GUJARAT FIRMS ON COTTON FARMING
Cotton is still playing a pre-dominant role in Indian Textile Industry. It is also an important cash crop, contributing around 30% to the gross domestic product of Indian Agriculture. Cotton share in total use by the Indian textile industry is forecast to increase to 58% in 2005-06 as against 55.5% used during 2004-05. This is mainly because of comfortable cotton production and supply situation vis-à-vis MMF (Man Made Fibre) in the recent past.
Industry, with phasing out of quota regime, has given a boost on cotton requirement in India, Pakistan and Bangladesh in the recent past. As estimated, domestic use will surpass previous records in India (15.8 million bales), Pakistan (10.8 million) and Bangladesh (1.8 million bales).
As per KSA Technopak, India is emerging as the fastest growing textile market. In the year 2004, India has achieved an 8 per cent rate of growth in textiles and clothing sales when all the major markets – the UK, France, Italy, Germany, Switzerland and Japan – shrunk. India, along with China and Pakistan is going to get maximum opportunity from its own internal market over the next 10-15 years.
Bangladesh imports almost all of its cotton needs whereas; India and Pakistan import a small portion of their requirement, mainly Extra Long Staple Fibre.
Today, India is the 3rd largest cotton producer in the country wherein State of Gujarat, alone, shares over 30% of cotton production in the country. The state’s production which was about 45 lakh bales in 2003-04, jumped to 70 lakh bales from 19-lakh hectare land in 2004-05. This has made a jump of 500 kg/hectare yield as against national average of 400 kg/hectare.
Recent phenomenon development of Cotton production in the country and ,in specific, for Gujarat was found mainly due to plantation of GM Crop (Bt Cotton). India planted (15% cotton cultivated area) 550,000 hectare (1.36 million acre) of Bt. Cotton last year (2003-04) up around 460% from a year earlier. Here too, Gujarat’s share has been 50% of the total area under Bt-cotton cultivation in the country.
Gujarat, in fact, has recorded a four-fold increase in cotton productivity over the last 5 years. The cotton yield per hectare has increased to 54.384 bales in 2004-05 from 11.614 bales in 2000-01. The area under cultivation has also increased from 16.15 lakh hectares to 19.94 lakh hectares during the same period. Gujarat again has taken leads for taking the advantage of Technology Mission on Cotton to improve both the productivity and quality. Under the scheme, state has modernized 161 Ginning & Pressing units as against 245units modernized in the country by March 2004.
India could possibly surpass the cotton production of US to become 2nd largest cotton producers in the world in the near future. This favorable situation enables the country to cope up with growing cotton need by subcontinent in this quota free regime. With export subsidy likely to further improve, the Indian Cotton price is expected to be more competitive and countries like Korea, Taiwan and Indonesia are expected to look forward to import cotton from India..
In an important and recent development, Government of Gujarat has taken a policy decision to introduce Contract Farming (GR No. APM-5103-GOI-1-G, 30.03.2005) and Corporate Farming in Wasteland (GR-Land/3903/453/A, 17.05.2005). Both these initiative are expected to give a boost for cotton cultivation still further.
In contract farming, a contract sponsor, that is any person who wishes to buy agriculture produce or future produce directly from farmers, may conclude an agreement in the model format given in GR. This agreement shall be called a Tripartite Agreement, as there will be three parties viz Farmer, Contract Sponsor and Agricultural Produce Marketing Committee in Gujarat. The APMC concerned shall play the role of a facilitator for both the farmers and the contract sponsor. Contract agreement shall be registered with Gujarat State Agriculture Marketing Board, Gandhinagar.
Under the Corporate Farming, big Industrial Houses and competent farmers will be given government wasteland on lease for cultivation with the help of modern technology and Urban Solid Waste as fertilizer. Many of the industrial houses with textile background have already shown interest to do so, in specific, for cultivation of cotton.
All these initiatives will make Gujarat a most prominent cotton producing state with competitive price and quality.
Interestingly, even with this remarkable growth potential for cotton, hardly 7% of cotton produced in Gujarat is used for further processing and value addition. Reasons for a little development of Cotton Ring Spinning are of many folds.
Historically, Ahmedabad was known for Composite Textile Mills. Independent Spinning Mills were concentrated mainly in South and in specific, in Coimbatore. Over the years, in the restructuring process, Gujarat Textile finds only fabric processing and to some extent, weaving, competitive. Except export oriented segment, nobody in cotton spinning could do well mainly due to comparatively higher sales Tax on Cotton yarn initially( now, with uniform sales Tax structure proposed due to VAT) higher power cost, (cotton spinning, being the one of the most power intensive segment). With a rough calculation, just one paisa reduction in unit power cost can save over Rs. 1 lakh per annum for a medium size-spinning mill (25000 spindles with 40s average count).
In case of Captive Power generation, majority of spinning units depend on High Speed Diesel (HSD) wherein power cost comes around Rs. 6.00 per Kwh. However, Cost of power generation with Heavy Fuel Oil (HFO) is as low as Rs. 3.00 per Kwh. But due to huge investment (Rs. 7-8 crore per 2 MW Plant) involvement for HFO power plant, it could be set up only by spinning EOU or high profit units.
But overall industrial scenario of Gujarat has been changed for the last few years dramatically due to availability of Natural Gas, which is expected to reach almost every corner of the state within a few years to come. With this abundant available gas, Captive Power Generation cost may be brought to below Rs. 2.50/Kwh. With the prevailing Industrial Policy, new unit is again exempted to pay Cess of Rs. 0.40/Kwh on Captive Power Generation for 5 years.
This situation has created interest to many investors to come in Gujarat with new Textile Project (including Cotton Spinning) along with Captive Power Generation Plant. In the similar line Gujarat should also encourage the existing Textile Mills too to go for Gas based Captive Power generation to become more completive and to generate a cleaner environment. Finally, Gujarat is emerging as strong Textile base with its competitiveness from cotton fibre to finished Made-up and Garments |