The government?s inflation control armoury seems to have an inexhaustible supply of exports bans. Cotton is the latest target, a decision aided by textile producers? demand that the government add their raw material to the list of items banned for export. The industry, its profitability hit recently by an appreciating rupee, sees the rising prices of cotton as further impeding its viability. The price of cotton this year is Rs 28,500 per candy compared with Rs 21,000 per candy in the previous year. There is no doubt that the textile industry is under pressure on its margins but banning exports of cotton is not the right policy response.
The rising prices of cotton are finally bringing some income and well-being to previously deprived farmers in Maharashtra, Gujarat and Punjab. The introduction of better technology seeds, through Bt cotton, has helped the farmers enormously. Production has risen from 136 lakh bales (1 bale=170 kg) in 2002-03 to 315 lakh bales in 2007-08. At the same time, yield per hectare has also risen impressively?from 301.55 kg/hectare in 2002-03 to 560.44 kg/hectare in 2007-08. A further boost has come in the form of soaring exports, up from 0.84 lakh bales in 2002-03 to 85 lakh bales in 2007-08. Imports have fallen from 16 lakh bales to 6.5 lakh bales in the same period. Clearly, the cotton farming industry has done very well. This should help silence the critics of genetically modified Bt cotton as well. And it should make the government realise that a ban on exports will simply worsen the prospects of farmers while transferring the gains to the less needy textile producers. Surely, this is not something a government committed to the aam aadmi can do. There is, of course, the argument that many of the gains do not accrue to farmers but to middlemen. Still, that?s an argument which suggests action to bypass middlemen rather than ban exports. It also lends a suggestion to textile producers themselves. There is a credible case for textile producers to establish strong backward linkages with farmers and source their inputs directly from them reducing commissions of middlemen. Contract farming could be an idea for the future. Government policy should encourage that and leave cotton exports alone.
