Why Textile and Garments Industry have sought a ban on cotton exports

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Why Textile and Garments Industry have sought a ban on cotton exports

  • Spiraling prices of cotton, resulting in demands by the textile and garment industries to ban exports of the fiber.
  • This comes days after the government on May 13 banned wheat shipments in response to rising prices due to a heat wave induced production shortfall.

How much have cotton prices gone up?

  • They have nearly doubled compared to last year.
  • The average modal or most quoted price of kapas (raw unginned cotton) at Rajkot APMC (Agricultural Produce Market Committee) mandi was Rs 12,250 per quintal on Thursday, as against around Rs 6,300 this time last year.
  • This was also way above the government's minimum support price of Rs 6,025 per quintal for long-staple cotton varieties.
  • Prices have been rallying since November, when they crossed Rs 8,000 per quintal before scaling the Rs 10,000 mark for the first ever time in many markets by early-January.
  • The marketing season for cotton extends from October to September, with more than 90% of crop arrivals already taking place by May end.

Why have prices risen so much?

  • Basically three reasons:
  • The first is lower production
    • In 2020-21, India's total cotton lint fibre output was 353 lakh bales (lb) of 170 kg each.
    • For the current year, the Cotton Association of India (CAI), a Mumbai-based trade body, has estimated production at 323.63 lb.
    • This figure, released on May 14, is lower than its previous estimates of 335.13 lb (made on April 9), 343.13 lb (February 25), 348.13 lb (January 18) and 360.13 lb (October 30).
  • The second reason is international prices.
    • The Cotlook 'A' Index price- an average of representative quotes in the Far East destination markets - is currently ruling at 167 cents per pound, up from 92 cents a year ago.
    • India is the world's second largest cotton producer (after China) and third largest exporter (after the US and Brazil).
    • High global prices have made exports attractive.
    • Also, they have pushed up domestic prices closer to export parity levels, while simultaneously making imports more expensive.
  • The third reason is consumption.
    • The state-owned Cotton Corporation of India (CCI), in March, projected total domestic consumption for 2021-22 at 345 lb, compared to 334.87 lb, 269.19 lb and 311.21 lb in the preceding three marketing years.
    • Demand has significantly increased, as mills and other users were operating at suboptimal levels in the past few years. Even during the pandemic, demand for bedsheets and towels had zoomed, translating into higher consumption of cotton and yarn.

Why has production fallen so much?

  • The area sown under cotton in India has reduced from 134.77 lakh hectares (Ih) in 2019-20 to 132.85 lh in 2020-21 and 123.5 Ih in 2021-22.
  • This has been largely due to the diminishing benefits from the genetically-modified Bt cotton, which helped almost treble the country's production from 136 lb to 398 lb between 2002-03 and 2013-14.
  • Over a period, Bt cotton has become increasingly susceptible to pink bollworm and white fly insect pest attacks, making it riskier for farmers to grow the crop.
  • Besides, the government does not permit testing or commercialisation of next-generation transgenic breeding technologies.
  • This time, the crop was also affected by unseasonal rains in November-December, which affected yields as well as quality of the bolls from the second and third "flushes" (cotton is generally harvested over three or even four pickings, with the first one in October November and the subsequent ones every following 20-30 days).

How justified is the demand for a ban on exports?

  • India's cotton exports are actually projected at 40 lb this year, down from the 78 Ibof 2020-21.
  • At the same time, imports are likely to be higher, at 15 lb, from last year's 10 Ib.
  • Moreover, on April 13, the Centre Slashed the import duty on cotton from 11% to nil.
  • Given the anyway lower exports and duty free imports - which have for now been allowed until September 30, before the next marketing season-there may be no strong case for an outright ban on shipments.
  • Further, with domestic prices already rising to international parity levels, exports would slow down in the natural course,
  • An export ban would not impact farmers, as they have already sold their crop.
  • However, a ban can also send wrong signals ahead of the planting season which will take off next month with the arrival of the southwest monsoon rains.

Exams Takeaway

  • Cotton crop
  • Bt-cotton
  • Pink bull worm
  • White fly insect

Q. The benefits of Bt-cotton have been under challenge due to emerging new diseases. Suggest ways to improve cotton production in the country.