`Remove All Blocks To Cotton Trades'

"The cotton export and import should be freed under OGL without any restrictions and Indian cotton prices must be made reasonable to stand at par with the world prices" said Arun Sekhsaria, managing director of Dwarkadas Cotton Co Pvt Ltd in an interview with Devendra. Excerpts :

Business Standard: Could you explain why cotton production in the northern belt (Punjab, Haryana and Rajasthan) has come down to about 28 lakh bales from 50 lakh bales in just about four years.

Arun Sekhsaria: The cotton crop in the northern belt in the current season has been reduced from the highest figure of 50 lakh to about 28 lakh bales. The main reason for this is that the farmers are getting defective seeds and spurious pesticides for which the government has no effective quality control measures at the distribution levels. Also, this season the entire northern belt has been facing unfavourable weather with repeated rains. Cotton, being a very delicate crop, requires bright sunshine and hot weather after the sowing period.

 

With repeated rains the plants could not receive enough heat, on the contrary the rains washed away the pesticides sprayed, resulting in heavy onslaught by insects that took a toll both in quality and quantity.

There was also the problem of water levels in many areas, particularly in Punjab, which rose to alarming levels damaging the crop.

BS: In Punjab the water-level in the soil is said to come up gradually which is supposed to be ideal for the rice crop. Farmers are switching over to rice as well as other foodgrain crop. In the light of this how do you see the future of the cotton crop in this state?

AS: Yes, water levels are coming up in some of the major cotton growing centres in Punjab like Mukatsar, Malout, Fazilka, Abohar etc., which is very much unfavourable to the cotton crop and ideal for rice and paddy, although the government has woken up to this problem, no sincere efforts are being put in so far. This problem has to be tackled on a war footing.

The above areas account for nearly about 75 per cent of the total crop of Punjab. In 96-97 the total crop in the above areas was about 10.50 lakh bales as against only about four lakh bales in the current season i.e., a drop of about 60 per cent. Unless quick steps are taken, farmers will be reluctant to sow cotton./

BS: What are the measures needed to increase cotton yield which is considered low in comparison to world production ?

AS: Having one of the highest acreage of cotton in the world, we are still suffering from one of the lowest cotton yield. In Pakistan, the total acreage of cotton area is about the same as our northern belt.

The total crop grown in Pakistan is from a low of 85 lakh to a record high achieved in 1992-93 of 130 lakh bales. We can also improve our yield considerably if the following measures are taken:

Firstly the government must make serious and sincere efforts for distribution of certified quality seeds and pesticides to the farmers in time and at reasonable prices.

Thereafter, strict checking must be made and stern action taken against the offenders. Secondly, there should be sufficient supply of water and electricity wherever canal water is not available.

Thirdly, the number of cotton varieties grown should be reduced, since otherwise seeds of different cotton varieties get mixed up which is considered harmful to the next cotton crop.

Fourthly, serious steps should be taken to promote hybrid farming which has proved higher yields the world over.

Lastly, and most importantly, crop insurance should be undertaken. All over the world the above facility is available to the farmers in insuring the crop, thus helping to avoid heavy losses.

BS: Do you foresee the necessity of futures trading in cotton ?

AS: Yes, it is necessary to allow futures trading in cotton. It can be used as a hedging tool by the buyers and sellers. In order to have smooth trading in futures the govt must allow all recognised and leading cotton associations to carry on futures trading after setting strict and uniform bye-laws.

Futures should not be allowed at one or two centres only. If futures is introduced then the prevailing wild price fluctuations can be avoided which will be to the benefit of the farmers and all parties concerned.

BS: What do you think of the existing exim policy vis-_-vis raw cotton?

AS: The existing exim policy for raw cotton is defective, it can be redeemed with the following measures:

nBefore the start of the season the government must announce the exim policy valid for atleast a period of five years. Consistency and uniformity in policy is a must, only then buyers and sellers all over the world will be confident in dealing with India.

nCotton export and import should be made free under OGL sans restrictions and Indian cotton prices should at par with that abroad. At present, on account of political pressures the government allots export quotas to various semi government bodies of various states, most of whom have little or no exposure in or outside India for doing business. Most of these bodies do not have ginning factories and buy full pressed cotton from private merchants which does not benefit the farmers either.

Similarly, most of them have no direct contact with overseas buyers and are fully dependant for selling through merchants in India. With the result no buyer or seller would like to deal with the above bodies in ordinary circumstances. As a result no useful purpose is served by making any reservations of export quotas for such government bodies. Therefore, all parties must be freely allowed to export or import cotton without any restrictions.

BS: What do you feel would bring about price stability in cotton market?

AS: At first I feel futures trading must be allowed; thereafter as stated earlier, a long term consistent and uniform exim policy must be announced valid for minimum 5 years; buffer stock for atleast 10 to 15 lakh bales of cotton is a must be kept at all times to check the unwanted rise or fall in the prices.

The government agencies should be allowed to operate only to provide price support for farmers. At present these agencies are buying and selling cotton just like any other private trader incurring huge losses due to inefficiency, corruption and very little experience.

So the govt must instruct these agencies to buy cotton only if the prices go below a certain level and unload the cotton only if prices go beyond a certain level. They should not be allowed to change purchase or sale prices as is being done now.