of However, serious doubts are raised against the Bt technology, as much of
its professed outcomes: higher yield, tolerance to pests/ plant diseases, its professed outcomes: higher yield, tolerance to pests/ plant diseases, etc are proven to be unrealistic and far from reality…etc are proven to be unrealistic and far from reality…
““That the ‘yield dividends’ arising from the Bt technology are realisable That the ‘yield dividends’ arising from the Bt technology are realisable only under an input intensive farm management regime” becomes the only under an input intensive farm management regime” becomes the harsh reality as evident from the emerging trends… harsh reality as evident from the emerging trends…
The reported higher yields do not get translated in terms of higher net The reported higher yields do not get translated in terms of higher net returns at the farm level, due mostly to:returns at the farm level, due mostly to:
a) stagnating prices and the imperfections in the primary market;a) stagnating prices and the imperfections in the primary market;
b) higher dosage of chemical inputs and pesticides that are b) higher dosage of chemical inputs and pesticides that are
required for realising the ‘optimum yield levels’ as claimed by required for realising the ‘optimum yield levels’ as claimed by
the innumerable seed companies (approved/ unapproved/ the innumerable seed companies (approved/ unapproved/
spurious) operating at the farm levelspurious) operating at the farm level
Input costs of Bt technology is Input costs of Bt technology is very highvery high
Bt-cotton seed cost is 2-3 times Bt-cotton seed cost is 2-3 times higherhigher
New insecticides are 5-6 times New insecticides are 5-6 times more costliermore costlier
Spurious seeds & inputsSpurious seeds & inputs
Ploughing/weeding/picking/Ploughing/weeding/picking/labour/spraying/transport costs labour/spraying/transport costs increased 2-3 timesincreased 2-3 times
And…cotton market price was And…cotton market price was stagnant for 10 yearsstagnant for 10 years
Stagnating prices may adversely affect cotton cultivationStagnating prices may adversely affect cotton cultivation Farm level realisation is still lower due to the differential gradingFarm level realisation is still lower due to the differential grading
Despite all, there is a definite trend towards adoption of Bt cotton Despite all, there is a definite trend towards adoption of Bt cotton all over (irrespective of the outcomes: positive/ negative) as all over (irrespective of the outcomes: positive/ negative) as emerge from the growing empirical evidences, particularly in emerge from the growing empirical evidences, particularly in Maharashtra, Gujarat, Andhra and PunjabMaharashtra, Gujarat, Andhra and Punjab
There is a clear vacuum of understanding as regards the emergent There is a clear vacuum of understanding as regards the emergent market dynamics in the wake of the diffusion of Bt technologymarket dynamics in the wake of the diffusion of Bt technology
Whether the dynamism as seen in the input markets has its Whether the dynamism as seen in the input markets has its repercussions on the output market?repercussions on the output market?
Whether the output realised from the Bt varieties have a definite Whether the output realised from the Bt varieties have a definite stake in the market in terms of high quality output and bargaining stake in the market in terms of high quality output and bargaining of better prices? of better prices?
No serious research has gone into understanding this dynamicsNo serious research has gone into understanding this dynamics
II. Why this study?II. Why this study?
Trade reforms has resulted in significant restructuring of the Trade reforms has resulted in significant restructuring of the domestic markets through which the various players try to domestic markets through which the various players try to bargain their stakes and keep it intact, adversely affecting bargain their stakes and keep it intact, adversely affecting the farm level prices the farm level prices
Imperfections in the output market have detrimental impacts Imperfections in the output market have detrimental impacts on the efficient performance of the trading systems on the efficient performance of the trading systems
The existing marketing interventions have become ineffective The existing marketing interventions have become ineffective and less transparent in ensuring higher returns to the and less transparent in ensuring higher returns to the farmers and thereby not compensating for the high risks farmers and thereby not compensating for the high risks involved in the Bt cottoninvolved in the Bt cotton
III. Research concernsIII. Research concerns
India is an exception in the global cotton scenario as cotton production India is an exception in the global cotton scenario as cotton production in rest of the dominant producing countries has been highly supported in rest of the dominant producing countries has been highly supported through direct and indirect subsidies, like income payments, input through direct and indirect subsidies, like income payments, input subsidies and export subsidiessubsidies and export subsidies
This creates distortions in global trade in cotton and countries like India This creates distortions in global trade in cotton and countries like India would be the worst affected in the long term would be the worst affected in the long term
Imports under the OGL scheme has been on the increase in recent timesImports under the OGL scheme has been on the increase in recent times
Input-output markets are interlinked and the farmers are indebted to Input-output markets are interlinked and the farmers are indebted to intermediaries and money lender-cum traders who eats away much of intermediaries and money lender-cum traders who eats away much of the farmer incomesthe farmer incomes
Nexus between the co-operative marketing institutions and the private Nexus between the co-operative marketing institutions and the private traders are strong enough to depress prices augmenting the farm crisistraders are strong enough to depress prices augmenting the farm crisis
IV. ObjectivesIV. Objectives Dynamics of the primary, secondary and the terminal cotton Dynamics of the primary, secondary and the terminal cotton
market and their linkages in the context of trade reformsmarket and their linkages in the context of trade reforms Role of the government support prices, domestic trade prices as Role of the government support prices, domestic trade prices as
well as the influence of the international cotton prices on the well as the influence of the international cotton prices on the domestic market and pricesdomestic market and prices
Trends in the spot and future prices of cotton in the past and Trends in the spot and future prices of cotton in the past and their influence on production and domestic market operationstheir influence on production and domestic market operations
The various reform measures introduced by the government to The various reform measures introduced by the government to organize cotton trading in terms of the institutional mechanisms organize cotton trading in terms of the institutional mechanisms and their performance and their performance
Diffusion of knowledge and training to the farmers to improve the Diffusion of knowledge and training to the farmers to improve the quality of their product to get remunerative prices and the quality of their product to get remunerative prices and the functioning and role of the marketsfunctioning and role of the markets
V. ApproachV. Approach Study will be undertaken in five districts each of Gujarat and Study will be undertaken in five districts each of Gujarat and
Maharashtra covering 200 farmers eachMaharashtra covering 200 farmers each
To reflect upon the marketing decisions of the cotton growers and To reflect upon the marketing decisions of the cotton growers and their perceptions as regards functioning of cotton markets and the their perceptions as regards functioning of cotton markets and the overall impacts of Bt technology on yield, prices, net returns and overall impacts of Bt technology on yield, prices, net returns and socio-economic, environmental and health aspectssocio-economic, environmental and health aspects
Analysis of the trends in spot and futures prices of cotton in Analysis of the trends in spot and futures prices of cotton in historic perspective in India historic perspective in India vsvs its counterparts its counterparts
Driving to policies for efficient and sustainable cotton production Driving to policies for efficient and sustainable cotton production systems in India in the new era systems in India in the new era