The Confederation of IndianTextile Industry (CITI) has recommended the Finance and Commerce Ministry toimplement a ban on the cotton exports from India, stating that cotton exportsto China would affect the Indian textile industry. India is the second largest producerof cotton in the world, overtaking US and standing next to China. Ban on the export of cotton will cause a decline in the price of cotton thusaffecting the farmers. A tale of woe in the Indian cotton history is the chainsuicides by the Vidharbha cotton farmers.

 

Vidharbha Cotton Farming-Thedeath trap:

 

Vidharbha lies in the easternregion of the State of Maharashtra crowned by its own cultural and historicalheritage that distinguishes it from the rest of the state. Indian mythologygives utmost importance and describes this region as a hoary place. It isfamous for oranges and cotton. On the contrary, it is infected by poverty andis not economically strong compared to other regions in Maharashtra. Vidharbhais in the medias spotlight currently, because of the string of suicides by the cottonfarmers of this region. Farmers, who lead a hand to mouth existence here, areaffected by the falling prices in cotton, and non-payment of dues by theapathetic State Government who procured cotton from them. 1,044 suicides werereported in 2006. The measures taken by the Government such as relief packagesto help the cotton farmers only proved unsuccessful. A report by an NGO hasrevealed an alarming fact that the loan burden of these farmers will double in2008.

 

The statement that cotton exportwill not affect the Indian textiles can be justified on the following grounds:

 

v    Cotton production in India has increased during the recent years.But, the quantity of cotton exports has not increased proportionately. Study ofthe demand and supply of cotton indicates that there is a surplus amount of cottoneven after maintaining buffer stock. Hence there would be a surplus of cottonin stock even after the exports. The argument that textile mills in India will be affected by the cotton exports is baseless. Moreover excess quantity ofcotton in the country will result in a crash in its price.

 

v    The domestic cotton prices in India are much lower than China comparatively. The cotton price in India during Nov 07 was Rs.61.81, Internationalprice was Rs.69.68, and China was Rs.82.59. So competitive Chinese mills do notget cheaper raw materials. So textile mills in India will not suffer.

 

v    Moreover, cotton imports in China has a very high import duty of40 percent whereas in India, cotton imports are liberalized under OGL (OpenGeneral License) where cotton can be imported at any time without any dutypayment. The cotton price in Pakistan and Bangladesh also remains the same as in China. Lower cotton price in India enables the country to remain competitivein the world market.

 

Raw cotton exports have performedwell during 2007. Indian cotton is getting into worldwide limelight benefitingthe farmers who gain price support due to the exports. If the export of cottonis banned by the Government, it will substantially cause a drastic decline inthe price of cotton, as the domestic textile industry will not pay a price ashigh as the foreign market. Without exports the Indian cotton prices willcollapse and ultimately farmers will have to face the price fall.

 

This unprecedented crisisstalking the country has created an urgency for the Government to takeimmediate actions. Otherwise it might create an adverse consequence of thecotton farmers shifting to some other product.

 

Reference:

1) http://sify.com/

2) http://www.bharattextile.com

3) www.thehindubusinessline.com

 

 

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