Effect of global pandemic on procurement of cotton by cotton corporation of india (CCI) in maharashtra, india

To what extent has the procurement of cotton from the cotton farmers in Maharashtra, India by the Cotton Corporation of India (CCI) been impacted by the global pandemic of COVID-19 and subsequent lockdown?

Maharashtra is the largest cotton producing state in India, covering around 34% of area under cotton cultivation. Around 17% of production of cotton comes from Maharashtra amounting to 25 lakhs bales per year. Cotton is cultivated by around 4 million farmers in regions of Vidarbha, Marathwada and the northern parts of Maharashtra, thereby not only proving to be the chief livelihood of this massive region, but also being a chief supplier of cotton to the textile industry that accounts for 5% of the GDP of India, 14% of India’s industrial production and 11% of total export earnings. Around 41.2 lakh hectares of land in Maharashtra is under cotton cultivation, so at any point in time, procurement, MSP and profit of the farmers become very relevant in face of increasing demand for Indian textile in the international market as well as fulfilling domestic demand. If the farmers are in plight, they will switch over to cultivation of some other crop, leaving this important cash crop fall in supply, creating dearth of raw material for the huge textile industry. Thus, it was of ardent importance that I felt that the problems and policies related to this white gold fibre needs to be addressed with priority as rural well-being is an absolute necessity for overall urban and industrial welfare.

 

Induced by the latest news on cotton farmers and distress and dilemma of the farmers, I came across a research paper by the Technoserve (Business solutions to poverty) -the sustainable trade initiative, published in May, 2019, authored by Martin Reind, Punit Gupta, Sairam Subramaniam, Ravdeep Kaur and Deepa Rani embodied a huge potential and insight into the inherent problems and policies with regards to cotton cultivation in Maharashtra. This article appeared to be addressing the vicious cycle of poverty the cotton farmers are prone to get entangled in even before the onset of the pandemic. This naturally stirred in me, a sense of inquisition, as to what may be befalling the lakhs of farmers whose very livelihood is on cotton cultivation A recent article reinforced my desire to research on the matter. It was an article of Hindu Business Line, “Plight of cotton farmers still unresolved, which upheld cotton farmers and cultivation of the fibre as a symbol of colonial slavery, still undented by neo-colonial era delineating the saga of cultivating poverty. The global trade distortion in cotton fibre on account of decreasing global price of the fibre has augmented the sad story of the farmers all the more. Thus, a research on pandemic hit cultivation seemed very relevant as India is a country with immense export potential of the good, yet faulty policy measures and market failures at the helm of it.

Cotton, whose scientific name is Gossypium Malvaceae is the most ancient of fibres ever used by human beings. It is also known as white gold or the king of fibres and is traditionally produced by China, Pakistan, United States of America, Australia, Uzbekistan, Turkey, Brazil and of course, India. It contributes massively to both agriculture and industry and is the basis of substantial farm income, employment, and export earnings and hence has assumed immense global importance. The crop is cultivated to around 2.5% of global land under cultivation and the above mentioned countries produce three quarters of the total world production of cotton. At a global level, the area under cotton cultivation has been projected to increase by 9% and the crop production, by 6%. It is a multipurpose crop that has five important by-products: lint, oil, seed meal, hulls, linters. This has multiplied the popularity of cotton as a cash crop among the farming community as an important raw material for industrial production.

India had been an exporter of raw cotton from a very old time, which did receive substantial setback after the second world war and then again after the partition of India in 1947, wherein 40 percent of fertile irrigated land under cotton cultivation shifted to Pakistan in Sind and Punjab districts and 98 percent of the cotton mills remained back in India. The main produce of cotton in these lands were medium and long staple cotton. As a result it became impossible for India to meet domestic demand for cotton to feed its own industries, let alone export demand. The event of partition converted India’s status from a major producer of cotton to an importer of the same, overnight. The situation became absolutely dire for the survival of the domestic industry in the competitive world market. Thus, government had to adopt a series of policy measures to increase domestic production of cotton. This steps were also supposed to be decreasing the country’s import dependency. Increase in domestic production of cotton was done in two major ways:1. By adopting improved variety of seeds, hybrids, BT hybrids, improved technology of production, and 2. By increasing the farmland under cultivation of cotton. Thus, farmers, realizing the cash crop value of cotton brought more land under cotton cultivation with the objective of greater profitability. Government of India launched campaigns like, “Grow more cotton”, and “Cotton extension scheme”. In the drive to increase cotton production on a massive scale, Government of India set up research programs, schemes and institutes like, All India Coordinated Cotton Improvement Scheme, in 1967 and Intensive Cotton Development Program in 1970-71. All these efforts successfully increased cotton production in the country from 3.04 million tonnes to 35.9 million tonnes at the national level.

 

This increase in cotton production can be attributed to area expansion and yield improvement of cotton. Maharashtra is a leading state in production of cotton in India covering 36 percent of total area under cotton cultivation in the country and 22 percent of total production of cotton. This provides a solid ground to analyse cotton produce and procurement parameters on this state level.

From time to time Government of India declares Minimum Support Price on cotton to encourage farmers to produce the crop so as to domestically meet the rising industrial demand for raw cotton. This embodies the classic concept of price control in terms of price floor imposition by the government, which in turn will give boost to the production of cotton. If the farmers feel assured of the price and procurement of cotton so that there is no fear of losing out on profit margin, it provides impetus enough to switch over to the production of cotton even if the farmers had been producing some other crops. Thus the imposition of price floor and the subsequent impact can be analysed with the help of suitable diagram.

In figure 1, D and S represent the demand curves and the supply curves respectively. The equilibrium price per unit of cotton, is fixed at OPe. And the quantity to be available for sale in the market is OQe. As the government announces an Minimum Support Price at Pf, above the equilibrium price level, such that cotton cannot be sold below this price level, there is a creation of excess supply of cotton in the market. In state of Maharashtra, currently the minimum support price so declared by the government is at INR 5500 per quintals. Thus, all the farmers are ready with their produce waiting to be procured by Cotton Corporation of India and its Maharashtra subsidiary board, Maharashtra State Cotton Growers’ Marketing Federation Limited (MSCGMF). The imposition of price floor though may have the usual dead weight loss due to non-competitive price intervention by the government, yet will be greatly beneficial to the farmers as a whole. The lockdown following the pandemic however resulted in huge quantity of cotton being spared from procurement due to unavailability of personnel to do the same as procurement requires grading of cotton which is a highly skilful job and requires highly trained personnel for the same. Non-procurement of cotton thus resulted in excess cotton lying with the farmers which they are not being able to sell in the market.

 

The farmers are thus sitting on heaps of cotton produced by them whose procurement seems a far cry in the lockdown period following the pandemic. The greatest challenge that appeared in this process of procurement is the grading of cotton which requires enormous skill and patience. The skilled graders are supplied only by the ICAR-CIRCOT (Central Institute for Research and Training) through their highly skilled workforce but the lockdown has dismantled the gathering and working of these grading personnel as a result of which the entire process of procurement came to a standstill. Around 100 lakh quintals of cotton of around 40 lakh farmers are just lying unprocured till June to the detriment of the farmers who require the money for the next sowing Kharif season in the month of August to September. The CCI and MSCGMF have procured some amount of cotton though they have not been able to do so for the entire amount due to lack of trained personnel for cotton grading Thus, he massive amount of cotton that remained unprocured form the excess supply of cotton in the market with not procurement facility. The situation has become so dire for the farmers that they are left with neither money to purchase fertilizers or seeds for other crops nor the ability to trade off the excess cotton with them for correct price. Thus, the option left with the farmers is panic selling and of course distress selling of cotton. The farmers are thus ready to sell their cotton to the traders just at a throw away price so as to get something rather than nothing. Even farmers who have borrowed money for the agricultural input in the previous season is in fix of not being able to raise revenue through government’s procuring of cotton at the minimum support price so declared by them. Thus, there have been incidents of farmers selling cotton at price as low as INR 3100 per quintal wherein the input cost of only labour per quintal of production is INR 1400 and cotton is a labour intensive crop. This itself gives an idea the detrimentally low profit margin the cotton farmers are subject to on account of distress selling. This situation of selling away cotton to the traders obviously benefitted the traders enormously as they are supplying the same cotton as raw materials to the textile industries at the correct price, thereby making an exorbitant profit. Thus if the concept of Microeconomics is applied in this scenario, the excess supply of cotton, remaining unprocured with the farmers, actually shifts the supply curve of cotton to the right.

 

Let us understand the situation through figure 2.

D and S are the usual demand and supply curves in the market of raw cotton, respectively. The equilibrium of the market was struck at E, corresponding to which, the determined price is at OPe. The quantity of cotton that the farmers are ready to sell is OQe. The unprocured excess cotton is represented by the gap AB between the demand curve and the supply curve. In usual situation this amount is taken away by the Cotton Corporation of India, but due to lockdown, this amount remained unclaimed. Hence, the usual market mechanism of restoration of market equilibrium starts operating. As there is excess supply of cotton emerging in the market, the price which should have been OPf, no more stands relevant. The producers of cotton are thus ready to lower the price per quintal of their produce in order to clear the excess stock of cotton

 

and the price reverts back to OPe, or even lesser, (in case there is no trader ready to buy the cotton. The crux of the matter thus revolves around the fact that the farmers are in a difficult situation as the price of cotton is falling and the distress selling may not help the farmers even to cover the cost of production, doubled with the burden of imminent necessity of cash for the next sowing season. The fact has been all the more intensified by lack of cotton graders all of whose movement got restricted due to the pandemic induced lockdown in the state of Maharashtra, accounting for the maximum number of covid cases at any point in time.

The research will thus proceed with the data on area covered under cotton cultivation in Maharashtra for the last five years in order to emphasize the significance of the crop for the state’s rural economy. The total yield of cotton, the method of irrigation in different regions will also be highlighted so that it becomes obvious the cost of agricultural inputs involved in the process as some major cotton growing zones of Vidarbha is frequently hit by severe drought conditions. Data will also be collected on Minimum Support Price declared by 14 the government of India from time to time. A clearer idea needs to be displayed as to which countries import cotton from India and which countries India import cotton from. A time series data can also be displayed as to how much productivity increase has happened for this crop after the adoption of BT variety of seeds.

 

The secondary data source is chiefly the Cotton Corporation of India as this department under the agriculture ministry is responsible for the growth and improvement of cotton cultivation in India. Another very significant data source is MSCGMF responsible for collecting information on cotton farmers and cotton crop related data specific to the state of Maharashtra. Both of these are government organizations that are supposed to be providing unbiased data and the most accurate ones. Data with the Textile Ministry is another valuable source. Data from the Directorate General of Commercial Intelligence and Statistics, Kolkata are extremely dependable ones as these are all part of the Programme Implementation Department of the Government of India. Furnishing the research with these data itself will give a clear idea as to why the discussion is so relevant in the current scenario and estimate the extent of setback suffered by the rural economy dealing with fibre cash crops.

 

The plight of the farmers arising out of unprocured cotton can be best judged from primary data sources, the farmers themselves and officials of ICAR-CIRCOT and MSCGMF. The cotton farmers from Vidarbha, Nasik, Marathwada, have been selected as maximum number of districts in these regions have maximum number of them. Discussion on their inter-cropping methods will also be outlined as the season in between harvesting of one season and sowing of the next season requires the farmers to be self sufficient with their food grain requirement as well.

The following tables collected from different sources form a basis of the claim that is being endeavoured to be established through the research question.

 

Minimum Support Price of Fair Average Quality grade seeds as fixed by the Government of India, per quintal for 2019-20 is given as follows:

Thus, it is evident that the CCI is procuring cotton through prior declaration of a Minimum Support Price through 400 different cotton collection centres across India and the same method was also supposed to be followed in Maharashtra for the whole cotton sowed and harvested throughout the year 2020.

 

The validity of cotton growers become all the more relevant through the following table stating the area, percentage increase in production over the years and absolute production in lakh bales per year.

Source: Meeting of committee on cotton production and consumption (COCPC) held on 5.1.21 The data given here is a clear indicator of cotton growth and the problems facing the cotton farmers in Maharashtra, due to which over the years the growth is faltering with decrease in area under cultivation and absolute production.

The pie charts below shows the result of the survey done.

According to the primary data collected from the stakeholders, 50 % of the farmers produce more than 50 quintals of cotton and same proportion cultivate cotton in over 20 hectares of land. Most of the farmers are dependent on monsoon for irrigation, while most of them are trained with latest technique and production method. Most of the farmers do not get fair price for their produce as most of their produce are not directly procured by the government. Less than half of the farmers get have received the full procurement price though more than 30% of the farmers’ produce got fully procured. More than farmers are indebted and are ready to switch over to production of other crops. Around half of farmers’ produce has not been procured and are trying to secure their produce by bargaining through cooperatives. Only a meagre proportion of government officials are trained in grading technique and most of the traders are purchasing the BT variety of cotton.

 

The plight have been multiplied by the lockdown following the severity of covid outbreak in the state. Though around 40 lakhs of farmers are sitting with unprocured cotton, yet the Ministry of Textile has undertaken the initiative to carry out the work of procurement even during lockdown. 34 centres in Maharashtra have been procuring 36,500 quintals of kapas through Minimum Support Price, equivalent to 6900 bales. Around 77.4% of the cotton grown by the Maharashtra farmers have already reached the market and have been sold till 25th March 2020. Cotton Corporation of India (CCI) procured around 91.9 lakh quintals of kapas equivalent 18.66 lakh bales of cotton valuing INR 4995 crores from cotton farmers. The distress sale however continues as most of the farmers are debt-ridden and are not being able to wait for the support price to be cleared to them by the government. This had resulted in some areas, for the farmers to sell their produce even at INR 2700 per quintal. The farmers earlier had been forced to hoard cotton in their homes and the nearby APMC markets. The huge dependence of cotton farmers on the CCI and the MSCCF is due to the fact that the private players are severely missing in this field who themselves are financially hard hit due to the lockdown. Those operating, thus lowered the price as low as INR 3000 per quintal thereby creating detrimental situation for the farmers. However 24 procurement centres have been set up in Vidarbha and Marathwada, though the process is much affected by the restriction on mobility within a district or village. However in Yavatmal, pandemic coupled with absence of logistic support have made the future of cotton farmers of the region, highly uncertain.

 

Another problem arising in the field is the increased fiscal pressure on the government from whom the farmers are expecting procurement of their produce at the Minimum Support Price within a stipulated period, and the former, already burdened with transfer payments related to food security now finds it relatively difficult to do so.

Applying a statistical technique, there is a an obvious positive correlation between cotton growth and hectares of land invested in its production, a regression analysis can be conducted to confirm the relation. A regression is used to denote estimation or production of the average value of one variable. The estimation is done by means of suitable equations derived on the basis of available bivariate data. this expression is called regression equation.

 

y - y_av = b_yx(x - x_av)

 

where, y is production of cotton in a year

 

y_av is the average production of the same

 

b_yx is the regression coefficient of y on x

 

x is the land under cotton cultivation in a year

 

x_av is the average land under cotton cultivation

 

Nevertheless, Maharashtra is gearing up for the next season in face of acute man-power shortage as has been complained about by the Maharashtra State Cotton Growers’ Federation, and amidst the scenario of an expected production of 450 lakh quintals of cotton in 2020-21, with the area of 42.07 lakh hectares under the same. Each procurement centre will be provided by a grader in coordination with ginning pressing factor, and the Department of Agriculture, to provide required manpower. Cotton procurement will start from end of October and the beginning of November with Minimum Support Price being set at INR 5515 per quintal for medium staple kapas (raw unginned cotton) and INR 5825 per quintal for the long staple variety. Cotton price with private players have also increased from 4500-5100 per quintal from 3500-4000 per quintal, though remained below the MSP. According to Khandesh cotton ginners association, the low price of cotton can be attributed to lack of industrial demand for the same as production has been stalled by lockdown and fall in demand for textile induced by the pandemic.

In the above diagram, S1 represents the supply of cotton when Government procures most of it and S2 represents the supply of cotton when Government cannot procure most of it. The diagram above shows that excess supply of cotton brings down the price of cotton from OP* to OP1*.

To what extent has the procurement of cotton from the cotton farmers in Maharashtra, India by the Cotton Corporation of India (CCI) been impacted by the global pandemic of COVID-19 and subsequent lockdown?

 

A brief overview of the topic has revealed that cotton production in India is dependent on many internal and external factors. The internal factors relates to issues of monsoon failures, irrigation, logistic support with respect to procurement and disbursement of the minimum support price to the cotton growers. The industrial demand and number of private traders also play a dominant role in the scene. The external factors largely depend upon the demand in the international market which is again determined by the terms and policies adopted by cotton producing first world economies quite against the rule regime set by the World Trade Organization. The covid situation has completely disrupted the scenario of cotton procurement in Maharashtra, wherein unable to receive the MSP declared by the government, the growers are forced to hoard cotton and then ultimately resort to distress sale, at a price much lesser than the MSP to the great loss of the farmers concerned.

The data collected in this analysis clearly shows a trend of instability in growth of cotton production overtime, due to the already mentioned indigenous and exogenous factors. It is also seen that the cotton farmers are forced to sit on huge pile of hoarded cotton in face of the pandemic induced lockdown. But at the same time, several organizations are trying to combat the indigenous factors to bring about stability in cotton price and help the farmers get out of the uncertainty associated with their production process. Several measures have been adopted to develop skill of the farm practices like, implementation of high density planting system, inter cropping system to involve farmers in between the harvest and the next sowing season, introduction of instrument based quality evaluation system, integrated cultivation procedure, frontline demonstration measures, upgradation of ginning and pressing process and many more of the like9. Also, the textile ministry has also assured to practicing the MSP policy for the 22.6% of the kapas which had not yet been procured. The ministry said that about 40% to 50% of kapas of value around INR 2100 crore could be average quality grade and farmers will be availing the MSP only as the private traders are not willing to offer better price due to pandemic. The APMCs are regulating the procurement business and the government of India is constantly coordinating with the Maharashtra state government through teleconferencing to expedite and make the process more efficient and effective.

 

The primary data so collected may be over emphasized as the debt ridden farmers may have exaggerated their situation due to uncertainty lying ahead and the crisis of confidence they suffer on account of the delay in procurement of their produce through the Minimum Support Price. Also, the lack of industrial demand for the fibre can be a scenario created by the private traders deliberately, to dampen the price of cotton so as to earn a higher profit margin for themselves. The primary information provided by the government officials are likely to be marginally erroneous as they overestimate the effort put forward by them for grading and creating conducive logistic base for the procurement process. Moreover, the number of farmers are so huge and in the lockdown situation, data collection had been so limited that the broader picture of the event is often blurred. The regions of cotton growing Maharashtra is so vast that impending travels under mobility restriction, also hampers the viewing of the scenario from all perspectives.

 

Elucidating the entire situation, a very interesting dimension to the story has crossed my mind and accordingly, I would like to modify the research question: ‘To what extent has been the subsidy policy towards cotton farmers by developed nations have been detrimental to less developed cotton producing economies?’ This question can be dealt with special reference to the plight faced by the African countries whose economy is cotton based, and the failure of the World Trade Organization to implement the rule based regime meant to augment free international multilateral trade. The economics of cotton and political lobbyism by the growers proving to be a political compulsion for the governance of developed economies to continue with subsidies, thereby creating distortions in global trade. Nevertheless, India, though much affected by these external trade distortions due to low price of cotton in global market can vouch for increasing domestic demand for cotton in face of a developing textile industry.

2020 Organic Cotton Market Report (OCMR) Released - Textile Exchange. 10 Aug. 2020, https://textileexchange.org/2020-organic-cotton-market-report-ocmr-released- 2/.

Anand, Aditya. “We Are Helping Maharashtra Cotton Farmers, Says Centre.” The Hindu, 4 May 2020. www.thehindu.com, https://www.thehindu.com/news/national/other- states/govt-helping-cotton-farmers-state-textiles-ministry/article31499547.ece.

 

Das&, Sachin Kumar Sharma /. Abhijit. Plight of Cotton Farmers Still Unresolved. https://www.thehindubusinessline.com/opinion/columns/plight-of-cotton-farmers- still-unresolved/article29674288.ece. Accessed 28 Jan. 2022.

 

Has Production of Cotton in Maharashtra Shown Stable Growth Over the Years ? – Current Agriculture Research Journal. https://www.agriculturejournal.org/volume8number3/has-production-of-cotton- in-maharashtra-shown-stable-growth-over-the-years/. Accessed 28 Jan. 2022.

 

Improving Water Security in Maharashtra’s Cotton-Growing Villages. https://www.downtoearth.org.in/blog/agriculture/improving-water-security-in- maharashtra-s-cotton-growing-villages-73405. Accessed 28 Jan. 2022.

 

India-Africa Partnerships for Food Security and Capacity Building: South-South Cooperation, 2018, Mumbai, Veranstaltung, and Renu Modi Venkatachalam, Meera. India-Africa Partnerships for Food Security and Capacity Building: South- South Cooperation. 2021.

“Kharif Cotton Procurement Should Begin in November: Maharashtra Minister.” The Indian Express, 22 Sept. 2021, https://indianexpress.com/article/cities/mumbai/kharif-cotton-procurement- should-begin-in-november-maharashtra-minister-7528072/.

 

WTO | Agriculture - Cotton. https://www.wto.org/english/tratop_e/agric_e/cotton_e.htm. Accessed 28 Jan. 2022.

Question 1 - Name:

 

Question 2 -  Age:

 

Question 3 - Gender:

 

Question 4 -  Stakeholder in cotton farming in Maharashtra:

a) Farmer

b) Trader

c) Government official

 

Question 5 -  What is land area under your cotton cultivation or supervision:

a) Below 10 hectares

b) 10 to 20 hectares

c) Above 20 hectares

 

Question 6 - Means of land irrigation:

a) Monsoon

b) Channel irrigation

c) Tube well irrigation

 

Question 7 - How much cotton do you sell every year

a) Below 50 quintals

b) 50-100 quintals

c) Above 100 quintals

 

Question 8 - How often do you attend training sessions

a) Once a year

b) Twice a year

c) Not regular

 

Question 9 - How much are you acquainted with the grading technique of cotton

a) Trained

b) Slightly trained

c) Untrained

 

Question 10 - Do you get a fair price for cotton every season?

a) All the time

b) Sometimes

c) Never

 

Question 11 - What cotton type do you produce/procure/buy?

a) Long staple fibre

b) BT variety

c) Kapas

 

Question 12 - Has your cotton been procured during the lockdown at MSP?

a)The full amount

b) Most of the amount

c) Some of the amount

d) None of the amount

 

Question 13 - How much cotton is hoarded in your land/supervised area?

a) Below 100 quintals

b) 100 quintals to 500 quintals

c) Above 500 quintals

 

Question 14 - Are you ready to sell cotton to private traders?

a) Yes

b) No

c) Not decided yet

 

Question 15 - How much price are you ready to lower for your produce to sell them to private traders?

a) 50%

b) More than 50%

c) Not decided yet

 

Question 16 - How much of your agricultural input has been purchased on loan?

a) Entire amount

b) Half the amount

c) Quarter of the amount

 

Question 17 - Have you received the amount of procured crop from the government?

a) Entire amount

b) Half of the amount

c) Nothing yet

 

Question 18 - Would you agree to switch over to production of other crops amidst uncertainty caused by the lockdown?

a) Strongly agree

b) Agree to some extent

c) Not decided yet

 

Question 19 - How much price are you ready to pay to the farmers if their produce is not procured?(trader)

a) Half of the MSP

b) 25% of the MSP

c) Depends on industrial demand situation.

 

Question 20 - What effort are you making to fetch better price for your produce?

a) Nothing, due to mobility restriction

b) Trying to form cooperative to bargain for better price

c) Trying to reach industry buyers directly