UPA’s lizzy-bizzy enterprise

The textile minister has created a predatory market situation wherein mills can now get their raw material at a price much lower than the MSP

Litmus tests, though simple, prove a lot in chemistry laboratories. If we were to have a simple but definitive test of the performance of the Congress-led UPA government at the Centre,

the recent unilateral decision to ban export of cotton and then a conditional rollback 120 hours later will suffice. It indicates failure and mismanagement at different levels.
The test results are grave and stunning, especially because they are a testimony to the fact that lessons are never learnt.
The 2012 no-cotton-export episode is a repeat of last year’s decision that, according to estimates, resulted in a loss of Rs 14,000 crore for Gujarat’s cotton farmers alone. There are reports of unsettled disputes still under arbitration with overseas buyers whose purchase orders could not be honoured. Many traders settled their disputes bearing 50 per cent of the loss incurred due to the sudden and immediate ban orders.
Cotton is not just any other crop in India. We are the second-largest producer, second-largest consumer and second-largest exporter of cotton in the world, after China. One in every four hectares cultivating cotton in the world is in India.
In India, annually, around nine million hectares are under cotton cultivation. Over four million farmers in 13 states are engaged in cotton cultivation. In 2009, 38 per cent of the country’s exports came from cotton, fetching the exchequer over Rs 80,000 crore.
The ministries of agriculture, textiles and commerce have interest and responsibilities in matters relating to cotton. The Cotton Corporation of India (CCI), formed in 1970, takes care of marketing and providing remunerative prices to cotton farmers through the now infamous Minimum Support Price (MSP). There is also a Cotton Advisory Board. Both the board and the corporation are under the textiles ministry. The Technology Mission on Cotton, which works through four mini missions, falls partly under the ministry of textiles. The remaining parts of the Technology Mission and the Directorate of Cotton Development are under the ministry of agriculture. The primary responsibility of the directorate needs no elaboration.
With so many important bodies focussing on cotton, just one amongst them — the Directorate General of Foreign Trade (DGFT) under the commerce ministry — issued a sudden and immediate ban on the export of cotton. Union agriculture minister Sharad Pawar said that he had no clue that such a decision was in the making. This modus operandi follows a pattern. Last year, the legitimate but contentious order allowing 51 per cent foreign direct investment in multi-brand retail came as a bolt from the blue, or rather, from the very same commerce ministry. Trinamul Congress’ Mamata Banerjee, an important ally in the UPA, had no clue then.
The minister for commerce, industry and textiles, Anand Sharma, justified the cotton export ban on the grounds that the textile mills were holding their lowest stocks in a last decade. To ensure sufficient raw material availability, based on the government’s own assessment, our textile mills and yarn manufacturers are allowed to hold a minimum stock of 52 lakh bales, or a stock of minimum two-and-a-half month consumption of cotton. On March 5, the day when the ban was imposed, they had only 27 lakh bales. The minister did not look for reasons for such a grave situation — mills probably are cash strapped, they may not be running to full capacity, mills’ physical holding capacity may not have increased over the years, et cetera. Instead, he hit at the farmer who had found newer shores to sell and survive.
It is public knowledge that the CCI has not opened enough procurement centres for purchasing cotton. There are over 4,000 regulated markets for cotton procurement and they were clearly going slow. No sooner was the ban announced than the price of cotton went down crashing, even below the MSP of Rs 3,300 per quintal. This from one decision of the UPA which waxes eloquent on inclusive growth and threw a one-time loan waivers at farmers!
The picture is clear. The textile minister has created, perhaps inadvertently, a predatory market situation wherein mills can now buy their raw material at a price that’s less than the MSP. Writing to the Prime Minister, Gujarat chief minister Narendra Modi said, “Last year when the ban was introduced, China released their stocks of cotton into international market at higher prices leading to a windfall profit. Actually, this benefit should have gone to the Indian farmer.”
The farmer took a beating then, and would have taken a beating again, despite the fact that they have reached world average output levels of 650-750 kg lint per hectare. In Gujarat, thanks to the government’s extensive and comprehensive support, the cotton variety “Shanker” is now of “international export standards”, with just about four per cent moisture level.
A decade ago incidents of farmer suicide were largely among cotton growers. To ensure that this resurgence in the cotton crop reaches even the marginal farmer, the government has a role to play. They should also ensure sustainability for the farmer rather than just helping only the mill owners.
Yet, though the Gujarat Congress Committee realised the damage the export ban could do in an election year, their pleas fell on deaf ears. Dr Singh, it seems, did direct yet another Group of Ministers to urgently review the decision. The meeting was promptly held but it ended inconclusively. All very much like the UPA, may I say, and its paralysis!
Policies must have a comprehensive blueprint. They have to be executed in a calibrated way. It is the duty of the government to ensure the credibility of Indian decision-making. Be it the arm’s-length approach in the 2G spectrum allocation where the 122 licences were cancelled by the Supreme Court or the flip-flop in our export policy, it is India’s credibility which is being damaged constantly.

The writer is spokesperson of the Bharatiya Janata Party. The views expressed in this column are her own.

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