Cotton imports led to farmers' suicides: Report

A spurt in cotton imports and the consequential decline in domestic prices in the wake of trade liberalisation has been held responsible for many cotton growers' suicides.

"Between 1990 and 2005, the import of cotton lint increased at a compound growth rate of over 75 per cent, growing in geometric multiples to domestic production," says a report released by Oxfam, an international voluntary organisation working for the protection of developing countries' interests.

As a result of these imports, the domestic prices of cotton witnessed a decline of more than 55 per cent between 1996 and 2003, when a spurt in suicides by cotton growers was seen in several states.

"Cotton has witnessed one of the worst phases wherein farmers have been significantly displaced due to the inflow of cheap imports into the domestic economy. All this, combined with the huge escalation in cost of inputs, results in cotton farmers being driven into indebtedness and taking drastic steps, many of them choosing to end their lives," the study concludes.

India liberalised cotton trade in 1991, allowing unrestricted imports by private traders at zero import duty. This had led to a surge in cheap imports and a major decline in domestic prices, squeezing the profits of local cotton growers.

The spate of farmer suicides as a result, forced the government to increase the import duty on cotton, first to 5 per cent in 2000 and subsequently to 30.6 per cent.

"This excessive surge in imports could not have been without subsidies, which wiped out the competitive advantage of many small and marginal farmers growing cotton in India," the report states.

Subsidies given to cotton increased in the European Union from $870 million in 1997-98 to $957 million in 2002-03. Similarly, cotton subsidies in the US surged sharply from $597 million in 1997-98 to $1996 million in 2002-03. The subsidy in the US in 2001-02 was as much as $3001 million, the report says.

On the global scale, subsidies on cotton averaged $5 billion. The extent of these subsidies amounted to nearly 13 per cent of the total value of the cotton produced in India. The US subsidy to cotton producers is in the form of direct assistance to farmers through marketing loan assistance and market loss assistance.

The report points out that a few countries that distort the market forces for their vested interests control agricultural global markets. In the OECD countries, the extent of financial support to farmers amounts to about $290 billion, which is 45 times the value of the total agricultural exports.

"Adverse impact of changes in the cotton sector since the 1990s are clearly seen in rural areas where the farmers are ill-equipped to meet the challenges of increased competition in a globalised world. This has been primarily attributed to the farming system being unprepared to anticipate such crisis and provide adequate safeguard measures," the report states.

Cotton is a major cash crop, with over one million farmers in the primary sector depending on it.

It is also responsible for direct employment in the textile industry that significantly contributes 14 per cent of the country's industrial production, 30 per cent of the export earnings and 4 per cent of the GDP.