Cotton import duty cuts: The farms versus firms debate, Pg9

Key Highlights:

• The Indian government removed the 11% import duty on cotton, leading to protests from farmer unions but welcomed by the textile industry.
• Raw cotton imports in 2024-25 reached 5,25,158 tonnes, a 77% increase from the previous year, even with the import duty.
• The Cotton Corporation of India (CCI) procured 34% of the cotton production by June 2025, signaling supply-demand imbalances.
• Indian cotton productivity currently stands at 437 kg/hectare, significantly lower than the world average of 833 kg/hectare.

Detailed Insights:

• India's cotton exports surged after 2004-05 due to increased international demand and domestic supply, reducing the textile industry's import dependence.
• Declining price parity, where domestic cotton is costlier than global prices, is driving increased imports despite the previous import duty.
• High domestic costs are linked to falling production, declining acreage, stagnating productivity, rising cultivation costs, and a weak cotton-to-lint ratio.
• Provisional estimates for 2024-25 indicate an 8.7% decline in cotton acreage, with farmers shifting to other crops like paddy, soybean, and groundnut.
• Bt hybrids, covering over 95% of cotton acreage, face challenges due to pest resistance and ineffectiveness, requiring advanced seed technology.
• India's R&D spending in agriculture is low compared to other developing nations, hindering innovation and technology adoption in cotton production.
• Revitalizing farm-to-firm linkages through public investments in cotton research and development is crucial for improving both quantity and quality.

Key Concepts Involved:

• Minimum Support Price (MSP): The price at which the government purchases crops from farmers to protect them from price fluctuations.
• Price Parity: The concept of maintaining a balance between domestic and international prices to ensure competitiveness.
• Bt Cotton: Genetically modified cotton that produces its own insecticide to combat bollworm attacks.