PUNJAB (INDIA) FARMERS WILL NOT BENEFIT FULLY FROM HIGH COTTON PRICES IN 2021–22
Cotton arrivals have started in Punjab Mandis (markets) and the prices range from Rs 6,200 to 6,700 against the Minimum Support Price of Rs 5,726 per quintal. Although a dip in prices can not be ruled out, the probability of it happening this year is low. The reason is deficient rainfall resulting in about 9% reduction in cotton area in the country by July end; and this reduction may have increased to 12% by August end. Low rainfall in August in cotton growing states not only hampered late sowing but also adversely impacted the already sown rainfed crop.
Cotton is a low water requiring crop, and is grown in the South-Western districts of water-stressed Punjab adjoining Haryana and Rajasthan. Due to poor quality of underground water in this belt, the main source of irrigation is canal water. Consequently, a comparable benefit of free power is not available in cotton farmers. Due to several reasons, including assured returns from paddy, the area under cotton has declined from 0.52 million hectare (mha) in 2011–12 to 0.25 mha in 2019–20. With new short duration and high yielding seeds, cotton represents a viable option for promoting water-resilient agriculture by shifting some area from rice to cotton if farmers can realise comparable returns. Cotton cultivation is also labour intensive, particularly cotton picking. Due to contraction of cotton area, the landless people in this belt migrate to Gujarat and Maharashtra in search of cotton picking work.
In order to encourage farmers to expand cotton area, Punjab needs a system which informs them about the likely prices they are likely to realise before planting time so that they can make an informed choice whether to grow rice or cotton. This was the objective of a sub-project on Establishment of Market Intelligence Cells under the World Bank supported National Agricultural Innovation Project (NAIP 2006–2014).
PAU MARKETING INTELLIGENCE CELL
Led by Tamil Nadu Agricultural University (TNAU) Coimbatore, a consortium. of about 20 Marketing Intelligence Cells (The Cells) was set up at the Agricultural Universities including Punjab Agricultural University (PAU) Ludhiana in 2009. The premise was that these cells by using historical data (production and demand) in conjunction with carryover inventories and modern analytics will forecast price bands for different crops if the production does not exceed a particular threshold. These analyses were to be completed before the planting time so that carefully targeted advisories are issued to target farmers in a state or region that if the total area under a particular crop is within the threshold, they can expect this price band at harvest time.
In the context of Punjab the focus crops were Basmati, cotton, maize and potato. Rice and wheat were kept out in view of their assured procurement at. MSP by the FCI. The complexity of price forecasting increased from maize, through potato and cotton, to Basmati as the largely intrastate trade (maize) was increasingly replaced by inter-state and international trade (Basmati) for these four major commodities. For obtaining latest trade and import-export data, and international prices, trade associations and other relevant entities (like Cotton Association of India, Rice Millers Association, APEDA, Export-Import Houses, etc.) were also roped in in conjunction with United States Department of Agriculture and Food and Agriculture Organization forecasts so as to make meaningful price predictions.
Although the concept of price forecasting was new, the learning curve of The Cell headed by Dr Jagroop Singh Sidhu was steep. They were proactively hand-holded by competent TNAU economists. After tackling teething start-up problems, they quickly ironed out the wrinkles by December 2010. By 2012 they had achieved about 80–90% accuracy in their predictive models. That is when The Cell started running into difficulties. And the problems were not due to complexity of the predictive models for Basmati, cotton or potato, but due to price forecasting for maize which was relatively simple and straightforward.
Total requirement of maize in Punjab for livestock feed, flour and other uses was constant at about 0.5 million tonnes for more than 4 decades till 2012. Due to productivity gain the area under maize had almost halved from about 0.25 mha during this period. Maize can not be stored for a long time due to rapid development of harmful aflatoxins in the usually moist seed. Although the yield of spring maize is higher than the traditional summer crop, it is a water guzzler. The planting window is also very narrow in February. Germination of the early sown crop is low. Delay of 2–3 weeks adversely impacts quality due to onset of rains at harvest time. The entire production is consumed within the state and the scope for exporting to other states is nil. [I plan to complete the maize story in another Post].
Consistent message from The Cell was that the price will crash if the area under maize increased from about 0.12 mha. [Accuracy of this forecast was re-confirmed when the price crashed to Rs 700–1000 against the MSP of Rs 1850 for the spring crop harvested in June 2021]. This was not consistent with the thinking of. maize breeder Vice-Chancellor (VC). Refusing to accept robust arguments of Dr J S Sidhu, the VC continued harping that he was wrong and the maize area can be expanded considerably. Fulfilling his commitments by orderly closure of the NAIP sub-project in 2014, and annoyed with arm twisting by the VC, Dr Sidhu refused to take the follow-on project funded by the Government of India (GoI). In this way The Cell, critical for providing useful inputs for crop diversification (including cotton), died prematurely.
Thanks to the efforts of Economics Head Dr Kamal Vatta, six year after closure, The Cell has been revived, and is in the process of being made fully operational. Glacial pace of fund release by the fiscally-constrained Government of Punjab (GoP) is delaying generation of meaningful data. The GoP, however, has done well to house The Cell at Kalkat Bhawan Mohali at arm’s length from future agrobiologist VCs guided by narrow disciplinary loyalties.
2021–22 COTTON STORY
While marketing intelligence work at PAU ceased in 2014, TNAU and other Centres continued this work (including on cotton) achieving up to 95% accuracy in some years. Even in the absence of robust analytical data, following indications pointed towards attractive prices for cotton in 2021–22.
Cotton industry meets its requirements from domestic production and imports. Due to Covid-induced shortage of container space, and choking of ports, shipping lanes and railway tracks, freight charges for the imported cotton have markedly escalated, and the deliveries have been delayed. The Government of India (GoI) also made cotton import expensive by imposing 10% import duty in the 2021–22 budget. US ban on products containing Xinjiang cotton due to human rights issues has raised import requirements of China spiking international prices. Of all the cotton producing states, Punjab cotton arrives first in the market. As per past trends, high prices at the end of last 2020–21 marketing season. also pointed towards high prices, at least in the beginning of the current season. Thus there were strong indications of a high price of cotton in the beginning of February 2021.
Cotton sowing starts in the last week of April. Thus Punjab had almost three months to make concerted efforts to significantly expand the cotton area. Funds should have been allocated on priority in the first week of February to repair the canal network on a war-footing to provide water for pre-sowing irrigation (Rauni) coupled with arranging additional seed and wide publicity in the cotton belt by advising the farmers to earn more by expanding the area. Alas this was not done!
I doubt anyone in the flat-footed agriculture research, extension and irrigation machinery of Punjab knew or bothered about the implications of Covid, US-China tensions and the budget for cotton prospects. This was despite the opportunity being flagged by Dr Sukhpal Singh (IIM Ahmedabad) in a Panel Discussion organized by Mr Navjot Singh Sidhu on 1st February 2021. One of the few sensible persons in the agriculture bureaucracy who could have sensed the opportunity and done something about it, Agriculture Commissioner Balwinder Sidhu, was busy firefighting in Delhi around that period, and probably missed the budget news. Consequently cotton area has only marginally increased to 0.32 mha. With concerted efforts another 0.3 mha could have possibly been shifted from the water guzzling paddy.
Early withdrawal of monsoons has further improved cotton prospects. The GoP immediately needs to ensure sufficient canal water availability for irrigating the standing crop.
HIGH MARKETING TAXES HURT COTTON FARMERS
At 8.5%, marketing taxes in Punjab are highest in the country. Unlike FCI which pays these taxes over and above the MSP, any private buyer takes into account his total costs while bidding for procurement of any commodity. Obviously he reduces the offer price by 8.5% while buying cotton in Punjab Mandis. In fact high Mandi taxes were one of the reasons for driving cotton ginning units out of Punjab. Discounting transportation costs, historically cotton prices in Punjab are 5–7% lower than Maharashtra, MP and Gujarat where Mandi fees are 2–3%. With a yield and price of 10 quintals and Rs 6,000 per quintal respectively, loss to a Punjab farmer due to high Mandi taxes is at least Rs 3,000 per acre.
PUNJAB FRITTERED AWAY EARLY MOVER ADVANTAGE
Another facet of cotton production is reducing costs and ensuring quality of pesticides (about 25% of the pesticides are spurious). Successful Integrated Pest Management (IPM) in cotton can lower costs but requires group action. Under another Bank supported National Agricultural Technology Project (NATP 1998–2005) an innovative approach to technology dissemination was piloted in seven states, including Punjab. The premise was to organise farmers into commodity groups and link them with input and output markets and multiple sources of production information through autonomous district level Agricultural Technology Management Agencies (ATMAs), with technical backstopping by a state level organization. The four ATMAs in Punjab, at best, were mediocre due to unwillingness of the Agriculture Department to appoint competent Project Directors. Even Bihar, Orissa and HP did much better than Punjab, forget about the best performer Maharashtra.
One success story of these innovations was state-of-the-art Punjab Agriculture Management and Extension Training Institute (PAMETI) almost single-handedly developed from scratch by the meticulous and straight-talking Dr S P S Brar. The commodity groups developed under NATP were envisaged to be federated at block and district levels for achieving economies of scale. Essentially these were the precursors of the present day Farmer Producer Organizations (FPOs). The FPOs in Maharashtra and several other states, inter alia, negotiate better terms for buying quality inputs and selling their produce; and plan group action for sequencing production, IPM, maintenance of field level irrigation channels, etc. Compare this with Punjab which is at the bottom of the heap, and was not even able to utilize the funds provided by the GoI and NABARD for this purpose. It does not have even 10 vibrant FPOs today. Again, this point was highlighted in the above mentioned Panel Discussion by Dr Sukhpal Singh and Sh. Puneet Singh Thind.Punjab is persisting with an obsolete, top down, target driven Training and Visit extension system which has outlived its utility.
The PAU, instead of going up the value chain by marrying technology dissemination with markets, has only tinkered at the margins, and merely increased the number of Kisan Melas straining the already overstretched and under-resourced faculty. Look at some of the vibrant FPOs across the border in Haryana. Had PAU effectively leveraged the expertise of committed and innovative extension leaders like Dr Brar, it would have emerged as a Centre of Excellence for forging vibrant and futuristic FPOs since PAMETI alone did not provide the scaling up opportunity. This did not happen because in the early 2000s the VC did not think it appropriate.
EPILOGUE
The profitability of cotton vis-a-vis rice in the cotton belt and adjoining areas has further improved due to acute shortage of power in July due to faulty power purchase agreements forcing rice farmers to incur extra diesel costs. If the cotton farmers make good money this year, they are likely to persist with it as they will be cushioned against losses in future. However, the GoI, the GOP and farmers need to watch against cartelization by traders and the cotton industry.
The unfolding cotton scenario in Punjab in February 2021 was somewhat similar to wheat in October 1967 when canals were the main source of irrigation. Following recommendation of PAU agronomist Dr Gubakhsh Singh Gill, Development Commissioner S S Grewal and Joint Director Agriculture G S Kalkat sat with Chief Engineer Irrigation to ration Bhakra Dam water for providing irrigation in (I) end October/early November, (II) early to mid-December, and (III) March, in this order of priority to maximise wheat production. The Irrigation Department not only provided water for sowing and at two critical stages of wheat growth, it was also a net revenue earner for the GoP. Such actions together with stitching of 2 kg cloth bags in Nabha Jail in 1966 for distributing imported seed of Mexican wheat to lakhs of farmers, and timely supply of urea to the village Cooperative Societies by Registrar Co-operative Societies M S Gill, advanced national food security by at least two years. What a decline the agile and nimble footed agriculture and irrigation machinery has undergone during the last 50 years!
In closing, we humans are egocentric creatures. We can’t help but see things from our own perspective. If the GoP continues with its policy of putting square pegs in round holes, farmers and agriculture will continue to suffer.
