Cotton in India

Since time immemorial India has been the producer of cotton and the finest and
most beautiful cotton fabrics. India thus enjoys the distinction of being the earliest
country in the world to domesticate cotton and utilize its fiber for manufacture of fabrics.
This affinity has endured through the centuries and today India ranks first in cotton
cultivated area and second in production among all cotton producing countries in the
world next to China.

Cotton is one of the principal crops of the country. It plays a vital role in the
country’s economy providing substantial employment and making significant
contributions to export earnings. The ratio of the use of cotton to man-made fiber and
made-made continuous filament yarn is 60: 40 for Indian textile industry (based on the
financial year 2005-06). It engages around 6 million farmers while another about 40 to
50 million people depends on activities relating to cotton cultivation, cotton trade and its
processing for their livelihood. It is the principal raw material for the domestic textile
industry.

India has brought about a quantitative and qualitative transformation in the

production of cotton since her independence. Production and productivity of cotton in
India have improved significantly during the past six decades. It increased from 2.79
millions of 170kgs each in 1947 to an estimated 310 millions of 170 kgs each in 2008-09.

Major Phases of development in India

The development of cotton cultivation falls into five distinct phases characterized
by expansion of area under cultivation, by intensive cultivation with introduction of high
yielding varieties, by steady increase in both area and productivity, by stagnation in area
under cultivation, decline in productivity, and production and irrigation coverage at 1996-
97 levels and finally by resurgence of the cotton sector from 2003 04 onwards. At the
time of independence, mostly short and medium staple cotton were produced in the
country and there were no long and and extra long staple cotton during 1947-48; the same
now constitute more than 40% of the production. Today India produces the widest range
of cotton capable of spinning for 6s to 120s counts of yarn. The import of cotton
particularly of Egyptian and Sudanese long and extra long staple cotton which was a
regular phenomenon till 1978-79, now taken place for extra long staple varieties (ELS)
and for orders in which yarn importers specify the growth to be use. Not only has that
India also emerged as a net exporter of cotton in the mid-1990s and now again from
2005-06.
Quality of Indian Cotton

Apart from the giant strides in production and productivity, Indian cotton has also
undergone a qualitative transformation since independence. Development of improved
varieties and hybrids in the different staple length groups, introduction of improved
production and plant protection technologies, their dissemination by extension
functionaries and adoption of farmers are responsible for bringing about the distinct
change in cotton scenario to its present stage. Government policies such as giving greater
thrust to research and development in cotton, encouraging use of quality seeds and
pesticides and price support measures have also contributed in no small measure to
changing the cotton scenario. These are highlighted below:

• Dedicated efforts in the field of research and technology generation, transfer of

technology and development, improvement of Marketing Infrastructure in Market
Yards and Modernization /Up- gradation of Ginning and Pressing Factories
undertaken by all the four Mini Missions of the Technology Mission on Cotton
(TMC) launched in February, 2000 have helped in the aim of addressing issues
relating to the increase in overall quantity and quality of cotton.

• Sustained awareness programmes by NGOs like Cotton Association of India’s

COTAAP Research foundation, CITI – CDRA etc. to adopt Best Management
Practices in modern agronomic methods and crop management techniques

• Phenomenal spread of Hybrid and Bt cottons

• Adoption of scientific and agronomic practices by farmers.

• Distribution of quality inputs, village adoption programmes, support to R & D

efforts

• Commercial cultivation of Bt. Cotton from 2002 resulting in higher yields and
higher economic benefits to farmers.

• Grater application of IPM technology and effective check on pest and disease
infestation

• Increase in area under irrigation seed.

India still has a long way to go to catch up with the world average yield. In terms
of area under cotton cultivation, India accounts for 25% of the global area of
around 33.4 million hectares. However, in terms of production, India accounts for
20% of world production. This is primarily because of lower productivity of
around 560 kgs per hectare as against global average of 788 kgs per hectare in
2007. This underscores the need for accelerating our efforts for rapid
improvement in productivity.

Export /Import

At present both cotton exports and imports are under Open General
License (OGL). With a view to boost cotton exports from the country, duty draw
back incentive of 1% was in vogue. However from 8th July, 2008 the
Government of India has withdrawn the duty draw back incentive on cotton
exports. Similarly till 8th July, 2008 an import duty of 10% was in vogue.
However, from 8th July, 2008 the Government of India has removed import duty
of 10% along with special countervailing duty on imports of cotton

Cotton Corporation of India Ltd., (CCI)

The role assigned to the CCI under the Textile Policy of June 1985 was:

1. To under take price support operations whenever the market prices

of kapas touch the support prices announced by the government of
India without any quantitative limit
2. To undertake commercial operations only at CCI ‘s own risk; and
3. To purchase cotton to fulfill export quotas given to CCI

• The above role of the CCI continued under the New Textile Policy
of 2000. However, the last stated function is no longer relevant as
export of cotton is now free and he Government is releasing no
quotas. Nevertheless CCI purchases cotton even now to under take
export of cotton.

• Besides the above role CCI has also been designated as the nodal
agency for implementation of Mini Missions III and IV of the
Technology Mission on Cotton for improvement and
Development of Market Yards and Modernization of Ginning and
Pressing factories and thereby improving the quality of cotton by
reducing contamination of cotton and ensuring better prices to the
growers
 TECHNOLOGY MISSION ON COTTON

With a view to improve the quality of cotton, increase per hectare productivity,
increase the income of cotton growers by reducing the cost of cultivation, to improve the
processing facilities, etc. the Government of India had launched Technology Mission on Cotton
(TMC) in February 2000 with four Mini Missions for achieving the above objectives.

MINISTRY OF AGRICULTURE
→ Mini Mission-I (MM I): Cotton Research and Technology generation
→ Mini Mission-II (MM II): Transfer of Technology and Development

MINISTRY OF TEXTILES
→ Mini Mission-III (MM III): Improvement of Marketing Infrastructure in market yards

→ Mini Mission-IV (MM IV): Modernization/upgradation of G & P factories

Initially the Scheme was meant for five years but later on it was extended up March,
2009
.

Targets for Mini Missions III and IV

The target set for MM III is the development and improvement of 250 Market Yards by
the end of 31.3.2009 which has since been accomplished.

The target set for Mini Mission IV was the Modernization / upgradation of 1000 Ginning
and Pressing factories by the end of 31.3.2009 which have also since been accomplished

Benefits of MM-III and IV

• Quality of processing of cotton under modernized factories have improved

considerably, both in terms of cleanliness, grade and trash.

• Level of contamination has come down and the cotton processed in such
modernized factories is mostly free from contaminants.

• Indian cotton has become fully acceptable to the domestic mills as well as
international buyers of cotton.

• Domestic mills are in a position to get quality cotton matching

international standards enabling them to compete globally for their finished
products.
• Farmers are indirectly benefited as it results in better price realization due
to higher sale prices for traders.

• Better infrastructural facilities are available to farmers at market yards for

disposal of their produce where there is better transparency in handling of
his produce.

• Commercial release of Bt seeds

• Indian cotton farmers have started growing biotech cotton only a few
years ago. Area under Bt has been rapidly increasing due to increased
yields and less production risks.

• Area under Bt cultivation during 2008-09 has increased by around 7% at

68.18 lakh hectares as against 63.34 lakh hectares during 2007-08. The
same is around 73% of the total acreage of 93.73-lakh hectare under cotton
cultivation during 2008-09.

• The major States where Bt cultivation is taken up in a big way includes

Gujarat, Maharashtra, Andhra Pradesh, Madhya Pradesh, Punjab and
Haryana.

• Integrated Cotton cultivation

• With a view to improve the quality of cotton through transfer of technology

and improved farm practices, the Government of India has been
propagating Contract Farming project, which has backward linkages with
cotton farmers and forward linkages with the ultimate consumers.

• CCI has been undertaking contract farming since 2002-03. During 2008-
09, the Corporation has taken up contract farming in all major cotton
growing States in around 44,617 hectares in association of 14,306 cotton
farmers as against 40,383 hectares with around 16,103 cotton farmers.

• Due to various efforts by the Ministry of Agriculture and the change in the
mindset of the cotton farmers in adopting latest technology, there has been
substantial increase in the yield per hectare in the recent years.

• The yield per hectare, which was 302 kgs per hectare in 2002-03 has
increased significantly over the years and reached 526 kgs per hectare in
2008-09 thereby showing an increase of about 74%.

Progress of Mini Missions III and IV

250 Projects have been sanctioned under MM III out of which 176 have
reported completion ;
 1000 Units have been modernized/ upgraded under Mini Mission IV out of
which 855 have reported competion

Budgetary Provision /Release of funds

Funds released during the 9th, 10th and 11th five year plans are as under :-

During 9th five year plan Rs. 55.00 crores

During 10th five year plan Rs. 165 crores
During 11th five year plan Rs. 100 crores (the total outlay of the plan up
31.3.2009 is Rs. 241 crores which includes
NER)

Dues pending are under process in consultation/ approval with the IFW
 Price Support Mechanism

Cotton is primarily marketed mostly in the form of kapas (seed cotton) in India,
unlike in leading cotton-growing countries where the seed cotton is processed and then
marketed as processed bales. The three marketing agencies involved in cotton trade are
(i) private sector comprising traders, owners of ginneries operating as individual
business proprietors, partnership firms and private limited companies (ii) public
sector agencies like the Cotton Corporation of India (CCI) and (iii) Co-operative
Sector.

The CCI a PSU under the Ministry of Textiles is the sole Public sector
organization involved in procurement and trading of cotton. It was established in 1970
primarily to conduct the price stabilization functions through the Minimum Support Price
(MSP) operations of government of India and to ensure reasonable prices to cotton
growers in the country. Till 1984-85, the CCI conducted only MSP operations. From
1985-86 onwards its MSP functions got reduced considerably on account of favorable
market prices of cotton. During the decade followed by 1984-85, CCI conducted
significant MSP operations only twice. It started procuring cotton on commercial terms
by paying premium over and above the MSP. CCI was also declared as one of the
canalizing agency for export of cotton and it exported most of the cotton from India.

Every year before the commencement of the Cotton Season (Oct to Sept), the
Ministry of Agriculture based on the recommendations of Advisory Board viz.,
Commission for Agricultural Costs and Prices (CACP) fixes the MSP with a view to
give incentives to the cotton farmers of the country.

Accordingly, taking into consideration of the recommendation of CACP the

Ministry of Agriculture had fixed MSP for two basic varieties of cotton viz. Medium
Staple length cotton having 2.5. % span length of 24.5 mm to 25 mm with micornnaire
value of 4.3 to 5.1 and long staple length cotton having 2.5% span length of 29.5 to 30.5
mm with micronnaire of 3.5 to 4.3 of new crop of seed cotton (kapas) of Fair Average
Quality (FAQ) for cotton season 2008-09. The support price for medium staple length
cotton has been fixed at Rs. 2500/- per quintal and for long staple at Rs. 3000/- per
quintal. Based on the support Price of these two basic varieties of kapas seed, the MSP
for other classes is fixed by the Textile Commissioner.

. The prices of cotton started dipping from October, 2008; ostensibly on account
of global economic recession and financial meltdown. Looking into the cotton situation,
the government of India made cotton imports duty free and also removed the incentive of
duty drawback of 1% on cotton exports from the country. Subsequently for the cotton
year 2008-09, the Government of India fixed MSP for Long Staple and Medium Staple
varieties of cotton at Rs. 3000/- per quintal and Rs. 2500 per quintal leading to a hike of
48% and 39% over the last year. MSPs for other varieties were also announced by the
Office of the Textile Commissioner based on normal market price differentials and
technical parameters. As a result Government nominated agencies namely the Cotton
Corporation of India and NAFED have to procure Kapas from the farmers at the extant
MSP. The Cabinet in its meeting held on 5th February approved for the provision of
additional Rs. 500 crores by way of RE in financial year 2008-09 to meet the anticipated
losses and also for the direction to CCI to dispose of cotton procured by MSP rate by
offering discounts for bulk purchases. Another Note has been placed before the Cabinet
for providing the balance requirement of Rs. 1473 crores to meet the losses incurred
during the cotton season 2008-09.

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