Long Yarn, the story of Indian cotton and farmer suicides
By Sourav Mishra
Dedicated to the memory of thousands of farmers who perished due to trade, economic and genetic policies related to cotton.
The cotton story is
a tangled tale. In many parts of India, farmers are committing
suicide. It's been a while Andhra Pradesh, Punjab and now Vidarbha in
Maharashtra. What goes into the vicious cycle is indebtedness,
brought on by a combination of international trade cycles, state
policies on subsidies and tariffs and the trade-off between the
interest of cultivators and manufacturers of the products that make
cotton a commercial crop.
Caught in the spinning wheel, principally, are three of the usual suspects: the US, India and China. The biggest problem is that Uncle Sam gives big subsidies to its cotton farmers, a problem that has been haunting the World Trade Organization (WTO) for a while. So India is importing cheap raw cotton, especially the extra-long staple (ELS) needed for the high-end textile trade. With the death of anti-dumping regulations, India expects a substantial increase in its textile trade and the textile lobby is powerful -- witness the recent proposal, approved by cabinet, to amend labour laws to help the industry deal with industrial ups and downs.
Indian subsidies are low restricted to the southward-bound minimum support price (MSP) for a small amount of total output, based on quality. Privatisation in procurement has made cotton farmers more vulnerable. But for textile magnates, importing cheap US cotton still remains a more worthwhile option. So, who cashes in? Private traders. And how? The strange thing is that while India is now importing raw cotton, it's also exporting -- through a private procurement and export regime -- mainly to Bangladesh and China. The profits are going to big trading houses, which is why farmers are committing suicide and not traders.
Stranger still is the fact that India is exporting cotton to its main rival in the global retail textile market. China imposes huge duties on Indian, and other, raw cotton to protect its farmers, which India does not. But it has overcome that extra cost to become the most competitive player in the global market because it has better technology.
Sourav Mishra unravels the enigma of the cotton story.