There is general feeling that agricultural commodity exports translate into higher income for farmers. It may be true in some cases, but by and large I have always seen that the benefit actually accrues only to the exporters. They are often able to export more because of the price difference, taking advantage of the low domestic prices vis a vis the international prices.
Take the case of cotton. I think it is an excellent case study to know who earns from exports. I remember the Commission for Agricultural Costs and Prices (CACP) had several years back in one of its reports said that cotton growers were deliberately paid 20 per cent less so as to keep the textile industry globally competitive. This policy has continued thereafter. In other words, it is the cotton farmers who have actually been subsidising the textile industry all these years.
No wonder, nearly 70 per cent of the farmers who have committed suicide were cotton growers.
All these years, cotton farmers were paid low prices. Then suddenly, in 2008-09, the cotton year that just passed, the procurement price of cotton were raised substantially -- from Rs 2050 to Rs 3000 -- a quantum jump something not witnessed in the recent past. This 40 per cent increase in procurement price certainly did not find favour with the textile industry, and of course the exporters. There were demands for lowering the price, and also for more incentives to exporters who were finding it uneconomical to export cotton in view of the high domestic prices.
Lesson 1: Exporters need cotton at low prices. So obviously it is not the cotton growers who benefit if exports increase.
While farmers gained, and this is also reflected in the way the electorate has voted in the suicide-prone cotton belt of Vidharba, the industry wasn't happy. But now let us look at the production figures. In 2007-08, the area planted under cotton was 94.39 lakh hectares. In 2008-09, it remained almost same at 93.73 lakh hectares. You would generally not expect much variation in production given that the area had remained almost static. And also let us not forget, considering the claim that production was actually increasing because of Bt cotton, if it holds true, there is no reason why cotton production in 2008-09 shouldn't have kept pace with the recorded harvest a year earlier in 2007-08.
As per the Cotton Corporation of India (CCI), cotton production in 2007-08 was a record 315 lakh bales (each bale weighing 170 kgs). This was attributed to a massive coverage of the cotton area with Bt cotton varieties, which is believed to have translated into higher productivity. The CCI also acknowledges that the agro-climatic conditions in 2007-08 had remained favourable.
In 2008-09, production drastically fell to 290 lakh bales. This was of course blamed on adverse weather conditions during the crop season. Well, did you notice that when the production is high, the credit goes to Bt cotton varieties; and when production falls, it is invariably the inclement weather to be blamed. The fact remains that if the weather is fine, it doesn't matter whether you are cultivating Bt cotton or non-GM cotton. Production will remain high in both the cases.
In that case, why not give credit to the weather for higher production?
If higher production in 2007-08 is attributed to increased productivity from Bt cotton; shouldn't the fall in production in 2008-09 also be linked to the declining performance of Bt cotton? Why I am specifically tallking about Bt cotton is because despite the claims by the seed industry and the government, the fact is that Bt cotton does not increase productivity. It only reduces crop losses.
Lesson 2: It is the weather which is actually responsible for higher production, and similarly it is the weather which can reduce crop productivity and thereby lower total production.
Coming to exports. This is where you see an interesting trend. In 2007-08, India exported 85 lakh bales. This year, the expectations have nose dived. Although the expectation is that India should be able to export 50 lakh bales this year, Cotton Association of India (CAI) estimates that by August 2009, the actual exports may touch only 40 lakh bales.The textile industry blames the high domestic cotton prices for the decline in exports, and estimates that the final figure may not even touch 30 lakh bales. The office of Textile Commissioner has figures upto July 2009, and it shows that so far permission for only 28 lakh bales exists including 16 lakh bales to be exported to Bangladesh, Pakistan, China and Indonesia.
Whatever be the final figures, exports have come down heavily from 85 lakh bales in 2007-08 to 50 lakh bales (if we accept the estimates drawn for the year) in 2008-09. While the industry may crib and cry, the fact remains that farmers are a happy lot. They never had it so good. And this was primarily because of a higher procurement price and not because of the high exports undertaken in the past.
Lesson 3: Exports do not benefit farmers. If cotton exports had benefitted farmers, there is no reason for the suicides to be so high. And secondly, farmers would have demanded an export-oriented marketing system rather than high procurement prices.