The Hindu Business Line : Banks can stitch cotton sector as a whole

Catching up: A file picture of Bt cotton being harvested at a farm near Salem in Tamil Nadu. Bt cotton accounts for 60 per cent of the total area under cotton currently.

G. Chandrashekhar

A success story that stands apart in the recent history of Indian agriculture relates to cotton, the dominant natural fibre. In six years between 2003 and 2008. Cotton output has expanded by over 70 per cent to breach the psychological 300-lakh-bales-mark, while yields have increased from a paltry 270 kg a hectare to over 450 kg/ha currently, making the country the world’s second largest producer after China.

Largest exporter

Importantly, from being an importer of 15-20 lakh bales of cotton, India today is a large exporter with shipment volumes reaching a record 80 lakh bales last year. Introduction of technology seeds – genetically modified cotton – Bt cotton – has surely played a significant role in this great turnaround of fortune that has benefited all stakeholders including growers, processors, exporters and textile mills.

Currently, over 60 per cent of the total area under cotton cultivation is planted to Bt cotton, proof that growers are ready to embrace technology that delivers real benefits. On the post-harvest activities, the Technology Mission on Cotton acquitted itself well by contributing to improved marketability of the farm produce on the one hand and helping modernise and upgrade the ginning and pressing factories on the other. There is now a perceptible improvement in the quality of cotton bales that come out of ginning and pressing units, which in turn has enhanced the comfort level of user industries, mainly cotton textile mills.

FUTURE

What does the future hold for this white gold? Rising incomes and demographic pressure continue to accelerate domestic cotton consumption. It is well known, India is under-clothed. Market for textiles and fabrics is expanding rapidly. If cotton output growth exceeded consumption growth in the last five years (resulting in export surplus), the next five years may find output growth slowing and demand growth racing ahead. This could lead to supply tightness. Domestic output should be encouraged to grow at not less than 5 per cent a year. This is possible through appropriate input management. Contract farming is one way forward. Cotton textile mills must establish backward linkages and improve management of the supply chain. The small capacity of the numerous ginning and pressing units across the country – mostly in clusters – denies scale economies.

ROLE OF TRADE

Trade has an important role to play in the marketing of cotton.

Standardisation of trade practices and effective arbitration / conciliation of trade disputes is necessary. Banks have an important role to play in strengthening the cotton sector as a whole and in each one of its distinct activities including cultivation, storage, processing, marketing, consumption and exports. India imports 6-8 lakh bales of extra-long staple premium cotton and exports indigenous cotton several times that quantity for which structured financing possibilities exist.