Documents
Resources
Learning Center
Upload
Plans & pricing Sign in
Sign Out

SECTION I COTTON FIBRE

VIEWS: 6 PAGES: 86

									SECTION I: COTTON FIBRE
TABLE OF CONTENTS
SUMMARY – COTTON FIBRE .............................................................................................................. 24

1.1. INDIAN COTTON FIBRE SCENARIO ............................................................................................ 32

     COTTON CULTIVATION IN INDIA .................................................................................................. 32

     CONSUMPTION OF COTTON IN INDIA ......................................................................................... 38

     COTTON MARKETING IN INDIA: ................................................................................................... 40

     COTTON EXPORT & IMPORT ........................................................................................................ 44

     TREND IN INDIAN COTTON PRICES ............................................................................................ 47

1.2. COTTON TEXTILE VALUE CHAIN ................................................................................................ 51

1.3. POLICY INITIATIVES IN THE COTTON FIBRE AND TEXTILE SEGMENT ................................. 55

1.4. WORLD SCENARIO FOR COTTON FIBRE .................................................................................. 63

     WORLD COTTON DEMAND-SUPPLY DYNAMICS ....................................................................... 63

     A BRIEF REVIEW OF MAJOR COTTON PRODUCING COUNTRIES .......................................... 66

     STOCK-TO-USE RATIO ANALYSIS: .............................................................................................. 77

1.5. FUTURE PROJECTIONS FOR COTTON FIBRE .......................................................................... 79

     FUTURE OUTLOOK OF INDIA‘S COTTON PRODUCTION .......................................................... 79

     FUTURE OUTLOOK FOR COTTON CONSUMPTION IN INDIA.................................................... 81

     IMPLICATION: ................................................................................................................................. 82

     ESTIMATING THE INVESTMENT REQUIRED FOR STRENGTHENING THE TEXTILE VALUE
     CHAIN .............................................................................................................................................. 83

1.6. THE SUB-GROUP ON COTTON TO FORMULATE NATIONAL FIBRE POLICY ........................ 91

     OVERVIEW ...................................................................................................................................... 91

     KEY ISSUES IDENTIFIED BY THE SUB-GROUP .......................................................................... 91

     RECOMMENDATIONS OF THE SUB-GROUP: ............................................................................. 92

1.A. ANNEXURE .................................................................................................................................... 98

     CASE STUDIES SPECIFIC PRODUCTION TECHNOLOGY AND YIELD ENHANCEMENT
     PROGRAMMES RUN BY CITI-CDRA AND SIMA-CDRA ............................................................... 98

     COMPOSITION OF THE SUB-GROUP ON COTTON TO FORMULATE NATIONAL FIBRE
     POLICY .......................................................................................................................................... 106
      SUMMARY – COTTON FIBRE
 I.   The sub-group on Cotton, which was constituted under the National Fibre Policy, has enunciated
      policy recommendations for development of the fibre. Cotton is one of the most important and widely
      cultivated cash crops across the world. It is also one of the most important commercial crops
      cultivated in India. Cotton has around 59% share in the raw material consumption basket of the Indian
      textile industry. Thus, it plays a major role in sustaining the livelihood of an estimated 5.8 mn cotton
      farmers and about 40-50 mn people engaged in related activities such as cotton processing and
      trade. The world cotton yield increased from 613 kg/ha in 2000-01 (season beginning August 1) to
      797 kg/ha in 2007-08 (season beginning August 1). India has the largest cotton cultivated area that
      constitutes around 30% of the global cotton area. Domestic cotton production has increased
                                   1                             2
      substantially to 290.0 lakh bales in 2008-09 from 30.6 lakh bales in 1950-51. Cotton yield in India
      improved remarkably to around 524 kg/ha in 2008-09 from 278 kg lint/ha during 2000-01. However,
      cotton productivity is still lower in India when compared with the world average yield of 767 kg/ha.



      COTTON FIBRE SCENARIO: WORLD
                                                                                                                                         3
II.   World cotton production declined for the second consecutive year in 2008-09 by 10%. In 2007/08 ,
      the production levels had dropped by around 2%. In fact, the world cotton production at 23.5 mn
      tonnes during 2008-09 is the lowest since 2004-05. The reduction in world cotton area for the second
      consecutive season was one of the reasons for the fall in production; a significant area under cotton
      cultivation was shifted to grains and oilseed production because these earned more attractive prices
      than cotton. In the last few years world cotton harvested area declined at a sustained rate. According
      to the ICAC data, area under cotton cultivation shrank to 30.66 mn ha (estimated) in 2008-09 from
      32.84 million ha (estimated) in 2007-08. During 2008-09, cotton yield also registered a decline
      compared to the previous year primarily on account of unfavourable weather conditions across the
      world. After witnessing sustained improvement since 2000-01, the world cotton yield is forecasted to
      have moderated to 767 kg/ha in 2008-09 from a peak of 797 kg/ha in 2007-08. World cotton yield has
      increased by around 17.8% between 2003-04 and 2008-09 mainly due to extensive use of BT cotton
      varieties across the globe. Genetically modified (GM) seeds constituted around 48% of the total
      harvested area globally in 2008-09. During 2008-09, almost all the major cotton producing countries
      witnessed a decline (y-o-y) in cotton production, except Pakistan and Australia. China, India, USA,
      Pakistan, Brazil and Uzbekistan accounted for almost 85% of the world cotton production in 2008-09.


      1
          Indian bale is of 170 kg
      2
          Indian cotton year – October to September
      3
          2008-09 refers to Cotton year August 2008-July 2009 (year mentioned in this section refer to cotton year from August to July


                                                                                                                                    24
       Even world cotton imports and exports declined during 2008-09. Exports from major exporting
       countries such as the US, India and Uzbekistan fell and caused world exports to decline by almost
       25.36% in 2008-09. Imports from some of the major importing countries such as China, Turkey and
       Pakistan also declined.



       COTTON FIBRE SCENARIO: INDIA

III.   Cotton production in India has more than doubled in a span of 7 years. Cotton production reached a
       peak of 307.0 lakh bales during 2007-08 from 140.0 lakh bales in 2000-01 but it fell to 290.0 lakh
       bales in 2008-09. The gradual increase in cotton production over the years can largely be attributed to
       the phenomenal increase in the yield of cotton. The introduction of BT cotton seeds has played a
       catalytic role in enhancing cotton production in India. The consumption of cotton by the textile mills
       and small-scale spinning units has witnessed sustained increase since 2001-02, except in 2002-03
       when the total domestic consumption declined. Domestic consumption of cotton fibre increased at a
       CAGR of 7.0% rising from 168.8 lakh bales in 2002-03 to 236.9 lakh bales during 2007-08, and fell to
       229 lakh bales in 2008-09. Cotton consumption has witnessed a sustained increase since 2003-04
       onwards due to growing demand for Indian textiles and subsequently, there has been considerable
       expansion and modernisation of the textile mills. Even though the Indian cotton consumption has
       increased at a rapid pace in the last few years, it has not kept pace with the growth in domestic cotton
       production, which has led to a surplus of production since 2003-2004. As a result, India has emerged
       as one of the top exporters of raw cotton in the world. Currently, India is the second-largest exporter
       of cotton after the US. In order to boost cotton exports, the Indian government liberalised raw cotton
       exports since July 2001, doing away with the system of allocation of cotton export quota in favour of
       different agencies and traders. Over the years, India‘s cotton export has been growing at an
       impressive rate, except for FY05, when exports dipped. In FY08, India exported 88.5 lakh bales of
       cotton. India‘s exports during 2008-09 have been estimated to have declined to 35 lakh bales.



       FUTURE OUTLOOK OF INDIA’S COTTON PRODUCTION AND CONSUMPTION

IV.    Three different scenarios were examined to arrive at the future projection of the demand-supply
       scenario for cotton fibre. Cotton production largely depends on the area under cotton production and
       productivity. Considering the issues pertaining to food security and land pressures, the area under
       cotton production is assumed to be largely constant at the current level. Thus, the future production is
       expected to be driven by improvement in cotton yield. Yield is assumed to grow at alternate rates of
       4.0% and 4.7%. Additionally, the Directorate of Cotton Development, Mumbai, has also made
       projections for cotton fibre production. The estimates made by the directorate are closer to our
       estimate that is based on an assumption of 4.7% increase in yield per hectare till the terminal year,
       2020. The projections for consumption of cotton fibre have been arrived at through projections for


                                                                                                            25
       cotton fabric consumption and through use of conversion ratios. The final scenario for 2020 is
       encapsulated in the table below.


       Exhibit I: Yield growth assumed at 4.7% (in lakh bales)

           Year                   Production        Consumption            Surplus

           2019-20                          483                 413               70

       Source: D&B India



       MAJOR IMPLICATIONS

 V.    In the years to come, the robust increase in domestic consumption is likely to drive down the surplus
       in cotton. Therefore, it is essential that there is greater focus on enhancing domestic production of
       cotton significantly to cater to the expected increase in domestic demand.


       Focus on Enhancing Production:

VI.    Given that the area under cotton cultivation in some of the major cotton producing countries such as
       the US has declined in the last few years, India has an opportunity to emerge as a leading exporter of
       raw cotton. Moreover, cotton remains India‘s strength in the global T&C markets. In the coming years,
       this strength is expected to accelerate as the area and production of cotton has been declining in
       China and the US. Over the past few years, the textile processing base has been increasingly shifting
       to emerging countries. Thus, by increasing cotton production and strengthening the textile value chain
       India will be able to capture the rapidly-evolving growth opportunities in the cotton industry.


       Focus on higher investments in textile value chain

VII.   Given that the production of cotton fibre, as well as MMF fibre and filament yarn is expected to
       witness a substantial increase in the next 10 years, the installed capacity for value addition under the
       textile value chain also needs to witness substantial improvement to absorb the expected increase in
       fibre production. It is estimated that investments worth Rs 176,510 crore will be needed during FY10-
       FY20 for creating the required capacity along the textile value chain on the basis of estimate of the
                                      4
       increased fibre production . The underlying assumptions to arrive at investment estimates are based
       on CITI‘s Vision for Indian Textile and Clothing Industry 2007-2012, Report of working group on
       Textiles & Jute industry for the eleventh five year plan (Ministry of textile) and inputs from major
       industry stake-holders, who are members of the sub-group.



       4
        The D&B estimates for fibre consumption for cotton and MMF are an underlying assumption for these investment estimates.
       The consumption for cotton fibre in 2020 by domestic mills is assumed as 6885 mn kg and that for MMF fibre and filament is
       assumed as 6001 mn kg. The investment estimate therefore considers both MMF as well as cotton segments.


                                                                                                                             26
         Exhibit II: Investment requirement till 2020 (Rs cr)

         Spinning                                            63,525

         Weaving                                             38,485

         Knitting                                            12,499

         Processing                                          26,695

         Garmenting                                          35,305

         Grand total                                        176,510




        KEY ISSUES IDENTIFIED BY THE SUB-GROUP ON COTTON FIBRE

VIII.   The following key issues were identified by the members of the sub-group:

 IX.    Lack of irrigation facilities: Predominance of rain-fed area has been one of the major hindrances to
        cotton cultivation in India. Almost 65% of the area under cotton cultivation is rain-fed and only 35% of
        it is irrigated, thus, exposing the cotton productivity to the vagaries of monsoon.

  X.    Cotton contamination: Cotton is vulnerable to contamination at the harvesting, marketing and
        ginning stages, if proper care is not taken. The two kinds of contaminants predominantly found in
        cotton are fibrous and non-fibrous.

 XI.    Poor quality: It has been difficult to develop a globally-competitive cotton industry in India because of
        the average quality of cotton. In fact, the cotton sector and the large textile enterprises have been
        importing quality cotton to meet their growing demand for high-quality cotton products.

XII.    Lack of infrastructure: The transport infrastructure is poor in India and the cost of transporting cotton
        fibre from one state to another is substantial.

XIII.   Problem of admixtures: There are inconsistencies in the strength, length, micronaire, colour and
        reflectance of cotton as different varieties of cotton fibre with different physical properties are mixed
        together. Admixture also makes the grading and testing of cotton difficult. Quality-conscious mills,
        particularly the export-oriented ones, are compelled to engage themselves in expensive bale
        management exercises to maintain yarn quality.




                                                                                                              27
 XIV.    Absence of uniform standards: Another issue related to quality of cotton has been the absence of
         uniform quality standards across the country. While there are various agencies involved in the quality
         testing and grading of cotton across the country, they do not adhere to uniform standards.

  XV.    Need for an Indian arbitration for imported cotton: The Indian textile mills importing cotton have to
         encounter onerous problems because foreign buyers invariably stipulate arbitration by International
         Cotton Association (ICA), Liverpool, in the sale contracts. India has been a regular importer of cotton
         and imports will continue in future. Therefore, unless corrective action is taken in the right earnest,
         problems will compound in future.



         RECOMMENDATIONS OF THE SUB-GROUP ON COTTON

 XVI.    The following broad objectives for the National fibre policy have emerged from the sub-group‘s
         deliberations:

                The National Fibre Policy should be fibre-neutral.

                The fibre policy should accord priority to the cotton fibre value chain in the following order of
                 priority:

                     o       Farmers

                     o       Domestic mills

                     o       Other cotton consuming countries

                It should enhance production, sustainability and growth of cotton.

                It should target enhanced competitiveness of cotton fibre, as well as ensure most judicious
                 and efficient utilisation of the country‘s strength for sustainable development of all the sub
                 sectors of the cotton economy through backward and forward integration.

                The cotton economy must be strengthened and its vibrancy improved through an upgraded
                 and a reformed marketing system and through conscious branding of cotton for use.

                An institutional mechanism must be created that will monitor, coordinate and also create a
                 unified platform of all other interests in the lines of the National Cotton Council of the US.

XVII.    The recommendation made by the sub-group members can largely be divided under the following
         broad heads:

XVIII.   Recommendations for enhancing production: The major interest of the policy for cotton fibre
         should be to enhance production of cotton. Augmenting cotton production will not only help India to
         meet the growing domestic demand but also will help the nation explore export opportunities. The




                                                                                                                  28
following recommendations have been made by the members of the sub-group for augmenting cotton
production in India:

       The members suggested that an institutional framework could be created for development of
        cotton fibre. The institution thus established could provide funding and direction for research
        in a holistic manner.

       Improving irrigation facilities and water harnessing was considered imperative for enhancing
        production and lowering its dependence on monsoon. It is recommended that the area under
        irrigation could be increased to 60% from its present level of 38% at national level. Further,
        drip irrigation system could be adopted for better water management. Drip irrigation system
        could be adopted in at least of 30-40% of total cotton area.

       Initiatives should be taken to increase awareness among farmers for adoption of rain water
        harvesting, soil moisture conservation techniques, suitable agronomic practices in order to
        increase the utilisation of rain water.

       New farming practices could be developed to increase the cotton yield. Various programmes
        could be devised to increase awareness regarding rain water harvesting, soil moisture
        conservation techniques and suitable agronomic practices among the farmers.

       Precision farming was considered important for enhancing cotton productivity. Emphasis
        could be laid on spreading ‗precision farming‘ to improve yield per unit area for all areas.

       Measures could be taken to enhance production and supply of ‗green manure / FYM /
        compost / vermi-compost‘ in the country to maintain soil productivity at sustainable levels.
        Green manure / FYM / compost / vermi-compost production and supply has to be taken up at
        a large scale under organised sector so that it becomes available for all cotton growers. This
        is a must for maintaining soil productivity at a sustainable level.

       Improve extension activities and provide certification facilities with subsidised inputs to cotton
        farmers to sustain their income levels.

       In field extension, public-private sector partnership projects may be launched on ―large area‖
        basis, by ensuring technology inputs and marketing tie-up, so that diversion of cotton area to
        other competing crops can be minimised.

       National research thrust for the cotton production sector could continue. The focus of the
        national research on cotton could be laid on increasing the lint productivity through
        improvement in ginning outturn of varieties / hybrids to 40 – 42% as compared with 34 – 36%
        of current cultivars.

       On line pest monitoring system at block level and IPM network to advise the farmers should
        be strengthened. Integrated disease and pest management strategies could be implemented
        vigorously on cluster basis.



                                                                                                       29
               Availability of sufficient quantity of micronutrients as in case of NPK could be ensured.
                Fertiliser companies could give equal importance to micronutrient manufacturing and
                marketing.

               The system of transfer of knowledge to farmers through Farmers Field School (FFS) should
                be continued and it could be taken up in each Gram Panchayat of cotton growing area.
                Sufficient number of Cotton Masters Trainer needs to be generated through season long ToF
                training to ensure availability of 1 cotton master trainer at each block level.

               Lessons from micro examples of yield improvement and production enhancement
                programmes run by CAI, CITI, CDRA and SIMA in different states of the countries should be
                adopted for other regions.

XIX.    Recommendations for enhancing investment along the textile value chain: The interest
        compensation of 5% available under the Technology Upgradation Fund Scheme (TUFS) has helped
        incentivise investments in the T&C industry. TUFS has had a major role to play in the growth of the
        industry and has aided an increase in investments in recent years in the sector. Given the significant
        estimated investments required for the textile value chain, the Technology Upgradation Fund Scheme
        can continue so that the industry may avail of the benefits under it.

 XX.    Recommendations for improving quality of cotton fibre: The focus of the national research on
        cotton could be on optimising the components of fibre quality parameters to meet the end-use
        requirements of the spinning sector, which is producing yarn in a wide range of spinning counts.
        Overall kapas grading is absolutely necessary, and ought to be strengthened. To prevent
        contamination in cotton fibre, use of white polypropylene bags for packing fertilisers could be replaced
        by coloured polypropylene bags.

XXI.    Recommendations for improving infrastructure: There is a serious need to improve the logistics of
        cotton, which includes conduct of cotton and its upkeep in warehouses and at ports. The warehousing
        should be scientific and IT-enabled to develop into dematerialised trading and movement of
        goods. Pressed cotton also needs to be stationed and warehoused at accessible affordable places.
        Steps could be taken to improve logistics for transporting cotton, so that cotton fibre can be supplied
        from surplus to deficient areas in a clean manner.

XXII.   Recommendation pertaining to export of cotton fibre: A healthy stock-to-use ratio should be
        maintained to avoid any distortion in the cotton market. The trade policy for cotton could target
        exports of surplus cotton, and imports in slots where there may be a deficit in domestic production.
        There is no need for import duties, and any restriction on imports should be need-based only. Exports
        of cotton fibre should be monitored on a time-to-time basis in each cotton year to ensure stability in
        supply as well as prices to domestic mills.




                                                                                                             30
XXIII.   Recommendations for improving marketing and branding of cotton: Grading of Kapas is
         imperative for improving the marketing and branding of Kapas and lint. The grading system by
         independent agency, better organised, regulated warehousing system, better contracting system with
         risk management instruments, will raise the dynamics of Indian cotton to a greater level of
         acceptance, fine image and remarkable branding. Creation of a Competing Crops Pricing Index could
         be explored to ensure judicious allocation of resources in crop patterns. A structured mechanism for
         promotion of cotton use could be developed to sustain domestic consumption on a long-term basis to
         maintain the strength of the cotton economy. Pilot projects for marketing of lint by the farmers, instead
         of kapas at present, could be considered. This might result in higher income to the farmers and
         accelerate cotton production. The role and functions of government agencies involved in marketing of
         cotton fibre can be looked into and their role towards inclusion of price stability can be reoriented.

XXIV.    Recommendations towards value addition in the cotton value chain: Returns on cotton fibre can
         be enhanced through backward integration of the cotton value chain. The cotton industry can adopt
         the example of the sugar industry through such activities as de-linting and use of cotton stalks, which
         present great opportunity with minimal investments. Further, realisation on seed can be improved
         through more R&D on cotton oil and cotton seeds, especially because the governments across the
         world are beginning to reduce green house gas emissions. For instance, the Australian Carbon
         Pollution Reduction Scheme is likely to cover cotton to control the emissions from application of
         nitrogen fertiliser, of carbon dioxide from biological decomposition, of methane from water logging,
         and of other emissions from processing cotton etc. Therefore, a careful study is recommended to
         devise a strategy for countering carbon emissions and subsequently a Carbon Emission Reduction
         Scheme can be framed.

XXV.     Recommendations towards Risk Management: Effective risk management is crucial for protecting
         the interest of all stakeholders in the Indian cotton economy. An efficient, integrated contracting
         system covering spot transactions forward transactions and futures transactions would be required for
         effective risk management.

XXVI.    Recommendations towards drawing lessons from policies of other cotton producing
         countries: A policy review of some of the cotton producing countries has been outlined in section 4.2
         of this report. Lessons can be drawn from policies in these countries that are pertinent to India and
         could be suitably adopted. For instance, the independent gradation certification system of total crop
         existing in the US could be studied and a similar system can be developed after suitable
         modifications.




                                                                                                                  31
         1.1. INDIAN COTTON FIBRE SCENARIO
1.1.1.   Cotton is one of the most important and widely cultivated cash crops across the world. Cotton
         accounts for around 40% of the total global fibre production, making it one of the most important fibres
         of the world. Cotton is also one of the most important commercial crops cultivated in India. In the raw
         material consumption basket of the Indian textile industry, the proportion of cotton is around 59%.
         Thus, it plays a major role in sustaining the livelihood of an estimated 5.8 mn cotton farmers and 40-
         50 mn people engaged in related activities such as cotton processing and trade.

1.1.2.   In the last few years, the area under cotton cultivation across the world has remained more or less
         stagnant. However, the world cotton production has witnessed substantial increase on account of
         sharp rise in cotton yield. World cotton yield increased from 613 kg/ha in 2000-01 (season beginning
         August 1) to 797 kg/ha in 2007-08 (season beginning August 1). Nonetheless, the cotton yield
         reduced to 767 kg/ha in 2008-09 (season beginning August 1).

1.1.3.   According to ICAC data, India has the largest cotton cultivated area, which forms around 30% of the
                                                                                                         5
         global cotton area. Domestic cotton production increased substantially to 290.0 lakh bales in 2008-
             6
         09 from 30.6 lakh bales in 1950-51. Currently, India is the second-largest cotton producing country in
         the world, after China and contributes about 21% to global cotton production. Cotton yield in India has
         improved remarkably to around 524 kg/ha in 2008-09 from 278 kg lint/ha during 2000-01. However,
         cotton productivity in India is still lower as compared with the world average yield of 767 kg/ha.




         COTTON CULTIVATION IN INDIA

1.1.4.   Though cotton is inherently a semi Xerophytes perennial crop, it is cultivated as an annual/ seasonal
         crop. In India cotton is cultivated in three diverse agro-ecological zones, Northern zone, Central zone
         and Southern zone. Northern zone comprises Punjab, Haryana and Rajasthan, the Central zone
         includes Maharashtra, Madhya Pradesh and Gujarat and the Southern zone consists of Andhra
         Pradesh, Karnataka and Tamil Nadu. Besides these nine states, cotton cultivation has gained
         momentum in Orissa as well. Cotton is also cultivated in small areas of non-traditional states such as
         Uttar Pradesh, West Bengal and Tripura.




         5
          Indian bale is of 170 kg
         6
          Indian cotton year – October to September (Years mentioned in section 1.1 to 1.5 refers to Indian cotton unless otherwise
         mentioned).


                                                                                                                               32
1.1.5.   India is the only country that produces all four varieties of cultivated cotton, namely, Gossypium
         arboreum and herbaceum (Asian cotton), G.barbadense (Egyptian cotton) and G.hirsutum (American
         Upland cotton). India produces many cotton varieties and hybrids. Though the number of varieties in
         cultivation exceeds 75, 98% of the production is contributed by about 25 varieties only. Gossypium,
         hirsutum represents 90% of the hybrid cotton production in India and all the current BT cotton hybrids
         are G.hirsutum. Currently, India produces the widest range of cotton capable of spinning for 6s to
         120s counts of yarn. Around 35% of the total area under cotton is irrigated and the remaining 65% is
         rain-fed


         Cotton Acreage in India

1.1.6.   Currently, India has the largest cotton cultivated area in the world. India accounts for around 30% of
         the 30.66 million hectares (ha) global cotton harvested area. The area under cotton cultivation in India
         grew from around 56.5 lakh ha in 1950-51 to 94.14 lakh ha in 2007-08 and witnessed a marginal
         decline at 94.06 lakh ha in 2008-09.

         Exhibit 1.1.1: Cotton Acreage in India




         Source: Cotton Advisory Board and D&B India

1.1.7.   However, the rise in area under cotton cultivation over the years has not been on a sustained basis.
         Various factors such as variability in monsoon, returns from competitive crops, have played a
         significant role in influencing the cotton planting decision of farmers. For instance, during 2002-03, the
         drought conditions experienced in India to certain extent restrained the growers to take up cultivation
         of cotton; as a result, the area under cotton cultivation went down to 76.7 lakh ha from 87.3 lakh ha in
         2001-02. Comparatively, the acreage under cotton increased by 5.4% (y-o-y) in 2006-07, primarily on
         account of a good monsoon in major cotton growing parts of India and higher prices fetched by
         farmers.




                                                                                                                33
         Exhibit 1.1.2: State-wise cotton acreage (2008-09)




         Source: Cotton Corporation of India and D&B India

1.1.8.   Among the cotton-growing states in India, Maharashtra, Gujarat and Andhra Pradesh together
         account for around 73% of area under cotton. Maharashtra has the highest area under cotton
         cultivation followed by Gujarat and Andhra Pradesh. During 2008-09, the area under cotton cultivation
         has declined compared with that of 2007-08 in almost all states except in Andhra Pradesh, Madhya
         Pradesh and Tamil Nadu.


         Cotton Production

1.1.9.   Cotton production in India has more than doubled in a span of 7 years. Cotton production had
         reached a peak of 307.0 lakh bales during 2007-08 as compared with 140.0 lakh bales in 2000-01,
         but fell to 290.0 lakh bales in 2008-09. The gradual increase in cotton production over the years can
         largely be attributed to the phenomenal increase in cotton yield. Introduction of BT cotton seeds has
         played a catalytic role in enhancing cotton production in India. However, in 2002-03, when BT seeds
         were introduced, cotton production dipped by 13.9% to 136.0 lakh bales due to the severe drought
         that hit major cotton producing states such as Gujarat, Andhra Pradesh, and parts of Tamil Nadu.
         Cotton production in Andhra Pradesh, Maharashtra and Gujarat declined by 26.2%, 24.1% and 6.2%
         respectively, during 2002-03. However, since then, the commercial cultivation of BT seeds has
         brought about a breakthrough in cotton production.




                                                                                                           34
          Exhibit 1.1.3: Cotton fibre production




          Source: Cotton Corporation of India and D&B India

1.1.10.   With suitable climatic conditions, better farm practices fostered by the government under TMC and
          spread of hybrid and BT seeds, cotton production witnessed significant year-on-year growth of 31.6%
          and 35.8% during 2003-04 and 2004-05, respectively. Good yield of cotton during 2006-07
          encouraged farmers to take up large-scale sowing of cotton during 2007-08; as a result, the
          production of cotton during this period increased by 12.5%. The area under BT cotton has also
          increased remarkably in the past few years given that the variety offered 25-30% net return over other
          conventional varieties. In 2007-08, area under BT cotton shot up to 63.3 lakh ha as compared with
          34.8 lakh ha during 2006-07.

1.1.11.   In 2008-09, cotton production declined to 290 lakh bales as compared with 307 lakh bales in 2007-08
          because cotton yield fell to 524.13 kg/ha in 2008-09 from 554.39 kg/ha in the previous year. Uneven
          rainfall coupled with high pest incidence could have affected the cotton productivity in 2008-09.

1.1.12.   India‘s cotton production primarily consists of medium long and long staple varieties, which account
          for around 77.2% of the total cotton fibre production in India. The production of medium long and long
          staple varieties surged to 216.0 lakh bales in 2006-07 from 61.0 lakh bales in 2001-02.




                                                                                                              35
                                                                                              7
          Exhibit 1.1.4: Staple-wise cotton production (in lakh bales)

               300.0

               250.0

               200.0

               150.0

               100.0

                50.0

                 0.0
                         01-02        02-03    03-04         04-05      05-06       06-07    07-08

                            Short (below 20.0 mm)
                            Medium (20.5 to 25.5 mm)
                            Medium Long (26.0 to 27.5 mm) & Long (28.0 to 33.5 mm)
                            Extra Long (34 mm & above)


          Source: Cotton Corporation of India and D&B India

1.1.13.   Extra long staple variety had a marginal share of 2.1% in the total production during 2006-07.
          Moreover, production of extra long staple variety has remained almost constant over the time period
          under consideration. Further, the production of short staple cotton has been witnessing sustained fall
          in the last few years as its production has declined from around 9.5 lakh bales in 2001-02 to 6.0 lakh
          bales in 2006-07. Short staple cotton constituted around 1.4% of the total cotton production in
          2006-07.

          Exhibit 1.1.5: State-wise share in cotton fibre production (2008-09)


                                                                          Madhya
                                                  Andhra                Pradesh, 7%
                            Maharashtra,       Pradesh, 19%
                               22%
                                                                                Punjab, 6%



                       Gujarat, 32%
                                                                           Haryana, 5%

                                                                         Karnataka, 3%


                                                Others, 1%    Tamil     Rajasthan, 3%
                                                             Nadu, 2%




          Source: Cotton Corporation of India and D&B India

1.1.14.   As of 2008-09, the central states of Gujarat, Maharashtra and Madhya Pradesh had the highest
          contribution of 61% in the domestic cotton production while the southern states such as Andhra
          Pradesh, Karnataka and Tamil Nadu contributed 24% and the northern states such as Punjab,
          Haryana and Rajasthan contributed to around 14% of cotton production.

1.1.15.   Cotton grown in different states have varying staple length, strength and grade depending on the
          climate and farm and pest management practices. Although Maharashtra had the highest area under



          7
              Data for 2007-08 are estimates


                                                                                                             36
          cotton cultivation in 2008-09 (at around 31.4 lakh ha), Gujarat had the highest contribution in cotton
          production (at an estimated 90 lakh bales) followed by Maharashtra (at 62 lakh bales). Increased area
          under cultivation and greater use of hybrid and genetically-modified seeds have aided the robust
          growth in Cotton production in Gujarat. In Maharashtra, cotton production recorded robust increase of
          38.9% and 24.0% in 2006-07 and 2007-08, respectively. The substantial increase in cotton production
          in Maharashtra can in part be attributed to the initiatives of CITI-CDRA and the government to extend
          integrated cotton farming programme and contract farming programme. In 2006 CITI-CDRA planned
          to extend integrated cotton farming programme in 9,600 acres in Wardha district, Maharashtra, which
          included better combination of crop, soil and pest management practices to increase and sustain
          productivity as well as quality of cotton. The programme also included a market-supportive
          mechanism for farmers to sell their produce. During 2007-08, the government took up contract
          farming programme in 40,044 ha involving 12,000 farmers as compared with 33,279 ha during
          2006-07.


           Box 1.1.1: Integrated cotton cultivation

           The Indian government promoted an integrated cotton cultivation programme (Contract
           Farming) with the twin objectives of a) benefitting the cotton farmers by way of making
           available quality inputs such as seeds, pesticides etc for producing quality cotton, and b) to
           enable the textile mills obtain desired quality of cotton. The corporate sector is also involved in
           this programme not only in extension services but also in making available quality inputs such
           as seeds, fertilisers to farmers to improve productivity and quality of Indian cotton.



          Productivity of cotton

1.1.16.   Cotton productivity in India has witnessed substantial improvement over the years. A confluence of
          factors such as adoption of BT varieties, accelerated technology transfer to the farmers, efforts taken
          by the government and other agencies have been instrumental in increasing cotton productivity in
          India. The average cotton yield increased from 278 kg/ha in 2000-01 to peak at 554.39 kg/ha in 2007-
          08 and slipped to 524.13 kg/ha in 2008-09. The drop in cotton yield in 2008-2009 could be attributed
          to the uneven monsoon which led to a dry spell in some areas and excessive rains in other areas.
          While significant progress has been made in the terms of improving cotton productivity, it is important
          to note that the cotton yield in India at around 524 kg/ha is lower as compared with the world average
          yield of 767 kg/ha.

1.1.17.   There are huge variations in the cotton productivity levels of different states in India. The vast
          difference in productivity levels can be gauged from the difference between the highest yield at 780
          kg/ha recorded by Tamil Nadu and the lowest yield at 335 kg/ha recorded by Maharashtra. High yield
          in Tamil Nadu can be attributed to increased use of better quality hybrid seeds, improved irrigation



                                                                                                                 37
          facilities and integrated pest control processes. The average yield in Gujarat and Andhra Pradesh is
          higher as compared with the average yield in Punjab and Haryana.

           Exhibit 1.1.6: State-wise yield of cotton fibre (kg/ha)

           States           2001-02     2002-03     2003-04   2004-05    2005-06     2006-07    2007-08    2008-09

           Tamil Nadu           425         600         619       725        668         850        714        780

           Andhra
                                454         418         557       469        527         630        687        644
           Pradesh

           Gujarat              328         317         516       651        794         733        786        650

           Rajasthan            343         220         452       427        397         437        451        422

           Punjab               262         284         389       551        610         672        619        565

           Haryana              153         287         372       424        379         481        563        522

           Madhya
                                546         561         565       472        494         505        567        490
           Pradesh

           Karnataka            201         216         228       261        268         270        338        375

           Others               142         321         333       250        215         239        315        405

           Maharashtra          195         158         191       311        213         274        330        335

          Source: Cotton Corporation of India and D&B India




          CONSUMPTION OF COTTON IN INDIA

1.1.18.   Although the Indian textile industry consumes a diverse range of fibres and yarn, it is predominantly
          cotton based. The ratio of the use of cotton to man-made fibres and filament yarns by the domestic
          industry is 59:41 (FY09). Thus, cotton is one of the major raw materials for the Indian textile industry.
          The proportion of cotton in the raw material consumption basket of the Indian textile industry is around
          59%. Cotton consumption has increased significantly over the years given the rapidly expanding
          domestic textile industry.

1.1.19.   The consumption of cotton by the textile mills and small-scale spinning units has witnessed sustained
          increase since 2001-02, except in 2002-03, when the total domestic consumption declined. Domestic
          consumption of cotton fibre increased at a CAGR of 7.0% rising from 168.8 lakh bales in 2002-03 to
          236.9 lakh bales during 2007-08, but fell to 229 lakh bales in 2008-09.

1.1.20.   There has been a phenomenal growth in the Indian textile industry in the last 2 decades in terms of
          installed spindles and yarn production. The pace of modernisation achieved by the Indian spinning


                                                                                                                38
          industry received a fillip after the launch of "Technology Up-gradation Fund" by the Indian government
          in April 1999. The robust growth of spinning industry and its modernisation has led to sustained
          growth in cotton consumption.

          Exhibit 1.1.7: Trend of domestic cotton consumption




          Source: Cotton Corporation of India and D&B India

1.1.21.   Cotton consumption has witnessed sustained increase since 2003-04 onwards as a result of growing
          demand for Indian textiles, which led to considerable expansion and modernisation of the textile mills.
          In 2007-08, domestic consumption merely grew by around 2% over that in 2006-07 due to
          consistently high cotton prices mainly because of speculative funds coming into play, and due to
          large-scale exports of raw cotton. Exports of cotton stood at around 88.5 lakh bales during 2007-08.
          Also, appreciation in the rupee for some months during the cotton year 2007-08 led to low textile
          exports that affected the domestic mill consumption of cotton. In the cotton year 2008-09, domestic
          consumption of cotton declined by 6.9 lakh bales to an estimated 229 lakh bales. The drop in mill
          consumption was a result of the global slowdown that affected domestic as well as export demand for
          textiles. Consumption also declined due to a steep hike in minimum support prices of different
          varieties of cotton, which resulted in high procurement costs of cotton for the mills.

           Exhibit 1.1.8: Segment-wise consumption of cotton

           Segment          2001-02    2002-03     2003-04     2004-05     2005-06     2006-07     2007-08   2008-09

           Mill
                             147.0       142.4       150.4       164.0       180.0       194.9      195.7     190.0
           consumption

           Small   mill
                              11.7       11.6        13.0        16.6         19.0        21.3       22.1      20.0
           consumption

           Non-mill
                              13.1       14.8        13.7        14.5         20.0        15.9       19.1      19.0
           consumption

          Source: Cotton Corporation of India, Office of the Textile Commissioner and D&B India




                                                                                                                  39
1.1.22.   Almost 83% of the cotton is consumed by the non-SSI mills and other 9% by the SSI mills. Non-mill
          consumption of cotton has remained more or less stable over the last 4 years and accounted for
          around 8%of the total domestic consumption.




          COTTON MARKETING IN INDIA:

1.1.23.   In India, cotton is primarily sold in the form of kapas (raw cotton or seed cotton). However, in other
          leading cotton growing countries, kapas is processed — wherein the fibre is extracted, and then the
          lint (cotton fibre extracted from seed cotton) is sold as processed bales. The Agriculture Produce
          Marketing Committee (APMC) is the primary market infrastructure in the country through which cotton
          is marketed. The APMCs were set up by the Agricultural Produce Marketing Committee (Regulations)
          Act in 1963 as a marketing platform for the sale of primary agriculture products to provide a regulated
          market infrastructure for agriculture goods, which was absent earlier on. The main functions of these
          markets or mandis is to regulate market practices such as weighing, process of sale, method of
          grading, payment process etc. APMCs also provide facilities storage, boarding and lodging for buyers,
          sellers etc. This committee charges 1% of the goods value as fees from the buyers. The marketing
          committee, which runs the market, consists of both buyers and sellers who have the responsibility of
          maintaining and developing the market yard for its users. In India, currently there are around 7,062
          mandis that are functional.

1.1.24.   The three marketing agencies engaged in cotton trade are:

                 Private sector comprising traders, owners of ginneries operating as individual business
                  proprietors, partnership firms and private limited companies

                 Public sector agencies like the Cotton Corporation of India (CCI)

                 Co-operative sector.

1.1.25.   It has been estimated that approximately 80% of the marketed surplus of kapas and lint is handled by
          the private marketing channels and the remaining 20% by the institutional marketing channels
          including co-operatives and Cotton Corporation of India (CCI).




                                                                                                              40
           Exhibit 1.1.9: Sale of cotton (In bales)

           Group                  2001-02        2002-03   2003-04      2004-05     2005-06     2006-07    2007-08

           NTC                     46,818         70,980    90,986      1,51,042     99,469     1,22,538   1,02,427

           STC/Cooperatives        58,950         51,588    60,106      1,42,597     55,351      76,901     47,190

           Private                8,36,804   4,70,908      6,87,111    22,08,059    9,07,912   10,95,234   6,66,329

           Total                  9,42,572   5,93,476      8,38,203    25,01,698   10,62,732   12,94,673   8,15,946

           Source: The Cotton Corporation of India Ltd and D&B India


1.1.26.   Generally, the marketing of cotton (selling of cotton lint) begins with the grading of cotton-based on
          various parameters such as fibre length, fibre strength etc. Grading of cotton not only helps in price
          determination and reduction in marketing costs but also facilitates exports. ‗Grade‘ is primarily
          determined by colour, lustre, fineness, trash content, proportion of stained or immature kapas, feel
          and moisture content.



           Box 1.1.2: Generic determinants of cotton fibre/yarn quality

           Fibre length: Genetic qualities of the cotton plant and certain environmental factors, such as
           moisture content in the soil post flowering, determine the improvement in fibre length. Fibre length
           determines the strength of the yarn and enables faster spinning speed during processing at the
           final stages of textile production.

           Length uniformity and shorter fibre content: Uniform fibre in yarn makes spinning easier by
           reducing breakage and assists faster spinning whereas short fibres can reduce strength of the
           yarn and lead to more wastage. The length and uniformity of fibres determine the premium or
           discount valuation of the yarn in the market.

           Fibre strength: The thickening of the fibres begins within around 28 days of flowering. During this
           period, fibre characteristics are influenced by temperature and stress as well as factors such as
           physical and microbial damage. The parameter can also be controlled by ensuring optimum
           potassium level in the soil. Fibre strength cotton helps make stronger yarn and better cloth at the
           final stage of textile manufacturing.

           Micronaire: This quality helps determine fibre maturity and fineness. Micronaire is determined by
           fibre diameter and the formation of the secondary wall prior to the opening of the cotton boll. The
           number of fibres in a cross section of yarn determines yarn fineness in cotton. The presence of
           immature bolls in harvested cotton is one of the primary reasons for low micronaire in Indian
           cotton. Moisture content in the cotton bolls also determines the micronaire of cotton.




                                                                                                                41
              Colour grade: Colour grade determines both yellowness and brightness in harvested cotton. The
              main reasons for low colour grade are weathering of cotton bolls and the low levels of cellulose
              production during development, which thereby affect the brightness of cotton. Environmental
              factors primarily contribute to colour and brightness variations while microorganisms, boll rot and
              insect damage cause discolouration.

              Leaf grade: Leaf grade is a measurement of the amount of trash that accumulates usually during
              mechanical harvesting of cotton. Burs, stems, weeds and leaf contribute to leaf grade. Excess leaf
              grade requires more cleaning, which adversely affects the quality of cotton fibre.

              Number of pickings: Number of pickings in seed cotton cultivation influences the quality of
              cotton. Quality of cotton fibre decreases with subsequent picking. In India, there are sometimes up
              to 6 pick per season. With increased number of pickings, especially by the fourth pick

                      There is an increase in the short fibre content of cotton

                      Micronaire and maturity deteriorate substantially

          Source: D&B India
                The levels of trash, micro-dust and fibre fragments in the fourth pick are higher than in the
                       first

                      The quality of yarns in terms of evenness, imperfections and tenacity deteriorate
                       substantially.



1.1.27.   A lot reflects the kapas of a particular variety on a given day for selling purpose. Normally, a lot has a
          code that indicates the particular variety of kapas. Approximately 4 kg samples of at least four
          different places are taken for evaluation. Those samples are mainly evaluated based on 3 main
          factors: grade, staple length and ginning percentage. According to the manual on good agricultural
          marketing practices for cotton, major grade designations in Indian markets are Special, A, B, C, D and
              8
          X . However, lack of uniformity in standards used by various agencies across the country is a major
          drawback. Moreover, visual-tactile assessment is the predominant form of assessment, thereby
          leading to a poor price-quality linkage.




          8
              Please refer to http://agmarknet.nic.in/ManualCotton.pdf for further details

                                                                                                                 42
          Exhibit 1.1.10: Cotton marketing system


                                                             Production




                                                                                           Marketable surplus
              Retention by producers


                         1–2%


                                                                                               Institutional
                    Private marketing

                                                                                           Marketing channels
                        Channels

                                                                                            CCI, Co-operative
                    Village Traders/

                                                                                          Societies/Federation
                       Merchants Wholesale                                                Co-operative Ginning

                                                                                             State Agencies
                Commission Agent
                              Merchants                                                      & Pressing Mills
                                                                                           Retailers Co-op./Fed./
                    Millers Ginning &                                                               CCI


                      Pressing Mills

                         Retailers                             Exports




                                                             Consumers

          Source: D&B India

1.1.28.   After the grading is done, the lots are auctioned to the potential buyers. Each graded lot has a tag
          assigned to it that denotes the ginning percentage and staple length of the lot for the inspection of
          potential buyers. The two methods of kapas sale practised in India are the ‗open auction system‘ in
          many states such as Gujarat, Rajasthan, Punjab and Haryana and the ‗closed tender system‘ in
          Karnataka. In an open auction, market participants openly bid for lots in the market yard, which
          belong to different commission agents, and the lot is sold to the highest bidder. In both these
          practices, there are no limiting conditions or prices. In the closed tender system, cotton is hoarded in
          the market yards where traders inspect these lots or samples of lots and quote their buying price in
          sealed envelopes. The envelopes are opened up and the lot is sold to the trader with the highest
          bidder.




                                                                                                                43
1.1.29.   While significant improvements have been made in the area of cotton marketing through the initiatives
          taken by the technology mission on cotton, certain problems still exist in the cotton marketing, such as
          lack of uniform grading standards, high transportation costs, lack of adequate storage facilities etc.
          Poor transaction practices at the market level, information asymmetry, lack of proper technology and
          physical infrastructure are some other major challenges encountered in the process of cotton
          marketing. The farmers and traders/ginners also face a problem of information failure and inadequate
          institutional support.




          COTTON EXPORT & IMPORT9
1.1.30.   With robust growth in cotton production in the last few years, India has become a net exporter of
          cotton from being a net importer.


          Export scenario:

1.1.31.   Indian cotton consumption has increased at a rapid pace in the last few years but the growth in
          consumption has not been commensurate with the growth in domestic cotton production, and
          therefore, since 2003-04, there has been surplus production in India. As a result, India has emerged
          as one of the top exporters of raw cotton in the world. Currently, India is the second-largest exporter
          of cotton after the US. In order to boost cotton exports, the Indian government liberalised raw cotton
          exports since July 2001, doing away with the system of allocation of cotton export quota in favour of
          different agencies and traders. Over the years, India‘s cotton export has been growing at an
          impressive rate, except for FY05, when exports dipped. In FY08, India exported 88.5 lakh bales of
          cotton.

          Exhibit 1.1.11: Exports of cotton fibre (in lakh bales)




          Source: Cotton Advisory Board and D&B India


          9
              Export and Import data in this section pertains to export and import of Cotton including waste

                                                                                                               44
1.1.32.   After emerging as the second largest cotton exporter since 2006-07, India‘s exports during 2008-09
          are estimated to have declined to 35 lakh bales. The substantial decline in cotton exports in 2008-09
          could in part be attributed to the lowered export competitiveness of Indian cotton subsequent to a hike
          of almost 30% to 50% (depending on quality) in the Minimum Support Price of cotton by the
          Government. During 2008-09, the Government raised the minimum support price (MSP) of long staple
          cotton and medium staple cotton to Rs 3,000 per quintal from Rs 2,030 per quintal to Rs 2,500 per
          quintal from Rs 1,800 per quintal, respectively.

1.1.33.   Despite strong growth over the years, one of the major issues faced by the Indian cotton exports is
          contamination. In the latest (2007) survey by the International Federation of Textile Manufacturers,
          the six most contaminated cottons tested were from India. Likely sources of contamination are hand-
          picking, where foreign matter (such as polypropylene strands from picking bags) may be accidentally
          introduced, and ginning, where seed coats may not be adequately removed, and wire or metal can
          break off machinery and remain embedded within the fibres.

          Exhibit 1.1.12: Country-wise share in India’s cotton exports (including waste) (FY08)




          Source: Office of Textile commissioner (Official Indian Textile Statistics 2007-08) and D&B India

1.1.34.   Among the most important destinations for Indian cotton exports are China, Pakistan and Ban-
          gladesh. In fact almost 76.10% of India‘s cotton exported to these three countries. China commands
          the highest share of 46.6% of India‘s cotton fibre exports to the world. Export to China has increased
          from 1.0 lakh bales in FY05 to 36.30 lakh bales in FY08.


          Imports

1.1.35.   Cotton has been imported into India under the Open General License (OGL) since April 1994. Till July
          8, 2008, the custom duty of 10% and 4% special countervailing duty were levied on cotton imports.
          However, from July 8, 2008, the Indian government abolished duty on cotton imports, thus enabling
          the domestic textile mills to import cotton as per their requirements. India‘s current import basket
          consists of the extra long staple variety due to meagre domestic production of the same. Previously,
          the domestic manufacturers used to import sizeable quantity of long staple cotton also, but it has




                                                                                                              45
          shrunk in the last couple of years. There has been a noticeable decrease in the long staple variety
          over the years.

1.1.36.   Domestic cotton production coupled with price differences between the domestic and foreign cotton
          have been key determinants of cotton imports in India. Import of cotton has reduced gradually from
          around 25.3 lakh bales in 2001-02 to 6.4 lakh bales in 2007-08, barring a surge in 2004-05, when
          exports increased to 12.2 lakh bales from 7.2 lakh bales in 2003-04. The imports of cotton increased
          to 10 lakh bales during 2008-09.

1.1.37.   Increasing domestic per capita income and refinement of consumer preference have resulted in an
          increase of imports of the extra long variety during the last few years. India generally imports ELS
          cotton from the US, Egypt, Sudan, West Africa and Commonwealth of Independent States (CIS)
          countries.

          Exhibit 1.1.13: India’s cotton Imports


                                        30
                                             25.3
                                        25
                Lakh bales of 170 kgs




                                        20              17.7

                                        15                                   12.2
                                                                                                                      10.0
                                        10                         7.2
                                                                                                  5.5       6.4
                                                                                        5.0
                                        5

                                        0
                                              2001-02




                                                                   2003-04



                                                                              2004-05




                                                                                                            2007-08



                                                                                                                       2008-09
                                                         2002-03




                                                                                        2005-06



                                                                                                  2006-07




          Source: Cotton Advisory Board and D&B India

1.1.38.   The US has the highest share of 31% and 39% in India‘s cotton fibre imports from the world in volume
          and value terms, respectively. Almost all imports come from the US and the other countries have a
          meagre share in India‘s imports. Egypt accounts for 20% (volume terms) of India‘s cotton fibre imports
          from the world. Within Africa, Egypt has the highest share in India‘s cotton fibre imports followed by
          Benin and Burkina Faso. Within Asia, Bangladesh has the highest share of 16% in India‘s cotton fibre
          imports in terms of quantity, however, in value terms, it accounts for a miniscule 1% share. This
          implies that the cotton imported from Bangladesh is of very low quality.




                                                                                                                                 46
          Exhibit 1.1.14: Country-wise share in India’s cotton imports (including waste) (FY08)




          Source: Office of the Textile Commissioner (Official Indian Textile Statistics 2007-08) and D&B India

1.1.39.   India‘s dependence on cotton imports from Egypt and the US may be a matter of concern for the
          former, considering the development in the textile industry of Egypt. In future, there can a rise in
          domestic consumption of Egyptian cotton, which will imply lesser exports to India.




          TREND IN INDIAN COTTON PRICES

1.1.40.   Prices of cotton across countries and varieties differ on account of a number of factors. Within a
          country, cotton prices during a particular year vary depending on the variety grown and the quality of
          the harvested cotton.

           Exhibit 1.1.15: Annual average prices of kapas for important varieties

                                                                                      Prices in Rs per quintal

           YEAR             BENGAL DESI                 J-34         LRA            H-4          S-6     DCH-32

           1996-97                      1168           1770          1786         1905         2010          2316

           1997-98                      1773           2101          2095         2186         2278          2973

           1998-99                      1883           2080          2037         2135         2141          2532

           1999-00                      1443           1836          1835         1909         2067          2732

           2000-01                      1438           2068          2103         2207         2310          2784

           2001-02                      1833           1828          1750         1891         1901               --

           2002-03                      1875           2218          2110         2215         2323          2927

           2003-04                      1962           2591          2470         2533         2632          3152



                                                                                                                       47
           Exhibit 1.1.15: Annual average prices of kapas for important varieties

                                                                                                                                                                                     Prices in Rs per quintal

           YEAR                            BENGAL DESI                                                          J-34                           LRA                                  H-4       S-6    DCH-32

           2004-05                                                      1689                               1844                                1835                                2003     2037        2840

           2005-06                                                      1738                               1999                                           --                       2002     2058        4111

           2006-07                                                      1871                               2133                                           --                       2168     2280        3034

           2007-08                                                      2351                               2523                                           --                       2483     2613        2827

           2008-09                                                      3051                               2800                                           --                       2850     2850           --

          Source: Cotton Corporation of India Ltd and D&B India

1.1.41.   In line with market dynamics, the market price of cotton has largely varied according to the domestic
          cotton production; for instance, cotton prices surged in 2003-04 consequent to a drop in production
          during this period. In addition to the demand-supply dynamics, cotton-pricing mechanism in India is
          also influenced by the minimum support price fixed by the government. In the past few years, the
          MSP of cotton has been raised gradually to ensure minimum returns to the farmers. In fact, in 2008-
          09, the government increased the MSP on various varieties of cotton by around 30-40% to provide
          support to the farmers in the depressed market conditions. A dip in cotton production on account of
          uneven monsoon coupled with lower demand due to global economic slowdown was expected to
          adversely affect the cotton farmers.

          Exhibit 1.1.16: Trend in prices of H-6 cotton variety

                               3,500.00

                               3,000.00
             RS. Per Quintal




                               2,500.00

                               2,000.00

                               1,500.00

                               1,000.00
                                                    1997-98




                                                                                                                           2004-05
                                          1996-97



                                                              1998-99

                                                                        1999-00

                                                                                  2000-01

                                                                                            2001-02

                                                                                                      2002-03

                                                                                                                 2003-04



                                                                                                                                     2005-06

                                                                                                                                                2006-07

                                                                                                                                                               2007-08

                                                                                                                                                                         2008-09




                                 MSP of Cotton - H4                     Annual average market price of Kapas for H-4



          Source: Cotton Corporation of India and D&B India


1.1.42.   Over the years, the market price of H-6 cotton variety has largely been above the MSP set by the
          government. Thus, the MSP generally acts as a lower ceiling for cotton prices and prevents the price
          of raw cotton from falling beyond a certain level.


                                                                                                                                                                                                                48
          Cotton prices in India vis-a-vis other countries

1.1.43.   It has been observed that the prices of Indian cotton have been around the world cotton prices. The
                                                                                                                               10
          recent prices of India S-6 1-1/8 cotton, the cotlook A Index , Brazil Midd 1-3/32 and Pakistan Type
          1503 have been considered for comparative analysis of cotton prices in some countries.

          Exhibit 1.1.17: Recent trend in cotton prices in India, Brazil, Pakistan and World

                               80                                                                                               76.50
                               75                                                                                                     74.00
                                                                                                                                      72.30
                 US cents/lb




                               70
                                                                                                                                      67.50
                               65
                               60
                               55
                               50
                                                       20-Aug-09




                                                                                                                                19-Nov-09
                                                                              17-Sep-09
                                                                   3-Sep-09




                                                                                                     22-Oct-09
                                         6-Aug-09




                                                                                                                    5-Nov-09
                                                                                          8-Oct-09




                               A Index              India S-6 1-1/8           Brazil Midd 1-3/32                 Pakistan Type 1503


          Source: Various and D&B India

1.1.44.   It can be observed from the above graph that prices of Indian cotton have been slightly higher as
          compared with the cotlook A Index, which is an indicator of the world cotton prices. Cotton prices in
          Pakistan have been substantially lower as compared with the Indian cotton prices, primarily due to
          high contamination level in cotton produced in Pakistan. However, the price of cotton in Brazil is
          higher as compared with the cotton prices in India.


          Domestic cotton prices vis-à-vis exported cotton price

1.1.45.   The landed price of Shankar-6 cotton in China has been considered for comparing the domestic
          cotton prices vis-à-vis exported cotton prices. In October 2009, the landed price of 1-1/8" cotton C&F
                                                                                                                                              11
          China was around 68 cents/lb, which is equivalent to Rs 24,524 per candy . After calculating the net
          price of exported cotton, it was observed that the price of Shankar 6 in the domestic market compares
          well with the price paid in the export market. The net selling price of exported cotton was Rs 23,289
          per candy as compared with the domestic spot price of Shankar-6 cotton at Rs 23,300 per candy.




          10
               The COTLOOK A INDEX is intended to be representative of the level of offering prices on the international raw cotton
          market.


          11
               1 candy = 355.62 kg = 784.01 lb; Exchange rate = Rs. 46 per US Dollar



                                                                                                                                                   49
Box 1.1.3: Net selling price of exported cotton

Net selling price of exported cotton = Landed price of cotton (Rs 24,524)
                                     - Sea freight, port handling, inland road transportation
                                       expenses (Rs 1,100)
                                     - Interest on W.C. approx. for 30 days (Rs 227)
                                     - Bank and misc charges (Rs 25)
                                     + Subsidy on exported cotton @1.5% (Rs 352)
                                     - Commission to agent for exports @1% (Rs 235)
                                     = Rs 23,289 per candy




                                                                                           50
         1.2. COTTON TEXTILE VALUE CHAIN
1.2.1.   The textile and garments industry is a key traditional industry in India. The textile industry contributes
         significantly to the economy in terms of industrial output, employment generation and the export
         earnings of the country. It contributes around 4% to the GDP, 14% to the industrial production, and
         17% to the country‘s export earnings. The Indian textile industry provides direct employment to over
         35 mn people. The textile sector is the second largest provider of employment after agriculture. India
         is one of the few countries in the world to have a well-established, complete value chain in the T&G
         industry. The Indian textile industry consumes a diverse range of fibres, but is predominantly cotton
         based. Currently, the ratio of the use of cotton to man-made fibres and filament yarns by the domestic
         industry is 59:41.

         Exhibit 1.2.1: Cotton-to-Textile value chain in India



           Cotton Fibre       Ginning &        Spinning        Weaving-          Dyeing &            Garment
            production         Pressing                         Knitting         Finishing          confection




             Raw cotton                          Yarn                 Fabric                  Garments
                fibre



                                               Dyeing &
                                               Finishing




                                          Textile Products (Cotton or blended)

         Source: D&B India

1.2.2.   The Indian T&G industry is complex in structure, with the presence of numerous small-scale,
         decentralised and fragmented units along with some large-sized integrated enterprises, also known
         as composite mills. While the small-scale sector is largely unorganised and labour-intensive, large-
         scale enterprises on the other hand are mostly organised and capital-intensive. In the last few years,
         the industry has witnessed considerable expansion, integration and technological upgradation due to
         potential growth opportunities in the export as well as domestic market.




                                                                                                                 51
         Exhibit 1.2.2: Increase in number of spinning mills (SSI and non-SSI)
           1800
                   1564          1566            1570         1608             1597
           1600
           1400
                                                                  1236            1219
                      1135           1161           1173
           1200

           1000

            800

            600

            400
            200

             0
                    FY04          FY05            FY06          FY07            FY08

                  Spinning mills (Non-SSI) No.      Spinning mills (SSI) No.


         Source: Office of the Textile Commissioner and D&B India

1.2.3.   Capacity installation and utilisation in the industry has also improved considerably over the past few
         years. The domestic textile industry comprises of 1608 spinning mills and 200 composite mills, with an
         installed capacity of 35.61 million spindles, 4,48,000 Open End Rotors and 69,000 looms in the
         organised sector along with another 1219 small scale spinning units with 4.00 million spindles and
         about 1,57,226 Rotors in the small scale decentralised sector. The capacity utilisation in the spinning
         sector of the organised textile mill industry ranged between 80 to 93% while the capacity utilisation in
         the weaving sector of the organised textile mill industry ranged between 41 to 63%.


         Product Segments in the T&G Industry:

1.2.4.   The T&G industry can be classified on the basis of product segments into four sub-heads — yarn,
         fabrics, made-ups, and garments. Since all these products are a part of the textile value chain, there
         are several integrated players in the industry, who manufacture two or more of these products.


         Yarn:

1.2.5.   Yarn is a long continuous length of interlocked fibre, suitable for use in the production of textiles,
         sewing, crocheting, knitting, weaving, embroidery, and rope-making. It is usually spun from natural or
         man-made fibres or both. Thus, based on the raw material used, yarn could take a variety of forms —
         cotton yarn, silk yarn, woollen yarn, polyester yarn, acrylic yarn, viscose yarn, or blended yarn (when
         more than one type of fibre is used to make yarn). India‘s strength lies in the production of cotton
         yarn, which accounts for around 74% of total spun yarn production in India. The production of cotton
         yarn in India has recorded an annual average growth rate of around 6.5% between FY05-FY09. While
         there has been a sustained improvement in cotton yarn production since FY05, the yarn production
         witnessed marginal decline of 1.69% in the FY09 as compared to an increase of 4.42% in FY08




                                                                                                              52
         Exhibit 1.2.3: Trend in production of cotton yarn in India (Million kg)

                   3100
                   2900
                   2700
                   2500
           Mn Kg




                   2300
                   2100
                   1900
                   1700
                   1500




                                                             FY06
                          FY01

                                 FY02

                                        FY03

                                               FY04

                                                      FY05




                                                                    FY07

                                                                           FY08

                                                                                  FY09 (P)
         Source: Office of the Textile Commissioner and D&B India

1.2.6.   India is net exporter of cotton yarn. In 2007-08, India registered 8.3% growth and 9.9% de-growth in
         exports and imports respectively. The dismantling of Multi fibre Agreement (MFA) in 2005 provided
         boost to India‘s yarn exports.


         Fabrics:

1.2.7.   Fabrics are items made of thread or yarn, formed by weaving or knitting. Fabrics are generally used
         for making finished textiles — garments and made-ups. Based on the type of yarn used in
         weaving/knitting, fabrics can be of different types — cotton, silk, woollen, synthetic, or blended.
         Fabrics are available in different designs and patterns, usually prepared through dyeing, colouring, or
         printing.

1.2.8.   India manufactures a large variety of fabrics, with a range of finishes, width, and designs. India‘s cloth
         production is mostly in the form of cotton or blended cloth. However, non-cotton cloth has gained
         prominence during the last 15 years, and currently accounts for about 37.9% of country‘s total fabric
         production. At the time of independence, the mill sector was the main producer of cloth in India.
         However, the growth of the powerloom and handloom sectors, aided through government incentives,
         has led to a steep decline in the share of the mill sector in India‘s overall cloth production. The share
         of mill sector in cloth production has gone down from over 70.0% in the 1950s to less than 6.0% in
         FY97 and to a mere 3.3%, currently. On the other hand, fabric production in powerloom and
         handloom sectors has grown considerably; currently, these account for about 74.4% of India‘s total
         cloth production. The production of knitted fabrics in the hosiery segment has also increased in recent
         times; currently, hosiery accounts for 22% of total cloth production in India.




                                                                                                                53
          Exhibit 1.2.4: Production of Cotton Cloth

                          30000

                          26000
             Mn Sq Mtrs




                          22000

                          18000

                          14000

                          10000




                                                                                                        2008-09(P)
                                  2001-02


                                            2002-03


                                                      2003-04




                                                                          2005-06


                                                                                    2006-07
                                                                2004-05




                                                                                              2007-08
          Source: Office of Textile Commissioner, D&B India

 1.2.9.   Cotton Cloth production in India has witnessed sustained increase since 2003-04 before witnessing a
          marginal decline in 2008-09. While the production in hosiery and mill sectors experienced modest
          increase, production in power looms and handlooms declined compared to the previous year. The
          decline in cotton textile during 2008-09 could be attributed to a confluence of factors like higher price
          of cotton, high interest rates and slowdown in demand in domestic as well as international markets.


          Made-ups and Garments:

1.2.10.   Made-ups are non-wearable finished textiles such as bed linen, table linen, canvas, bags, blankets,
          carpets, mattresses, cushions, fish nets, terry towels, furnishing materials etc. Made-ups can also be
          classified on the basis of raw material type — cotton made-ups, non-cotton made-ups, and blended
          made-ups. Majority of Made-ups manufactured in India are largely cotton-based. Bed sheets
          constitute the largest variety of made-ups in India, followed by canvases and other made-ups. Other
          types of made-ups include curtains, furnishings, towels and towelling, mosquito nets, filter, lint, and
          bed ticking. Besides made-ups, fabric can be converted into readymade garments, which are
          wearable and need not be tailored. Garments are generally manufactured in the following stages —
          designing, cutting fabrics, sewing cut fabrics, and finishing the garment (trimming, checking, and
          ironing). Readymade garments are a relatively new concept in India‘s manufacturing history as
          Indians traditionally had garments stitched from local tailors.




                                                                                                                     54
         1.3. POLICY INITIATIVES IN THE COTTON FIBRE
         AND TEXTILE SEGMENT
1.3.1.   Cotton production in India received a fillip with the development of improved varieties and hybrids in
         the different staple length groups and thorough support by the Government, in addition to
         technological development and multiple other factors as summarised below:

                Extensive research and development, technology transfer and adoption of scientific and
                 agronomic practices by the farmers

                Increase in area under irrigation

                Improvement in marketing infrastructure

                Launch of Technology Mission on Cotton (TMC) in February 2000

                Sustained awareness programmes by NGOs like Cotton Association of India‘s (CAI‘s), Cotton
                 and Allied Products Research Foundation (COTAAP), Cotton Development and Research
                 Association (CDRA) under Confederation of Indian Textile Industry (CITI), etc. to adopt best
                 management practices in modern agronomic methods and crop management techniques

                Spread of hybrid cotton and commercial cultivation of BT cotton from 2002, resulting in higher
                 yield as well as economic benefits to farmers

                Distribution of quality inputs, village adoption programmes and support to R&D by the
                 Government

                Increased application of integrated pest management (IPM) technology and effective check
                 on pest and disease infestation


         Major Government policies and initiatives

1.3.2.   Government policies and initiatives have been providing the requisite boost to domestic cotton
         production, processing as well as consumption.


         National Textile Policy (NTP) 2000

1.3.3.   The NTP (2000) aimed at building a strong and vibrant textile industry competent of producing quality
         cloth at an acceptable price, increasingly contributing to employment provision and economic growth
         and competing with for an increased share of global market. For development of cotton sector the
         policy endeavoured to




                                                                                                            55
                Increase cotton productivity and upgrade its quality to international standards, through
                 effective implementation of the Technology Mission on Cotton

                Though cotton is expected to continue to be the dominant fibre yet special attention will be
                 given to bring the cotton to non-cotton fibres ratio closer to international trends

                Full fibre flexibility between cotton and man-made fibres will be encouraged

                Encourage the spinning sector to continue modernisation

                Liberalise and encourage export of cotton yarn

1.3.4.   The objectives, measures introduced by the Government in National Textile Policy in 2000 and the
         impacts can be summarised as follows.

           Exhibit 1.3.1: National Textile Policy, 2000 – A snapshot

           Objectives                      Measures introduced                          Impact/progress

           Increasing output     De-reservation of garments and knitting         Growth in hosiery segment
                                 from SSI


           Technological         Implementation of TUFS, covering all            Slow progress initially, but
           Up-gradation          manufacturing segments of the industry          picked up pace in recent times
                                                                                 — major capacity expansions
                                                                                 underway

           Productivity          Implementation of Technology Mission on         Strengthening of raw material
           enhancement           Cotton and Technology Mission on Jute           base for the industry

           Quality               Reviving textile research associations          Substantial increase in cotton
           improvement           (TRAs) to focus research on industry            production, though no major
                                 needs                                           progress in jute production
           Strengthening raw
           material base

           Infrastructure        Encouraging private sector to set up            40 textiles park projects have
           development           world-class, environment-friendly,              been approved by the Ministry
                                 integrated textile complexes and textile        of Textiles.
                                 processing units


           Product               Strengthen and encourage the handloom           No major progress in terms of
           diversification       industry to produce value-added items           product diversification

           Export expansion      Marketing assistance to the industry to         Increased interaction between
                                 forge joint ventures to secure global           Indian textile industry and
                                 markets                                         foreign counterparts through
                                                                                 participation in foreign
                                                                                 exhibitions and delegate visits




                                                                                                                   56
           Exhibit 1.3.1: National Textile Policy, 2000 – A snapshot

           Objectives                          Measures introduced                          Impact/progress

           Employment                Setting up a venture capital fund for
           generation                tapping knowledge-based entrepreneurs
                                     of the industry

                                     Re-design and revamp schemes and
                                     programmes initiated in the handloom,
                                     sericulture, handicrafts, and jute sectors
                                     to ensure better returns for those from the
                                     disadvantaged categories

           Human resource            Strengthening HRD institutions, including       Development of skilled labour in
           development               NIFT, on innovative lines                       the industry

         Source: Ministry of Textiles (Government of India), D&B India


         Technology Upgradation Fund Scheme (TUFS)

1.3.5.   The Indian government launched TUFS in April 1999 with a view to modernise the textile industry and
         to increase its competitiveness in domestic as well as international markets. Under the scheme, textile
         firms across segments (spinning, cotton ginning and pressing, silk reeling and twisting, wool scouring
         and combing, synthetic filament yarn, texturising, crimping and twisting, manufacturing of viscose
         filament     yarn   (VFY)      and   viscose   staple   fibre   (VSF),   weaving/knitting,   garment/made-up
         manufacturing, processing units etc) could avail of loans for technological upgradation at lower
         interest rates. Some of the incentives provided under this scheme included:

                   Interest reimbursement at the rate of 5% of the normal interest rate charged by the lending
                    agency or rupee term loan, or

                   Coverage of 5% exchange fluctuation (interest and repayment) from the base rate on foreign
                    currency loan, or

                   Credit-linked capital subsidy of 15% for SSI textile and jute sector, or

                   Credit-linked capital subsidy of 20% for the powerloom sector, or

                   Interest reimbursement at the rate of 5% plus 10% capital subsidy for specified processing
                    machinery.

1.3.6.   This scheme facilitated more investment in the sector, mostly from large players. The scheme has
         been so popular that the industry asked for an extension of the scheme, which was originally set to
         expire by March 2007. The government has now extended this scheme for another 5 years, i.e. until
         FY12. The benefits of Modified TUFS are available for all sectors of textile industry as it was earlier
         with certain modifications. The modified structure of TUFS lays emphasis on better technology
         adoption, additional capacity building and provides for a higher level of assistance to segments that



                                                                                                                   57
have huge growth potential like garmenting, technical textiles and processing. Some of the major
                                                                                12
highlights of the modified TUF Scheme have been discussed in the below Box .

     Box 1.3.1: Highlights of Modified TUF Scheme:

            The scheme continues to provide 5 percentage points reimbursement on the interest
             charged by the lending agency except for the spinning machinery for which it will be 4
             percentage points.
            The scheme continues to provide cover for foreign exchange rate fluctuation not exceeding
             5% for the spinning machinery for which it will be 4%.
            The powerlooms units are now provided with an additional option to avail of 20% Margin
             Money subsidy under TUFS in lieu of 5% interest reimbursement on investment in TUF
             compatible specified machinery subject to a capital ceiling of Rs. 200 lakh and ceiling on
             margin money subsidy Rs.20 lakh. A minimum of 15% equity contribution from
             beneficiaries will be ensured.
            The SSI textile and Jute sector are now provide 15% Margin Money subsidy in lieu of 5%
             interest reimbursement on investment in TUF compatible specified machinery subject to a
             capital ceiling of Rs. 200 lakh and ceiling on margin money subsidy Rs.15 lakh. A minimum
             of 15% equity contribution from beneficiaries will be ensured.
            5% interest reimbursement plus 10% capital subsidy for specified processing machinery is
             continued.
            The Scheme will now provide 5% interest reimbursement plus 10% capital subsidy for
             specified machinery required in manufacture of technical textiles and garmenting
             machineries.
            Interest subsidy/capital subsidy/Margin Money subsidy will now be provided on the basic
             value of the machineries and the tax component would be excluded for the purpose of
             valuation in view of the decision for non-subsidising the taxes.
            25% capital subsidy on purchase of the new machinery and equipments for the pre-loom &
             post-loom operations, handlooms/upgradation of handlooms and testing & Quality Control
             equipments, for handloom production units.
            The entire range of imported second hand machinery, which have been permitted in the
             earlier Scheme, will now be ineligible under the modified Scheme for any benefit except
             automatic shuttleless looms with the value cap of Rs. 8.00 lakh per machine and 10 years‘
             vintage and with a residual life of minimum 10 years.
            Other investments such as energy saving devices, effluent treatment plant, in-house R&D,
             IT including ERP, TQM including adoption of ISO/BIS standards, CPP etc (including non-
             conventional sources) of the earlier Scheme will now be eligible for benefits of the scheme
             only up to 25% of the cost of machinery.
            For a specific thrust to garmenting, machineries for CAD, CAM and design studios and
             likes will be included in the separate heading of the guidelines of the scheme with a
             financial cap to be determined by the Inter Ministerial Steering Committee (IMSC) under the
             Chairmanship of Secretary (Textiles).
            Investments like land, factory building, pre-operative expenses and margin money for
             working capital will now be ineligible for benefit of reimbursement under the scheme except
             meant for apparel sector and handloom with existing 50% cap. In case apparel unit is
             engaged in other activity, the eligible investment under this head will only be related to
             plant & machinery eligible for manufacturing of apparel.

     Source: Ministry of Textile




12
   For further details please refer to
http://www.txcindia.com/html/TUFS%20Tex%20Jute%20industry_sub.htm


                                                                                                     58
1.3.7.   The progress in TUFS implementation was extremely slow at the time of inception but has gradually
         improved. By FY10 (until June), 26087 applications have been received under the scheme, of which
         25893 applications have been sanctioned, of which 25777 have been disbursed. Initially, the industry
         considered the interest subsidy to be very low to encourage speedy investments in modern machinery
         but with the introduction of credit-linked capital subsidy of 20% for the powerloom sector, investments
         have gradually picked up.

          Exhibit 1.3.2: Progress of TUFS

                                      Received                      Sanctioned                     Disbursed

          Year                                   Cost of
                                     No. of                         No. of     Amount             No. of      Amount
                                                 project
                               applications                   applications     (Rs bn)      applications      (Rs bn)
                                                 (Rs bn)

          FY00                           407          57.71            309         24.21              179         7.46

          FY01                           719          62.96            616          20.9              494        18.63

          FY02                           472            19             444           6.3              401         8.04

          FY03                           494          18.35            456          8.39              411         9.31

          FY04                           867          33.56            884         13.41              814         8.56

          FY05                           986          79.41            986          29.9              801        17.57

          FY06                         1086       161.94             1,078         67.76              993        39.62

          FY07                        12336       610.63            12,589       290.73            13168       266.05

          FY08                         2408       212.54             2,260         80.58             2207        68.54

          FY09 (P)*                    6113       565.42             6,072       240.07              6111      218.26

          FY10 (till
          June 2009)
                                         199           1.17            199          0.82              198          0.8

          Total                       26,087     182270             25,893       783.07            25,777      662.84

         * As the cut off date for the cases sanctioned prior to on or before 31st March, 2007 for claiming subsidy under
         TUFS has been fixed till the quarter ending Dec., 2008, the data up to Dec., 2008 covers units whose project was
         sanctioned prior to 31st March, 2007

         Source: Ministry of Textiles and D&B India




                                                                                                                      59
         Technology Mission on Cotton (TMC) 2000

1.3.8.   TMC was launched in February 2000 with the primary objective of improving production, productivity
         and quality of cotton in India. The TMC was structured into four mini missions, which were
         implemented by different nodal agencies.


           Exhibit 1.3.3: Objectives of TMC

             Mini Mission         Objective                                   Nodal Agency

                                  Cotton Research and Technology              Indian Council of Agriculture
                    I
                                  generation                                  Research

                                  Transfer of Technology and
                   II                                                         Ministry of Agriculture
                                  Development

                                  Improvement of Marketing
                   III                                                        Ministry of Textiles
                                  infrastructure

                                  Modernisation / Upgradation of G & P
                   IV                                                         Ministry of Textiles
                                  Factories

         Source: Office of Textile Commissioner and D&B India


1.3.9.   Objectives of TMC:

                Mini Mission I

                         o   Develop short duration, high yielding, disease and pest resistant varieties and hybrids
                             of cotton with appropriate fibre parameters to meet the need of the textile industry

                         o   Develop integrated water and nutrient management practices for cotton and cotton
                             based cropping system

                         o   Develop and validate IPM technology for different cotton growing areas of India to
                             improve yield and reduce the cost of cultivation, thereby ensure better net return to
                             the cotton growers

                Mini Mission II

                         o   Technology transfer through demonstration and training

                         o   Supply of delinted certified seed by setting up of delinting units

                         o   Accelerate IPM activities

                         o   Providing adequate and timely information input to the farmers periodically




                                                                                                                    60
                   Mini Mission III

                        o   Improve marketing infrastructure by setting up new market yards and activating as
                            well as improving existing market yards

                   Mini Mission IV

                        o   Modernise and technologically upgrade existing ginning and pressing factories so as
                            to improve the processing of cotton

1.3.10.   The following table describes the ‗Technology Mission on Cotton (TMC) in brief.

          Table 8: Technology Mission on Cotton (TMC)

             Exhibit 1.3.4: Progress of TMC

             Mission           Focus                       Output

             Mini                                          Development of new genotypes to improve quality
                               Research
             Mission I                                     of cotton and cotton yarn in the country


             Mini              Technology
                                                           Extension services and distribution of improved
                               dissemination programs
             Mission II                                    seed varieties
                               for farmers

             Mini              Improvements in market      161 Market yards (out of sanctioned 250 market
                                                           yards) were modernised to avoid cotton
             Mission III       infrastructure              contamination

                               Modernisation of the
             Mini                                          829 ginning and pressing factories (out of targeted
                               ginning and pressing        993 projects) were modernised
             Mission IV
                               sector

          Source: Ministry of Textiles and D&B India

1.3.11.   Under Mini Mission III, development of 250 market yards has been sanctioned and 161 have been
          completed by September 2008. The total cost of the sanctioned project is Rs 4.9 billion out of which
          share of TMC is Rs 2.5 billion. Under Mini Mission IV, modernisation of 993 Ginning and Pressing
          (G&P) factories have been sanctioned and 829 have been completed. The total cost of the sanctioned
          projects is Rs 14.5 billion out of which the share of TMC is Rs 2.3 billion. Fund allocated to TMC (Mini
          Mission III & IV) during FY09 was Rs 500 million and is the same during FY10. The Government, by
          the end of the Eleventh Plan, envisages increasing the yield of cotton to 700 kg/ha. The Government
          also targets to increase the production of extra long staple (ELS) cotton to reduce the gap between
          demand and indigenous supply of ELS cotton.




                                                                                                                 61
          Duty Structure

1.3.12.   The Government had increased customs duty on cotton fibre exports from 5% in FY02 to 10% in
          FY03. But in FY09, the Government has done away with the customs duty on cotton. The customs
          duty on cotton yarn also has gradually decreased from 20% in FY05 to 15% in FY06 and further to
          10% in FY08. The duty on cotton fabric has also decreased substantially over the years. In addition,
          the Government allowed 5% export incentive for raw cottons.

           Exhibit 1.3.5: Customs duty on different categories of cotton textiles (% advalorem)

           ITEMS                  FY02      FY03       FY04       FY05       FY06              FY07     FY08        FY09     FY10

           Cotton                      5         10         10         10          10            10          10        Nil      Nil

           Cotton Yarn               20          20         20         20          15          12.5          10        10       10

           Cotton
                              **30/35*       ** 30      ** 20      ** 20          **15     **12.5           **10     **10     **10
           fabrics

          **Attracts advalorem rate or specific rate whichever is higher basis

          Source: Office of the Textile Commissioner and D&B India

1.3.13.   Cotton production does not attract excise duty. However, excise duty is applicable on cotton yarn and
          cotton fabric which have been reduced substantially.

           Exhibit 1.3.6: Excise duty on different categories of cotton textiles (% advalorem)

           ITEMS            FY02       FY03       FY04       FY05       FY06        FY07         FY08               FY09        FY10

           Cotton              Nil         Nil        Nil        Nil        Nil          Nil          Nil              Nil            Nil

                                                                                                                                    #
           Cotton Yarn         9.2         9.2        9.2    *4.08      *4.08       *4.08        * 4.12        # *4.12/Nil
                                                                                                                             *4.12/Nil

           Cotton                                                                                                                   #
                               16          12         10     *4.08      *4.08       *4.08        * 4.12        # *4.12/Nil
           Fabrics                                                                                                           *4.12/Nil

          *Zero duty without CENVAT facility

          #The three major advalorem rates of CENVAT-14%, 12% and 8% applicable to non-petroleum products have
          been reduced by 4% each, i.e., to 10%, 8% and 4% respectively and CENVAT on cotton textiles and textile
          articles has been reduced from 4% to Nil as a measure to stimulate the economy in the context of global
          economic recession by Government of India on 7th December 2008. However, in Budget 2009-10, the optional
          CENVAT on Pure cotton textiles restored at 4% and for other textile excluding Man-made filament yarns and
          fibres at 8%

          Source: Office of the Textile Commissioner and D&B India




                                                                                                                                      62
         1.4. WORLD SCENARIO FOR COTTON FIBRE
1.4.1.   Cotton is mainly native to tropical countries. However, it is planted widely in both the hemispheres.
         Cotton is critical to economies of many developing countries. Out of the 65 cotton-producing
         countries, 52 were developing countries in 2007-08. Cotton is also regarded as one of the heavily
         traded agricultural commodities, given the involvement of over 100 countries in exports or imports of
         cotton. The world cotton industry has witnessed substantial improvement in terms of both production
         and consumption of cotton. However, the Cotton‘s share of world fibre use has declined to around
         40% from about 60% in the 1960s. Nevertheless, it still is one of the major fibres produced in the
         world.




         WORLD COTTON DEMAND-SUPPLY DYNAMICS

1.4.2.   World cotton production has declined for second consecutive years in 2008-09. World cotton
                                                                         13
         production has declined by around 2% and 10% in 2007-08              and 2008-09, respectively. In fact, world
         cotton production at 23.5 mn tonnes during 2008-09 is the smallest since 2004-05. World cotton
         production declined during the year primarily due to a reduction in world cotton area for the second
         consecutive season.

         Exhibit 1.4.1: World cotton Production (Season beginning August 1)




         Source: International Cotton Advisory Committee (ICAC) and D&B India

1.4.3.   Significant area of cotton was shifted to grains and oilseed production due to more attractive prices
         than for cotton. World cotton harvested area has experienced sustained decline in the last few years.
         According to the ICAC data, area under cotton cultivation shrank to 30.66 mn ha (estimated) in 2008-


         13
           2008-09 refers to Cotton year August 2008-July 2009 (year mentioned in this section refer to cotton year from
         August to July unless otherwise stated)

                                                                                                                     63
         09 from 32.84 million ha in 2007-08. During 2008-09, cotton yield also registered a decline compared
         to the previous year primarily on account of unfavourable weather conditions across the world. After
         witnessing sustained improvement since 2000-01, the world cotton yield has moderated to 767kg/ha
         in 2008-09 from a peak of 797 kg/ha in 2007-08. World cotton yield has increased by around 17.8%
         from 2003-04 to 2008-09 mainly due to extensive use of BT cotton varieties across the globe.
         Genetically modified (GM) seeds occupied around 48% of total harvested area globally in 2008-09.

         Exhibit 1.4.2: World Cotton harvest area and production yield (Season beginning August 1)




         Source: ICAC, D&B India

1.4.4.   During 2008-09, almost all the major cotton producing countries witnessed a decline (y-o-y) in
         production of cotton except Pakistan and Australia. China, India, USA, Pakistan, Brazil and
         Uzbekistan accounted for almost 85% of the world cotton production in 2008-09.

1.4.5.   With the global economy traversing through turbulent times, cotton consumption declined
         substantially by 12.75% during 2008-09. World cotton mill consumption diminished due to a drop in
         end-use consumption of cotton products subsequent to a slow-down in world economy, loss of
         competitiveness of cotton prices against polyester prices, and tightening credit conditions for textile
         mills. The slump in the world consumption of cotton could be largely attributed to substantial decline in
         domestic consumption of cotton in China, which is the largest consumer of cotton in the world. In fact,
         the china‘s cotton consumption declined by around 17% in 2008-09. During 2008-09, cotton
         consumption declined in almost all the major cotton consumers in the world.




                                                                                                               64
         Exhibit 1.4.3: World domestic consumption (Season beginning August 1)




         Source: ICAC and D&B India

1.4.6.   Even world cotton imports and exports declined during 2008-09. World exports declined by almost
         25.36% in 2008-09 primarily backed by reduction in exports from major exporting countries like US,
         India and Uzbekistan. With imports from some of the major importing countries like China, Turkey and
         Pakistan witnessing substantial decline, World cotton imports also declined by around 25.73% during
         2008-09.

         Exhibit 1.4.4: Trend in World Cotton Export & Import




         Source: ICAC, D&B India

1.4.7.   USA maintained its first position as a largest exporter of cotton in 2008-09 accounting for as much as
         44.39% of the world cotton exports. India, however, could not secure its place as second largest
         exporter after USA in 2008-09 on account of significant decline of 73.86% in cotton exports from
         India. Uzbekistan has emerged as the second largest cotton exporters in the World during 2008-09.




                                                                                                            65
         Exhibit 1.4.5: Country-wise Share in Cotton Exports




         Source: ICAC, D&B India

1.4.8.   China continued to retain its position as the leading importer of cotton in 2008-09, accounting for
         almost 23% of the world‘s cotton export. During 2008-09, Bangladesh was the second largest
         importer of cotton having a share of 10% in world import.

         Exhibit 1.4.6: Country-wise Share in Cotton Imports




         Source: ICAC, D&B India




         A BRIEF REVIEW OF MAJOR COTTON PRODUCING COUNTRIES

         United States (US)

1.4.9.   The United States (US) is the world‘s largest exporter of agricultural products. Any change in US
         agricultural policy markedly influences the world‘s agricultural markets. US is the largest exporter of
         cotton across the world. US primarily exports US upland and US Pima cotton varieties to countries
         like China, India, Pakistan, etc. US domestic consumption cotton showed a downward trend since
         2004-05 due to increased competition from price-competitive foreign imported textile products,


                                                                                                             66
          particularly from Asia. The proportion of cotton exports in production also grew from 62.1% in 2004-05
          to 99.3% in 2008-09. US is a net exporter of cotton. The following chart depicts the trend of exports
          proportion in production.

          Exhibit 1.4.7: Trend of cotton exports proportion in production




          Source: ICAC, D&B India

1.4.10.   US usually enacts ‗Farm Bill‘ in every 5-6 years including comprehensive legislations on farm policies.
          The latest farm bill titled ‗Food, Conservation, and Energy Act of 2008‘ (thereon, Farm Bill 2008) is
          another bill in the long series of farm bills. This farm bill was structured under the purview of record
          high farm incomes and very high market prices, by historical standards, for two consecutive years.
          This was primarily in the case for grains, oilseeds and dairy.

1.4.11.   The following table furnishes major policy initiatives incorporated in Farm Bill 2008 with an emphasis
          on cotton farming.

           Exhibit 1.4.8: United States Farm Bill 2008

           Major Policy
                                       Objectives              Measures                 Current Status
           Initiatives

           Direct Payments             Providing income        Producer has to enter    Direct Payment Rates
           Counter-Cyclical            support to farmers      into an annual           for upland cotton are
           Payments                    engaged in farming of   agreement to receive     specified at US$
                                       upland or ELS cotton    the benefit of ‗Direct   0.0667/lb.
           Marketing
                                       and other mentioned     Payments‘.
           Assistance                                                                   Target prices for upland
                                       crops in the bill.
           loans                                               Counter-cyclical         cotton are specified at
                                                               payments are             US$ 0.7125/lb, US$
           Loan Deficiency
                                                               provided, whenever       0.7125/lb and US$
           Payments
                                                               the current effective    0.7125/lb for CY 2008,
                                                                                           14
                                                               commodity price is       CY 2009 and CYs
                                                               lesser than the target   2010-2012 respectively.
                                                               price.
                                                                                        National Marketing
                                                               Marketing Assistance     Assistance Loan Rates
                                                               Loans are provided for   for upland cotton and


          14
               CY – Cotton Year for US is from August-July

                                                                                                                67
Exhibit 1.4.8: United States Farm Bill 2008

Major Policy
                     Objectives               Measures                  Current Status
Initiatives
                                              9 months to protect       ELS cotton are specified
                                              farmers from adverse      at US$ 0.52/lb and US$
                                              market conditions.        0.7977/lb, respectively
                                                                        for CY 2008, CY 2009
                                              Loan Deficiency
                                                                        and CYs 2010-2012.
                                              Payments are meant
                                              to support producers      Loan Deficiency
                                              with a cash payment       Payments are available
                                              option without            for all loan commodities
                                              indebting their           except ELS cotton.
                                              commodity.

Commodity            Speeding up the          Commodity certificates    Continues cotton
Certificates         process of obtaining     can be purchased at       storage payments, but
                     commodity loan.          effective adjusted        reduces rates by 10%
                                              world price for upland    from rates provided in
                                              cotton.                   2006 for CY 2008-11.
                                                                        Reduces rates by 20%
                                              USDA is authorised to
                                                                        for CY 2012
                                              pay storage and other
                                              costs associated with
                                              upland cotton going
                                              into the loan program.

Average Crop         To reduce market risks   ACRE is first time        ACRE revenue
Revenue Election     by allowing farmers to   introduced in Farm Bill   payments are available
(ACRE) Program       lock in revenue          2008. It provides a       on 83.3% of acreage
                     guarantee.               better match to the       planted or considered
                                              producer‘s current        planted to covered
                                              production of all         commodities or peanuts
                                              covered crops             in CY 2009-11 and 85%
                                              (including upland         in CY 2012.
                                              cotton) than the
                                              traditional schemes.
                                              Payments under
                                              ACRE are only
                                              triggered when
                                              revenue falls below the
                                              guarantee.

Recourse Loans       Enhancing support to     Repayment of              Recourse seed cotton
for High-Moisture    farmers for cotton       recourse loans made       loans are available on
Corn and Seed        farming.                 under this section was    any production of upland
Cotton                                        made at loan rate         and ELS cotton.
                                              established for the
                                              commodity, plus
                                              interest.




                                                                                                 68
Exhibit 1.4.8: United States Farm Bill 2008

Major Policy
                     Objectives                 Measures                   Current Status
Initiatives

Special Upland       To temporarily increase    Special import quotas      A limited global import
Cotton Marketing     cotton supplies into the   are permitted              quota was authorised
Loan Provisions      country                                               when average monthly
                                                                           spot price of base-
                                                                           quality upland cotton
                                                                           exceeded 130% of
                                                                           average price during
                                                                           preceding 36 months.

Upland Cotton        To increase domestic       Economic Adjustment        From August 1, 2008
Economic             cotton consumption         Assistance will be         through July 31, 2012,
Adjustment                                      provided to all            economic adjustment
Assistance                                      domestic users of          assistance equal to 4
                                                upland cotton for all      cents/lb shall be
                                                documented use of          provided to domestic
                                                upland cotton during       users of upland cotton.
                                                previous month             Payment rate drops to 3
                                                regardless of the origin   cents/lb on August 1,
                                                of the cotton. This        2012.
                                                provision is first time
                                                                           Assistance can be used
                                                introduced in Farm Bill
                                                                           only for acquisition,
                                                2008.
                                                                           construction, installation,
                                                                           modernisation,
                                                                           development,
                                                                           conversion, or
                                                                           expansion of land, plant,
                                                                           buildings, equipment,
                                                                           facilities, or machinery.

Special              To increase exports and    Payments were made         Payments were made to
Competitive          maintain                   to domestic users and      lowest priced competing
Provisions for       competitiveness of ELS     exporters when world       ELS cotton was less
Extra-Long Staple    cotton in world markets    market price was           than 134% of ELS loan
Cotton                                          below the US price for     rate to exporters and
                                                4 consecutive weeks.       domestic users.


Cotton Price         For better information     Agricultural Marketing     Restriction is repealed in
Forecasting          dissemination              Act 1929 prohibited        Farm Bill 2008.
                                                any prediction of
                                                cotton prices from
                                                issuance or inclusion
                                                in any government
                                                report, bulletin, or
                                                other such publication.




                                                                                                   69
           Exhibit 1.4.8: United States Farm Bill 2008

           Major Policy
                                       Objectives                  Measures                 Current Status
           Initiatives

           Crop Insurance              Obtaining cost savings,     Title XV of the Farm     Producers who will
           and Disaster                greater compliance and      Bill 2008 authorizes     suffer losses on eligible
           Assistance                  giving special treatment    the Supplemental         commodities in
                                       to organic farmers.         Agricultural Disaster    designated agricultural
                                       Expanding research and      Assistance Trust Fund.   disaster counties and
                                       development. Timing                                  producers with losses
                                       shifts in premium due                                that exceed 50% for
                                       dates and company                                    farms in counties
                                       expense                                              outside a disaster area
                                       reimbursement. Giving                                will be eligible for
                                       regular opportunities for                            assistance under this
                                       the Risk Management                                  program.
                                       Agency (RMA) to evalu-
                                       ate the industry.

          Source: USDA, D&B India


          China

1.4.12.   China is of particular significance in the world cotton industry given that it is not only the largest cotton
          producer but also the biggest consumer of cotton. There are five main cotton-planting areas in China:
          the South China Region, the Yangtze River Region, the Yellow River Region, the North Region, with a
          Special Early-Maturing Cotton Region and the Northwest Inland Region (China Agricultural Network,
          2007). Among them, Xinjiang Autonomous Region (included in Northwest Inland Region) takes a
          significant position in cotton production in China.

                                                                                                                        15
1.4.13.   According to ICAC data, the China‘s cotton production stood at an estimated 8.02 MMT during MY
          2008-09. Despite being the largest producer of cotton, China‘s cotton production has been unable to
          meet its cotton consumption, which is estimated at 9.00 MMT for MY 2008-09. Thus, china imports
          large quantities of cotton and is the largest importer of cotton. China‘s cotton imports in MY 2008-09
          are estimated to have been around 1.42 MMT lower compared to 2.51 MMT in the previous year.
          Destination-wise United States is the largest import origin for China followed by India. According to an
          USDA report India‘s share in China‘s cotton import has increased from 23% during MY 2006-07 to
          32% in MY 2007-08.

1.4.14.   Chinese government has over the years taken many measures such as providing seed subsidy,
          reforming the classification system etc to support the Chinese cotton as well as textile industry. While
          the Chinese cotton market has been liberalised to greater extent the Government has been
          intervening by way of state purchase and sale of cotton with an aim to maintain orderly conditions in



          15
               MY – Market Year for china is from August-July

                                                                                                                    70
the market. Government policies such as adjustment of sliding-scale duties, public acquisition of
reserve cotton, adjustment of export rebates for textile products and cotton subsidies for improved
species with a definite orientation to protect the farmer‘s interests and enhance China‘s sustainable
development capacity for cotton products has provided substantial support to all the stake holders in
China‘s cotton economy.



 Box 1.4.1: Working of the sliding scale duties and the macro adjustment by the
 Chinese Government

 As per information available, the Chinese government distributed 0.894 million tons worth of TRQs
 and 1 million tons worth of quotas with sliding scale duties in mid December 2009, which was done
 earlier than that in previous years. It is reported that a further one million tons of quotas with sliding
 scale duties will be distributed in April, 2010. The stated purpose of these measures is to increase
 cotton supply in order to stabilize domestic cotton prices while supporting the textile industry.

 It is estimated by Chinese authorities that a supply-demand gap of 3.3 million tons will be seen for
 the year, up from 1.7 million tons last year. Unlike in previous years, it may be difficult to source
 cotton internationally. Hence, in order to avoid ‗irrational cotton pricing‘, certain macro-control
 measures were decided upon during the National Cotton Modulation Conference‘ in Nov 2009.
 The following integrated control measures are expected to be published soon. Apart from
 distribution of quotas as mentioned above, cotton reserves will be sold to maintain a demand-
 supply balance, and avoid sharp price increases. In 2009, 2.62 million tons of reserve cotton was
 reportedly sold.




                                                                                                         71
1.4.15.   Some major policy initiatives of the Chinese Government to support the cotton industry have been
          discussed in the below table:


           Exhibit 1.4.9: Chinese cotton policy round-up

           Policy              Objective            Measures                          Current Status

           Cotton Quality      To align China‘s     Transfer responsibility of        As of the end of 2008,
           Classification      Classification       cotton quality classification     1,343 gins had been
           System Reform       System with          and labelling to the Bureau of    completed or were
           Plan                international        Fibre Inspection of China         undergoing renovation of
                               standards            (BFIC) from the processing        equipment, of which 1,257
                                                    industries.                       gins having a total baling
                               To create a more                                       capacity of 6.8 MMT were
                               objective and        Develop a National Cotton         completed
                               scientific testing   Quality Database.
                               process                                                85 classification
                                                                                      laboratories equipped with
                                                    Develop Quality Standards for
                                                                                      278 HVI instruments
                                                    HVI Testing. Replace the
                                                                                      capable of classifying 4.2
                                                    earlier testing method based
                                                                                      MMT of cotton were
                                                    on the classifier‘s subjective
                                                                                      developed by around 82
                                                    judgment and experience to a
                                                                                      classification agencies
                                                    new system based on high
                                                                                      spread nationwide
                                                    volume instrument testing
                                                    (HVI).
                                                                                      Increasing number of gins
                                                                                      participating in cotton HVI
                                                    Replace the 85 Kg bales used
                                                                                      classification Around 1,216
                                                    earlier with international
                                                                                      gins participated in cotton
                                                    standard of 227Kg bales.
                                                                                      HVI classification as of the
                                                                                      end of 2008, up 57 percent
                                                    Develop a new humidity
                                                                                      over that in 2007.
                                                    control system to ensure
                                                    appropriate moisture levels for
                                                    cotton throughout the             Total processed cotton
                                                    processing chain.                 based on the new
                                                                                      classification system
                                                    Built Specialised Cotton          reached 2.8 MMT during
                                                    Warehouses where tested           2008
                                                    and classified cotton will be
                                                                                      According to China‘s
                                                    delivered on a voluntary basis
                                                                                      cotton classification plan,
                                                    without changing ownership.
                                                                                      the new classification
                                                    The seller will deliver cotton
                                                                                      system will be fully
                                                    out of the designated
                                                                                      enforced by September
                                                    warehouses after a sale is
                                                                                      2010; specifically ―small
                                                    completed.
                                                                                      bale‖ cotton will not be
                                                                                      allowed to enter the
                                                    Classification to be shifted
                                                                                      market.
                                                    from textile factories to the
                                                    processing enterprises.
                                                                                      Concession loans are
                                                    Classifiers will be trained and
                                                                                      being provided to the
                                                    licensed before they are hired
                                                                                      entities engaged in the
                                                                                      reform for equipment
                                                                                      renovation




                                                                                                                72
Exhibit 1.4.9: Chinese cotton policy round-up

Policy             Objective           Measures                         Current Status

Multi-year “seed   To stabilise the    The subsidy provided to large    According to USDA a total
subsidy”           cotton planted      seed producers/traders for       of $72 million (RMB 500
program            area                selected ―high quality           million) per year in 2007
                                       varieties‖ through an open       and 2008 has been
                                       bidding process                  appropriated to cotton
                                                                        seed producers/traders to
                                                                        cover 2.25 MHa of the
                                                                        planted area in major
                                                                        cotton-producing provinces

Subsidy to         To facilitate the   On June 23, 2008, MOFIN          -
Transportation     shipment of         published announcement on
of Xinjiang        outbound            Administrative Measures on
Cotton             Xinjiang cotton     Subsidy to Transportation of
                   which is            Xinjiang Cotton, whereby the
                   generally           GOC will provide a
                   hindered by         transportation subsidy for the
                   railcars            shipment of cotton out of
                   shortages           Xinjiang, effective MY08-09
                                       through MY10-11 tentatively.

                                       The subsidy rate is $59 (RMB
                                       400)/MT.

Targeted loans     To financially      The Agriculture Development      According to the USAD, as
                   assist domestic     Bank of China (ADBC)             at end March 2008, ADBC
                   cotton marketing    provides targeted loans with     disbursed loans for more
                                       favourable terms for the         than 4.4 MMT of the 2007
                                       purchase of cotton.              crop

                                                                        Xinjiang‘s loans reached a
                                                                        record $3.7 bn covering
                                                                        more than 2.1 MMT of the
                                                                        MY07-08 crop in the
                                                                        province, up 13 percent
                                                                        over the previous year.

State cotton       To support the      Government conducts sales        -
reserve            domestic cotton     and purchase of cotton
management         price and
policy             facilitate
                   marketing of
                   domestic cotton

                   Enhance the
                   ongoing
                   classification
                   reform by paying
                   out a premium
                   for large bale
                   cotton.




                                                                                                73
           Exhibit 1.4.9: Chinese cotton policy round-up

           Policy                   Objective             Measures                          Current Status

           “Quality Credit          To strengthen         General Administration of         -
           Assessment               the inspection        Quality Supervision,
           Measures”.               and quarantine        Inspection and Quarantine of
                                    supervision of        People's Republic of China
                                    imported cotton,      (AQSIQ) decided to
                                                          implement registration
                                    Prevent from          management upon the
                                    misdeeds in           overseas cotton supplier
                                    trade, such as        enterprises who are going to
                                    defect or             export to China mainland
                                    adulteration,         (overseas supplier
                                                          enterprises).
                                    Guarantee the
                                    quality of
                                    imported cotton

           Tariff Rate              To regulate the       On joining the WTO, China
           Quota (TRQ)              market and            was required to establish
                                    protect the           Tariff Rate Quotas (TRQ's) on
                                    interests of both     a number of commodities
                                    farmers and the       including cotton, permitting
                                    domestic textile      imports of a stipulated amount
                                    industry              at a nominal tariff (1% for in-
                                                          quota cotton).

                                                          The GOC adjusts the tariff
                                                          rate applied to cotton imports
                                                          under the additional TRQ as
                                                          an when required


          Source: Various, D&B India


          Brazil

                        16
1.4.16.   In 2008-09 , Brazil accounted for around 5.19% of the total world cotton production after increasing
          to 6.12% in 2007-08 from 4.05% in 2005-06. Brazil‘s cotton production declined by around 23.85%
          during 2008-09 primarily on account of reduction in planted area, especially in the Mato Grosso
          region. According to a USDA report, the farmers shifted area under cotton production to soyabean
          and other commodities mainly due to lack of adequate financing. In the last few years although
          consumption of cotton in Brazil has witnessed marginal improvement, it has been lower compared to
          the domestic cotton production. Consumption of cotton has declined by 7.07% during 2008-09. Brazil
          is emerging as one of the leading exporter of cotton. Brazil‘s cotton exports increased at an annual
          average rate of 21.41% in the last four years (2006-2009)




          16
               2008-09 refers to the period from August 2008 to July 2009

                                                                                                             74
1.4.17.   Brazilian Government has over the years devised policies to aid agriculture sector in general and
          some commodities in particular. While certain policies such as the Preferential credit policy are aimed
          at providing support the entire agriculture sector, other like the income support programs have been
          introduced to promote certain commodities. Preferential credit policies, which have been in place in
          Brazil since the 1970s, are primarily aimed at stimulating the expansion of agricultural production.
          New income support programs were also put in place in Brazil since the agricultural policy reform in
          the early 1990s. The details of some of the major policy initiative taken by Brazil to support cotton
          sector have been enumerated in the below table:


           Exhibit 1.4.10: Brazil cotton policy round-up

           Major Policy
                               Objective                           Measures
           Initiatives

           PEP (Premium        To supplement the supply of         Premium is paid to wholesale buyers who are
           to Commercial       commodities in areas of the         wiling to acquire the product indicated by the
           Buyers)             country considered to be            federal government from the farmer and /or
                               deficient in agricultural           cooperative at a reference value
                               production
                                                                   premium is equal to the difference between the
                                                                   minimum guaranteed price and the market
                                                                   price.

           PEPRO               Compensate the farmers for the      Government grants a premium to the farmer or
           (Equalization       weakening U.S. dollar in relation   cooperative which sells its products at public
           Premium to          to the Reais.                       auction.
           Farmers)
                                                                   The premium paid is the difference between
                                                                   the Reference Value established by the
                                                                   government and the value of the premium (the
                                                                   maximum value paid by the government as a
                                                                   guarantee of the Reference Value)

           PROP                To signal future price for the      It is a subsidy program granted in the form of a
           (Premium to         market                              public auction for the consumer to acquire, at a
           Commercial                                              future date, a determined product directly from
           Buyers under a      Guarantee future income to the      the producer and/or cooperative at a prefixed
           Private Sell        farmers                             price, utilising a private contract for the option
           Option                                                  to sell.
           Contract)
                                                                   Government pays buyer of the product a risk
                                                                   premium if the market price falls below the
                                                                   option exercise price

           AGF (Federal        To ensure purchase of product       The Government buys agricultural products at
           Government          at a minimum price determined       the minimum price when the market price is
           Acquisition )       by the Government                   below the minimum.

                               To support the farmers

                               To support commodity prices

          Source: Various, D&B India


                                                                                                                 75
          Pakistan

1.4.18.   Pakistan announced its first ever Textile Policy 2009-2014 during August, 2009. Policy targets to
          increase exports from the existing US$ 10 billion to US$ 25 billion by the end of policy period. The
          following initiatives have been taken to support domestic textile industry by the government.

           Exhibit 1.4.11: Pakistan cotton policy round-up

           Major Policy Initiatives           Objective

           Cotton Standardisation System      To earn better price in the international market
           (1987-1992)
                                              To allow graded cotton to be used for domestic use


           Clean Cotton Programme             To enable production of standardised and clean (free from
           (2005-06)                          contamination) cotton



           Cotton Fibre Testing               To encourage instrumental classification of cotton fibre



           Infrastructure and technological   To develop clusters with amenities such as laboratories,
           development                        product development centres, research centres, etc.
                                              To develop ginning factories (import duty on ginning presses
                                              reduced to 5%

           Focus in value addition            To introduce BT cotton on priority basis
                                              To enhance production of long staple cotton

           Marketing Insurance Schemes        To foster the export of cotton fibre
           & Zero rating of Exports
                                              To protect exporters against unforeseen losses


           Tariff Rate Quota (TRQ)            To regulate the market and protect the interests of both
                                              farmers and the domestic textile industry


           First Textile Policy (2009-2014)   To increase exports from present level of US$ 10 billion to
                                              US$ 25 billion.

          Source: D&B India




                                                                                                             76
          STOCK-TO-USE RATIO ANALYSIS:

1.4.19.   SU ratio can be defined as the level of carryover (ending) stock for any particular commodity as a
          percentage of the total demand or use. It indicates the interrelationship between supply and demand
          of any commodity.

1.4.20.   The stock-to-use ratio can be calculated by following mathematical expression.


               (Beginning Stock + Production + Imports) — (Domestic Consumption + Exports)


                                                                                                     x 100


                               (Domestic Consumption (OR) Mill Use + Exports)


1.4.21.   Stock-to-use ratio is considered as one of the important indicators of future price trend of any
          commodity as it indicates the surplus supply against demand. According to a study comparing the
          monthly world stocks-to-use estimates (in percent) with the cotlook A-index of world cotton prices (in
          cents per lb), the stocks-to-use ratio vary inversely with world prices.

1.4.22.   World stock-to-use ratio of cotton has largely remained range bound albeit some fluctuations
          depending on the production and consumption of cotton across various countries in the world. During
          2004-05, the growth in world cotton production (27.86%) outpaced the growth of world cotton
          consumption (9.63%) leading to surge in the SU ratio. The SU ratio surged to 49% in 2004-05 as
          compared to 41% during 2003-04. SU ratio remained stable at 49% in 2005-06 and experienced
          marginal decline in the two subsequent years before increasing to 56% in 2008-09. The increase in
          SU ratio could be attributed to the slowdown in consumption and weaker international price scenario
          in 2008-09.




                                                                                                             77
                                                                                                          17
               Exhibit 1.4.12: Stock-to-Use Ratio in Major Cotton Producing Countries
               (Crop year: August-July)

               Countries                          2004-05            2005-06            2006-07         2007-08     2008-09

               World                                   49.0               49.0               48.0          47.0        56.0


               India                                   52.0               37.0               33.0          28.0        59.0


               India*                                    37                 24                 20              15      21.4


               China                                     32                 42                 34              30       42


               United States                             26                 26                 53              55       41


               Pakistan                                  36                 32                 30              31       28


               Brazil                                    72                 44                 75              69       46

          *Data is taken from Cotton Advisory Board, Indian cotton crop year: October-September

          Source: ICAC (cotton: world Statistics September 2009), D&B India

1.4.23.   There has been no general pattern observed in the SU ratio of major countries of the world. The SU
          ratio varies across different countries depending on their domestic production, consumption and its
          trade of cotton. The SU ratio is generally calculated according to the cotton cropping season of any
          country.




          17
               Stock-to-use ratio is calculated as ending stocks divided by consumption plus exports.



                                                                                                                          78
         1.5. FUTURE PROJECTIONS FOR COTTON FIBRE
1.5.1.   Cotton fibres lie at the lowermost level of the textile chain with readymade garments and other final
         products being in the final stage. Production and consumption at each stage is influenced by the
         demand supply dynamics for readymade garments. D&B India has projected the cotton fibre
                                                          18
         consumption on the basis of apparent                  cotton fabric consumption in the country. For projection of
         production, D&B India has taken two production yield scenarios in the country.




         FUTURE OUTLOOK OF INDIA’S COTTON PRODUCTION

         D&B Forecasts:

1.5.2.   Cotton production is largely dependent on the area under cotton production coupled with its
         productivity. Given the issues pertaining to food security and land pressures, it has been assumed
         that the area under cotton production is largely constant at the current level (which is 94.06 lakh
         hectares). Thus, the future production is expected to be driven by improvement in cotton yield. The
         following exhibit showcases the forecasting methodology adopted in projecting production

         Exhibit 1.5.1: Production of cotton fibre forecasting methodology




         Source: D&B India




         18
              Apparent cotton fabric consumption= Production + Imports-Exports


                                                                                                                       79
1.5.3.   The following two scenarios have been considered for projecting the future cotton production in India:

                 Scenario I: Cotton yield will grow by 4.0%

                 Scenario II: Cotton yield will growth by 4.7% (growth rate required to achieve the current
                         average yield of cotton in the world, excluding the cotton yield in India at 873 kg/ha by
                         2020)

          Exhibit 1.5.2: Cotton fibre production forecasted by D&B India

                                        Scenario I                                  Scenario II
          Year
                             Estimated production     Yield (Kg       Estimated production (Lakh      Yield (Kg
                                     (Lakh bales)          /ha)                           bales)           /ha)

          2010-11                              315           569                               319         577

          2014-15                              368           666                               384         693

          2019-20                              448           810                               483         873

         Source: D&B India


         Production forecast by Directorate of Cotton Development, Mumbai (DOCD)

1.5.4.   The forecast of DOCD are based on the following assumptions:

                  Area expansion is limited and there will be no increase in area. It can be ranged between 95-
                   100 lakh hectares

                  Maximum production and yield obtained in major states during last few years were taken as
                   the base for estimation

                  Availability of irrigation potentiality in the respective states was considered.

                  Growth rate of cotton production during the last decade in the country.

1.5.5.   Based on the above assumption, the forecast of cotton production by DOCD are as follows:

           Exhibit 1.5.3: Forecasting of cotton fibre production by DOCD, Mumbai

                                    Estimated production                           Projected yield
           Year
                                              (Lakh bales)                         (Kg lint per ha)

           2010-11                                     330                                     561

           2014-15                                     395                                     671

           2019-20                                     475                                     807

         Source: DOCD Mumbai


                                                                                                                  80
         FUTURE OUTLOOK FOR COTTON CONSUMPTION IN INDIA

1.5.6.   The estimated consumption of cotton is derived by applying a conversion ratio to the estimated
         consumption of cotton fabric. The fabric consumption is determined by world GDP growth rate, India‘s
         PCI (per capita income) and the growth rate of MMF (man made fibre). The following mathematical
         expression showcases the relationship between fabric consumption and stated variables.


         Fabric consumption=f (World GDP growth, India’s PCI, Growth in MMF production)

1.5.7.   The following exhibit depicts the forecasting methodology adopted in consumption projection.

         Exhibit 1.5.4: Forecasting Methodology




         Source: D&B India




          Box 1.5.1: Conversion ratio


          The conversion ratio shows the amount of average cotton fibre (in kg) required to manufacture one

          square meter of average cotton fabric. D&B India has applied the conversion ratio to arrive at cotton
          fibre consumption that has been derived from a certain value of cotton fabric consumption for all
          periods under consideration.
         Source: D&B India




                                                                                                           81
 1.5.8.   Key assumptions

          World GDP growth rate – 4% (as per IMF World Economic Outlook October 2009)

          India‘s PCI growth rate – 6.5% (6.5% PCI growth is derived taking into consideration a GDP growth of
          8% and population growth of 1.5%. GDP growth of 8.0% is expected to be driven by expected
          average investment rate of close to 35% and an expected consistent increase in demand.)

          MMF (100% non-cotton) production growth - 10% (with a GDP growth of 8%, the growth in MMF
          production (100% non-cotton cloth) has been estimated at around 10%

 1.5.9.   On the basis of the above assumptions, cotton consumption is forecasted to increase to around 413
          lakh bales by FY20.


           Exhibit 1.5.5: Cotton consumption forecast

                                  Cotton fibre consumption
           Year
                                                (Lakh bales)

           2010-11                                        267

           2014-15                                        323

           2019-20                                        413

          Source: D&B India

          Based on these forecasts cotton fibre consumption is expected to have 52% share in the total fibre
          consumption as compared with 48% of MMF consumption in FY20.




          IMPLICATION:

1.5.10.   The forecast for domestic cotton consumption and production for the next 10 years reveal that the
          surplus of production over consumption will decline gradually.

          Exhibit 1.5.6: Scenario I – Yield growth 4% (in lakh bales)

            Year                      Production        Consumption             Surplus

            2010-11                           315                 267                48

            2014-15                           368                 323                45

            2019-20                           448                 413                35

          Source: D&B India

                                                                                                           82
          Exhibit 1.5.7: Scenario II - Yield growth 4.7% (in lakh bales)

               Year                Production        Consumption           Surplus

               2010-11                      319                 267               52

               2014-15                      384                 323               61

               2019-20                      483                 413               70

          Source: D&B India

1.5.11.   The robust increase in domestic consumption is likely to drive down the surplus in cotton over the
          years. Thus, it is essential to focus on significantly improving the domestic production of cotton to
          meet the expected increase in domestic demand for cotton.

1.5.12.   Given that the area under cotton cultivation in some of the major cotton producing countries such as
          the US has declined in the last few years, India has an opportunity to emerge as a leading exporter of
          raw cotton. Moreover, cotton drives India‘s strength in the global T&C markets. In the coming years,
          this strength is expected to accelerate considering the fact that both area under cotton cultivation and
          production are declining in China and the US. Over the past few years, there has been an increasing
          inclination towards shifting the textile processing base to emerging countries. Thus, India will be able
          to make use of the growing opportunities in the cotton industry by increasing its cotton production and
          strengthening its textile value chain.




          ESTIMATING THE INVESTMENT REQUIRED FOR STRENGTHENING
          THE TEXTILE VALUE CHAIN

1.5.13.   Given that the production of cotton fibre, MMF fibre and filament yarn is expected to witness a
          substantial increase in the next 10 years, the installed capacity for value addition under the textile
          value chain also needs to improve substantially to absorb the expected increase in fibre production. It
          is estimated that investments worth Rs 176,510 crore will be needed during FY10-FY20 for creating
          the required capacity along the textile value chain. The required capacity has been estimated on the
                                                    19
          basis of the increased fibre production . The underlying assumptions used to arrive at investment
          estimates (mentioned against each segment below) are based on the Vision for Indian textile and
          clothing industry CITI 2007-2012, Report of working group on Textiles & Jute industry for the eleventh



          19
             The D&B estimates for fibre consumption for cotton and MMF are an underlying assumption for these
          investment estimates. The consumption for cotton fibre in 2020 by domestic mills is assumed as 6885 mn kg and
          that for MMF fibre and filament is assumed as 6001 mn kg. The investment estimate therefore considers both
          MMF as well as cotton segments.

                                                                                                                    83
          five year plan (Ministry of textile) and inputs from major industry stakeholders, who are members of
          the sub-group.

           Exhibit 1.5.8: INVESTMENT REQUIRED TILL
           THE TERMINAL YEAR 2020 (RS CR)

           Spinning                                 63,525

           Weaving                                  38,485

           Knitting                                 12,499

           Processing                               26,695

           Garments                                 35,305

           Grand total                             176,510


          Source: D&B India


          Estimated investment in spinning sector

1.5.14.   The estimated investment in the spinning sector has been arrived at on the basis of the assumptions
          stated below:

              49. It is assumed that the average conversion ratio of cotton and MMF fibre to spun yarn will be
                  around 0.9.

              50. The productivity level for new spindles is taken as 190 gms/spindle/shift @95% utilisation.

              51. It has been assumed that 1.65 mn spindles will be replaced every year from the existing
                  spindles.

              52. Productivity of spindles replaced is taken as 175 gms/spindle/shift and 90% utilisation.

              53. It has been assumed that 20% of the discarded spindles will be reused although at lower
                  productivity level of 155 gm/spindle/shift and at 80% utilisation.

              54. For estimating yarn production on old spindles, it has been estimated that 8 mn spindles are
                  out of use. Therefore, the present spindles capacity is 32 mn spindles (as against 39 mn
                  spindles mentioned by the Office of Textile Commissioner).

              55. The productivity for existing spindles is taken as 150 gms/spindle/shift @90% utilisation.

              56. Second-hand spindles will be used to replace 15% of the required spindles.

              57. As compared with the cost of modernisation per spindle (Rs 10,000) and the capital cost for
                  new spindle (Rs 35,000) a second-hand spindle will cost Rs 10,000.




                                                                                                                84
Exhibit 1.5.9: INVESTMENT REQUIRED IN SPINNING SECTOR BY 2020

Spinning                                                                    Units      2019-20

Yarn production on spindles replaced

Replacement spindles-1.65 mn per year                                       mn           18.15

Annual output (per spindle/per shift -175 gm @90% utilisation)              kg            168

Annual yarn production on replaced spindles                                 mn kg        3,053

Yarn production on existing spindles

No. of old spindles ( 32 mn -18.15 mn)                                      mn           13.85

Annual output/spindle (per spindle/per shift -150 gm @90% utilisation)      kg/year       144

Annual yarn production on existing spindles                                 mn kg        1,997

Yarn production on discarded spindles which will be reused (3.63
mn)

(20% of discarded will be reused (of 18.15 mn) , productivity 155 gm/per
                                                                            mn kg         481
spindle/per shift and at 80% utilisation

Total yarn production                                                       mn kg        5,531

Projected spun yarn production (2019-20)                                    mn kg        8,330

Additional yarn production for which new spindles required                  mn kg        2,799


Annual output /spindle (per spindle/per shift -190 gm at 95% utilisation)   kg/year       193

No of fresh spindles required                                               mn             15

No of spindles for fresh capacities acquired second hand                    mn              2

Capital cost for a new spindle                                              Rs          35,000

Capital cost of a second hand spindles (per spindle)                        Rs          10,000

Cost of modernisation of spindles ( per spindle)                            Rs          10,000

Total projected investment (for approx. 34 mn additional spindles)

        For new spindles                                                    Rs crore    43,197

        For second-hand spindles                                            Rs crore     2,178

        For replacement                                                     Rs crore    18,150

Total                                                                       Rs crore    63,525




                                                                                            85
          Estimated investment in weaving and knitting

1.5.15.   The estimated investment in the weaving and knitting sector has been arrived on the basis of the
          below stated assumptions.


          Assumptions for weaving

             1. The estimated fabric production has been arrived at by assuming a CAGR of 7% during
                  FY09-FY20. Therefore, total fabric produced in 2020 is 114 bn sq meters.

             2. 75% of the fabric produced is woven & 25% of the fabric produced is knitted

             3. The break-up of additional fabric production would be as follows: On shuttle-less looms =
                  30%; On automatic looms = 30%; On semi-automatic looms = 15%; On plain looms = 25%

             4. Average productivity of shuttle-less loom is assumed to be around 615 sq mtrs/day;
                  production per automatic loom per day = 175 sq mtrs/day; production per semi-automatic
                  loom per day = 110 sq mtrs/day; production per plain loom per day = 100 sq mtrs/day

             5. Capital cost of new shuttle-less loom = Rs 25 lakhs; Capital cost of new automatic loom = Rs
                  10 lakhs; Capital cost of new semi-automatic loom = Rs. 1 Lakh; Capital cost of new plain
                  loom = Rs. 1 lakh

             6. Capital cost of second hand shuttle-less loom= Rs. 12 lakh; Capital cost of second hand
                  automatic loom = Rs. 3 lakh

             7. Number of working days in a year = 356 days

            Exhibit 1.5.10: INVESTMENT REQUIRED IN WEAVING SECTOR BY 2020

            Weaving                                                               Units            2019-20

            Additional fabric required by 2019-2020                               bn sq mtrs            42.6

            % of additional fabric production on shuttle-less looms                                     30%

            % of additional fabric production on automatic looms                                        30%

            % of additional fabric production on semi-automatic looms                                   15%

            % of additional fabric production on plain looms                                            25%

            Production per shuttle-less loom per day                              sq mtrs/day           615

            Production per automatic loom per day                                 sq mtrs/day           175

            Production per semi-automatic loom per day                            sq mtrs/day           110

            Production per plain loom per day                                     sq mtrs/day           100




                                                                                                          86
 Exhibit 1.5.10: INVESTMENT REQUIRED IN WEAVING SECTOR BY 2020

 Weaving                                                 Units      2019-20

 Number of working days in a year                        days           356

 Capital cost of new shuttle-less loom                   Rs lakh         25

 Capital cost of new automatic loom                      Rs lakh         10

 Capital cost of new semi-automatic loom                 Rs lakh          1

 Capital cost of new plain loom                          Rs lakh          1

 Capital cost of second hand shuttle-less loom           Rs lakh         12

 Capital cost of second hand automatic loom              Rs lakh          3

 Number of shuttle-less looms required                   No.         58,316

 Number of automatic looms required                      No.        204,939

 Number of semi-automatic looms required                 No.        163,020

 Number of plain looms required                          No.        298,870

 % of second-hand shuttle-less loom                      %             35%

 % of second-hand automatic loom                         %             15%

 % of second-hand semi-automatic loom                    %               0%

 % of second-hand plain loom                             %               0%

 Investment for new shuttle-less loom                    Rs cr     11,925.64

 Investment for new automatic loom                       Rs cr     18,342.07

 Investment for new semi-automatic loom                  Rs cr      1,630.20

 Investment for new plain loom                           Rs cr      2,988.70

 Total investment required                               Rs cr     34,886.00


Assumptions for knitting

   1. Conversion factor (sq mtrs to kg) = 6

   2. Average production per machine per day = 180 kg

   3. Capital cost of new Machine = Rs 0.35 cr

   4. Capital cost of second hand machines = Rs 0.1 cr




                                                                          87
            Exhibit 1.5.11: INVESTMENT REQUIRED IN KNITTING SECTOR BY 2020

            Knitting                                               Units                     20019-20

            Estimated additional fabric required in the terminal
                                                                   bn sq mtrs                     16.7
            year

            Conversion factor (sq mtrs to kg)                                                        6

            Additional fabric required                             mn kg                         2,786

            Average production per machine per day                 kg/day/machine                  180

            Number of working days in a year                       days                            356

            Average production per machine per year                kg / year / machine          64,080

            Number of machines required                            No.                          43,476

            Capital cost of new Machine                            Rs cr                          0.35

            Capital cost of second-hand machines                   Rs cr                           0.1

            % of second-hand machines                              %                              25%

            Investment required                                    Rs cr                     12,499.00


          Estimated investment in processing

1.5.16.   The estimated investment in the processing sector has been arrived on the basis of the below stated
          assumptions.


          Assumptions:

             1. It is assumed that 75% of the total fabric produced is processed

             2. 75% of the additional fabric produced by the shuttle-less and automatic looms will require
                  modernised processing units and the existing capacity could cater to the remaining production

             3. Conversion ratio of linear mtr to sq mtr = 2.18

             4. Number of meters processed per day = 100,000 linear mtr / day

             5. Additional investment required for modernisation of existing process houses (assumed as
                  20% of investment in new process houses)




                                                                                                            88
            Exhibit 1.5.12: INVESTMENT REQUIRED IN PROCESSING SECTOR BY 2020

            Processing                                          Units                                2019-20

            Incremental fabric required for domestic
                                                                bn sq mtrs                                  19
            consumption by 2020

            Additional processed fabric demand                  bn linear mtrs                             8.80

            Number of meters processed per day                  linear mtrs / day                     100,000

            Number of working days per day                      days                                       356

                                                                Rs cr per 100,000 mtr/day
            Cost of modern process house                                                                    90
                                                                capacity

            Investment required for new modern process
                                                                Rs cr                                  22,246
            houses

            Additional investment required for modernisation
            of existing process houses (assumed as 20% of       Rs cr                                   4,449
            investment in new process houses)

            Total investment required in processing             Rs cr                                  26,695


          Estimated investment in garmenting

1.5.17.   The estimated investment in the Garmenting sector has been arrived on the basis of the below stated
          assumptions. The estimates for investment in garmenting excludes investment requirement of the
          technical textile sector.


          Assumptions

              1. Conversion ratio for home textiles = 4.3 sq m/piece

              2. Conversion ratio for garments = 2.03 sq m/piece

              3. 75% of the processed fabric would be converted into garments by the garmenting industry

              4. 60% of the fabric is produced for apparel segment

              5. 35% of the fabric produced on shuttle-less looms is for home textile

              6. 5% of the fabric produced on shuttle-less looms is for Technical textile




                                                                                                           89
Exhibit 1.5.13: INVESTMENT REQUIRED IN GARMENTING SECTOR BY 2020

Garmenting                              Units               2019-20

Additional pieces required              bn pieces                  13

Number of pieces per day per machine    pieces                     15

Number of working days in a year        days                   356

Number of pieces per year per machine   pieces/year           5,340

Number of machine required              No.               2,353,686

Capital cost of new machine             Rs lakh                     2

% of second-hand machine                %                           0

Investment required                     Rs cr                35,305




                                                                        90
         1.6. THE SUB-GROUP ON COTTON TO FORMULATE
         NATIONAL FIBRE POLICY
         OVERVIEW

1.6.1.   The sub-group on cotton was created to make suggestions towards the National Fibre Policy with
         regard to the cotton fibre, to ensure its sustained availability over a 10-year period. The sub-group has
         identified key issues and made recommendations towards the above goal.



         KEY ISSUES IDENTIFIED BY THE SUB-GROUP

1.6.2.   Lack of irrigation facilities: Predominance of rain-fed area has been one of the major hindrances to
         cotton cultivation in India. Almost 65% of the area under cotton cultivation is rain fed and only 35% of
         it is irrigated, thus, exposing the cotton productivity to the vagaries of monsoon. This is more
         prominent in the central and southern zone where nearly 80% and 60% of area under cotton
         cultivation is rain-fed respectively. While the north zone has relatively better irrigation facilities, rising
         water table, salinity, high temperature in the early stages and emerging problem of CLCV are some of
         the major yield limiting factors.

1.6.3.   Cotton contamination: Cotton is vulnerable to contamination at the harvesting, marketing and
         ginning stages if proper care is not taken. The two kinds of contaminants predominantly found in
         cotton are:

                Fibrous – Human hair, animal hair, bird feather, yarn pieces, cloth pieces, polypropylene
                 fibres, jute etc.

                Non-fibrous – Stones, metallic wire, nails, rubber, leather, tin, insects etc. These
                 contaminants are easier to remove, but can cause damage to the mechanical parts of the
                 cleaning machinery.

1.6.4.   Poor quality: Due to average cotton quality, a globally competitive cotton sector has been difficult to
         develop. With growing demand for high quality products, the cotton sector and larger textile
         enterprises have initiated imports of quality cotton.

1.6.5.   Lack of infrastructure: Infrastructure in terms of transport is poor. The cost of transporting cotton
         fibre from one state to another incurs substantial cost.

1.6.6.   Problem of admixtures (Different varieties of cotton fibre with different physical properties is mixed
         together). This leads to inconsistencies in strength, length, micronaire, colour and reflectance in

                                                                                                                    91
         cotton. Admixture also makes the grading and testing of cotton difficult. Admixtures occur both at the
         harvest and post harvest stages when (a) different varieties of cotton are picked and stored together,
         (b) when different lots are mixed by local traders or farmers for transportation to the market, (c) in the
         markets before sale by farmers and traders and (d) at the ginner yard, where kapas is mixed before
         ginning. As a result, the average fibre quality in a bale of cotton has become unpredictable. Quality
         conscious mills, particularly the export oriented ones, are compelled to engage themselves in
         expensive bale management exercises to maintain yarn quality.

1.6.7.   Absence of uniform standards: Another issue related to quality of cotton has been the absence of
         uniform quality standards across the country. While there are various agencies involved into quality
         testing and grading of cotton across, uniform standards are not being used.

1.6.8.   Need for an Indian arbitration for imported cotton: Indian textile mills importing cotton have to
         encounter onerous problems because foreign buyers invariably stipulate Arbitration by International
         Cotton Association (ICA), Liverpool, in the sale contracts. India has been a regular importer of cotton
         and imports will continue in future. Therefore, unless corrective action is taken in right earnest,
         problems in future will get compounded. Various importing countries believe that ICA Bylaws and
         Rules are biased in favour of sellers. Cotton business, both national and international, needs to be
         codified with updated rules and regulations, based on the principle of natural justice. Historically,
         arbitration machinery was introduced in Liverpool when it was a major trading, Since Liverpool is no
         longer a trading centre, Liverpool Arbitration machinery has lost its relevance and therefore Indian
         Arbitration should be brought in its place.



         RECOMMENDATIONS OF THE SUB-GROUP:

1.6.9.   The following broad objectives for the National fibre policy have emerged from the deliberations of the
         sub-group:

                The National Fibre Policy should be fibre-neutral.

                The fibre policy should look to accord priority to the cotton fibre value chain in the following
                 order of priority:

                      o   Farmers

                      o   Domestic mills

                      o   Other cotton consuming countries

                It should enhance production, sustainability and growth of cotton

                It should target enhanced competitiveness of cotton fibre, as well as ensure most judicious
                 and efficient utilisation of country‘s strength for sustainable development of all the sub sectors
                 of the cotton economy through backward and forward integration.

                                                                                                                92
                   To strengthen and improve vibrancy in cotton economy, through upgraded and reformed
                    marketing system and conscious branding of cotton for use.

                   To create an institutional mechanism which monitors, coordinates and also create unified
                    platform of all other interests on lines of National Cotton Council of USA.

1.6.10.   The recommendation made by the sub-group members can largely be divided under the following
          broad heads:


          I.       Recommendations for enhancing production:

1.6.11.   The members of the sub-group opined that major interest of the policy for cotton fibre should be
          enhancing the production of cotton. Augmenting cotton production would not only help India to meet
          the growing domestic demand but also explore export opportunities. The following recommendations
          have been made by the members of the sub-group for augmenting cotton production in India:

                   An institutional framework could be created for development of cotton fibre. The institution
                    thus established could provide funding and direction for research in a holistic manner.

                   Improving irrigation facilities and water harnessing was considered imperative for enhancing
                    production and lowering its dependence on monsoon. The area under irrigation could be
                    increased to 60% from its present level of 38% at national level. Further, members opined
                    that drip irrigation system could be adopted for better water management. Drip irrigation
                    system could be adopted in at least of 30-40% of total cotton area.

                   Initiative should be taken to increase awareness among farmers for adoption of rain water
                    harvesting, soil moisture conservation techniques, suitable agronomic practices in order to
                    increase the utilisation of rain water.


1.6.12.   Improving Cotton Yield – New Practice:

                   New farming practices could be developed in order to increase the cotton yield. Various
                    programmes could be devised to increase awareness regarding rain water harvesting, soil
                    moisture conservation techniques and suitable agronomic practices among the farmers.

                   Precision farming was considered as important too for enhancing cotton productivity.
                    Emphasis could be given to spread of ‗Precision farming‘ to improve yield per unit area for all
                    areas.

                   Measures could be taken to enhance production and supply of ‗Green manure / FYM /
                    Compost / Vermi-compost‘ in the country to maintain soil productivity at sustainable level.
                    Green manure / FYM / Compost / Vermi-compost production and supply has to be taken up at
                    large scale under organised sector so that it become available to all cotton growers. This is
                    must for maintaining soil productivity at sustainable level.


                                                                                                                93
1.6.13.   Extension Services:

                     Improved extension activities and certification facilities with subsidised inputs could be
                      provided to cotton farmers to sustain their income level.

                     In field extension, Public-Private Sector Partnership projects may be launched on ―Large
                      Area‖ basis, ensuring technology inputs and marketing tie-up, so that diversion of cotton area
                      to other competing crops can be minimised.

1.6.14.   Research Thrust: National research thrust for the cotton production sector could continue. It was
          recommended that the focus of the national research on cotton could be laid on increasing the lint
          productivity through improvement in ginning outturn of varieties / hybrids to the level of 40 – 42% as
          compared to 34 – 36% of current cultivars.

1.6.15.   Integrated Pest Management Practices: On line pest monitoring system at block level and IPM
          network to advise the farmers could be strengthened. Integrated disease and pest management
          strategies could be implemented vigorously on cluster basis.

1.6.16.   Nutrition Management: Availability of sufficient quantity of micronutrients as in case of NPK could be
          ensured. Fertiliser companies could give equal importance to micronutrient manufacturing &
          marketing.

1.6.17.   Training and awareness: The system of transfer of knowledge to farmer through Farmers Field
          School (FFS) could be continued and it could be taken up in each Gram Panchayat of Cotton growing
          area. Sufficient number of Cotton Masters Trainer needs to be generated through season long ToF
          training in order to ensure availability of one cotton Master Trainer at each Block level.

1.6.18.   Co-ordination and interaction of various NGOs: Lessons can be derived from micro examples of
          yield improvement and production enhancement programs run by CAI, CITI, CDRA and SIMA in
          different states of the countries. The case studies of some projects conducted by CITI-CDRA and
                                                                         20
          SIMA-CDRA have been appended in the Annexure .

1.6.19.   Contract Farming: The practice of Contract Farming can augment production, also create
          demonstrative models, for improving farm practices, increasing productivity and sequentially direct
          itself towards balancing overall supply and demand of cotton.

1.6.20.   Wasteland Commissioning: Commissioning and restructuring of land can increase availability of
          land for profitable cotton farming, through contract and company – driven corporate farming.




          20
               The submission of Dr. KR Kranthi, Acting Director, CICR Nagpur have been supplemented with this report


                                                                                                                        94
          II.    Recommendations for enhancing investment along the textile value chain:

1.6.21.   The interest compensation of 5% available under the Technology Upgradation Fund Scheme (TUFS)
          has helped in incentivising investments in the T&C industry. TUFS has had a major role to play in the
          growth of the industry and increased investments in recent years in the sector. Given the significant
          estimated investments required for the textile value chain, it is therefore recommended that the
          Technology Upgradation Fund Scheme is continued, so that the industry may avail of the benefits
          under it.


          III.   Recommendations for Improving Quality:

1.6.22.   Improvement of Fibre parameters: The focus of the national research on cotton could be on
          optimising the components of fibre quality parameters to meet the end use requirements of the
          spinning sector which is producing yarn, in a wide range of spinning counts. Improvement of Fibre
          parameters through ―Fibre Engineering‖ by deploying Bio Technology and commissioning researches

1.6.23.   Research Integration: Constant Research to improve and optimise fibre properties comparable to
          benchmark international high rank qualities for cotton. There should be focus on Fibre Balancing
          Research (Between Supply & Demand) and an attempt to integrate research to capacitate every node
          of the value chain.

1.6.24.   Use of coloured poly propylene bags: To prevent contamination and also, to facilitate detection of
          contamination the use of white poly propylene bags for packing fertilisers should be replaced by the
          use of coloured poly propylene bags.

1.6.25.   Infrastructure of Cotton: There is a serious need to improve ―Logistics of Cotton‖. The Logistics
          includes conduct of cotton and its upkeep in warehouses and at port. The ware housing should be
          scientific and IT enabled to develop into dematerialised trading and movement of goods. Pressed
          cotton also needs to be stationed and warehoused at accessible affordable places. The members of
          the sub-group recommended that steps could be taken to improve logistics for transporting cotton, so
          that cotton fibre can be supplied from surplus to deficient areas in a clean manner.


          IV.    Recommendations for improving infrastructure:

1.6.26.   There is a serious need to improve the logistics of cotton, which includes conduct of cotton and its
          upkeep in warehouses and at port. The ware housing should be scientific and IT enabled to develop
          into dematerialised trading and movement of goods. Pressed cotton also needs to be stationed and
          warehoused at accessible affordable places. Steps could be taken to improve logistics for transporting
          cotton, so that cotton fibre can be supplied from surplus to deficient areas in a clean manner.



                                                                                                             95
          V.        Recommendation pertaining to export of cotton fibre:

1.6.27.   A healthy stock-to-use ratio could be maintained in order to avoid any distortions in the cotton market.

1.6.28.   Trade policy for cotton could target exports of surplus cotton after meeting the requirements of
          domestic mills. Imports can happen in slots, where there may be deficit in domestic production. No
          import duties are needed, and any restrictions on imports could be need-based.

1.6.29.   Exports of cotton fibre should be monitored on a time-to-time basis each cotton-year, so as to ensure
          stability in supply as well as prices for cotton fibre to the domestic mills.


          VI.       Recommendations for improving marketing and branding of cotton:

1.6.30.   Grading of Kapas is imperative for improving the marketing and branding of Kapas and lint. The
          grading system by independent agency, better organised, regulated ware housing system, better
          contracting system with risk management instruments, will raise the dynamics of Indian cotton to a
          greater level of acceptance, fine image and remarkable branding.

                   Creation of a Competing Crops Pricing Index could be explored so as to ensure judicious
                    allocation of resources in crop patterns.

                   A structured mechanism for promotion of cotton use could be developed, in order to sustain
                    domestic consumption on a long term basis, so as to maintain the strength of cotton
                    economy.

                   Pilot projects for marketing of lint by the farmers, instead of kapas as at present could be
                    considered. This might result in higher income to the farmers and accelerate cotton
                    production.

                   The role and functions of Government agencies involved in marketing of cotton fibre can be
                    looked into for any reorientation of their role towards inclusion of price stability.


          VII.      Recommendations towards value addition in the cotton value chain:

1.6.31.   Returns on cotton fibre can be enhanced through backward integration of the cotton value chain. The
          example of the sugar industry could be adopted for the cotton industry, through such activities as de-
          linting and use of cotton stalks which presents great opportunity with minimal investments. Further,
          realisation on seed can be improved through more R & D on cotton oil and cotton seeds.

1.6.32.   Considering that governments across the world are starting to action to reduce green house
          emissions. For example the Australian Carbon Pollution Reduction Scheme is likely to cover cotton,
          due to emissions from application of nitrogen fertilizer, release of carbon dioxide from biological
          decomposition, methane from water logging, emissions from processing cotton etc. Therefore, careful


                                                                                                               96
          study is recommended so that a strategy for countering Carbon Emission Reduction Scheme can be
          framed.


          VIII.     Recommendations towards Risk Management:


1.6.33.   Effective risk management is crucial for protecting the interest of all stakeholders in the Indian cotton
          economy. An efficient, integrated contracting system covering spot transactions forward transactions
          and futures transactions would be required for effective risk management.


           IX.      Recommendations towards drawing lessons from policies of other
                    cotton producing countries:

1.6.34.   A policy review of some of the cotton producing countries has been outlined in section 4.2 of this
          report. Lessons could be drawn from policies in these countries that are pertinent to India and could
          be suitably adopted. For example, the independent gradation certification system of total crop existing
          in US could be studied and a similar system could be developed after suitable modifications.




                                                                                                                97
         1.A. ANNEXURE
         1.A.1. CASE STUDIES SPECIFIC PRODUCTION TECHNOLOGY AND
         YIELD ENHANCEMENT PROGRAMMES RUN BY CITI-CDRA AND
         SIMA-CDRA

1.A.1.   Front Line Demonstrations (FLDs) under Mini Mission II of Technology Mission on Cotton are focused
         on transfer of modern/improved cotton production technologies including farm implements/machinery
         as well as improved cotton varieties and hybrids. FLDs helped farmers to increase yields and reduce
         the use of pesticides and production cost significantly by demonstrating high yielding varieties and
         hybrids suited for various agro-climatic conditions, approved transgenic cotton varieties, integrated
         nutrient management (INM), integrated pest management (IPM) and application of bio-fertilisers.
         Under this initiative, scientists receive feedback from cotton farmers, which subsequently help to
         improve as well as disseminate of technology. CITI-CDRA (Confederation of Indian Textile Industry-
         Cotton Development and Research Association) and SIMA-CD&RA (The Southern India Mills
         Association–Cotton Development and Research Association) conducted various FLDs in state of
         Rajasthan and Sothern India, respectively.


         CITI-CDRA (Confederation of Indian Textile Industry-Cotton Development and
         Research Association)

1.A.2.   CITI-CDRA conducted 1200 FLDs on production technologies (PTs) for cotton and 3 FLDs on
         integrated pest management in Banswara and Bhilwara districts of Rajasthan during 2008-09 with an
         investment of Rs 27.5 lakhs for the FLD programmes on PTs, IPM and awareness programmes. The
         total expenses as on January 31, 2009 were estimated at Rs 26.5 lakhs. The villages and the farmers
         to be covered under the FLDs on Production Technology and IPM were selected by the Deputy
         Directors of Agriculture (Extension), Banswara and Bhilwara districts.

1.A.3.   These are following objectives of CITI-CDRA initiatives:

                Transferring modern/improved cotton production and protection technologies among cotton
                 farmers by giving training to the farmers through organising field visits, arranging field days
                 and ‗Kissan Melas‘ and conducting Awareness Campaigns.

                Demonstrating high yield ‗High Yield Varieties‘ (HYVs) and hybrids including approved
                 transgenic cottons (Bt. Cottons) suitable for various agro-climatic conditions prevalent in
                 Banswara and Bhilwara districts of Southern Rajasthan.




                                                                                                             98
                Increasing yield and reducing production cost (including pesticide cost) through INM, IPM,
                 application of bio-fertilisers and bio-pesticides and emphasis on water management and inter-
                 cropping system.

                Promoting quality consciousness among cotton farmers via improved practices for picking of
                 kapas, its storage and transportation for marketing.

                Improving the overall economic conditions of farmers


         Production Technologies

1.A.4.   The production technology and integrated pest management to be demonstrated at the above Front
         Line Demonstration Villages were recommended / approved by the Agriculture Research Station
         (ARS), Banswara attached to the Maharana Pratap Agriculture University, RCA Campus, Udaipur as
         the concerned FLD villages of Banswara and Bhilwara districts fall within the jurisdiction of the
         University. The technologies finalised and demonstrated in the FLD villages included the following:-


1.A.5.   Production technologies (PTs) demonstrated in FLD

                Sowing of BT Cotton and refugee crop.

                Intercropping of Maize, Soya Bean, Pigeon Pea and Black Gram.

                Ensuring proper plant population by adopting of gap filling to maximise yield.

                INM including use of micro-nutrients - Zinc Sulphate, Planofix (NAM) including foliar spray.

                Clean – weed Free – cotton cultivation including cleaning of borders.

                Water management: Preparation of ridges and furrows at the time of last hoeing in-situ
                 moisture conservation of run-off excess rain water.

                ETL (Economic Threshold Level) based pest and disease management

                Checking flower and fruit shedding through harmon spray

                Nipping of terminal 10th-12th node for arresting terminal growth.

                Need based use of pesticides, including use of bio-pesticides


1.A.6.   Technologies demonstrated in FLDs on IPM:

                Keeping cotton fields weed free including borders by removing parthenium plants and other
                 alternate host plants.

                Trap cropping with Okhra.




                                                                                                                99
                 Installation of bird perches (at the rate of 2-3 per acre), pheromone traps for different boll
                  worms and yellow sticky traps for white flies.

                 Use of Bio-Agents (Trichogramma and Chryso Perla spp) and bio-pesticides (Neem Leaf
                  extract 10%, Neem Kernel extract 5% and Neem Oil 1%).

                 Pest Surveillance by the scouts at weekly interval by randomly selecting 10 plants from the
                  fields of each participating farmers and recording of observations

                 Clipping, hand picking and destruction of spotted boll worm larva in case of heavy infestation

                 Need based use of recommended chemical insecticides at recommended dose on ETL

                 Creating awareness among the cotton growers about the IPM Technology and its
                  dissemination to reduce pesticide consumption on cotton crop.


          Strategy adopted for implementation of Programme:

 1.A.7.   In keeping with the guidelines issued by the Government of India, in the Ministry of Agriculture, to
          introduce a more effective system to develop closer coordination with State functionaries, Panchayat
          Raj Institutions, ICAR and SAUs Institutions, while implementing FLD Programmes both for P.T and
          IPM, CITI-CDRA adopted a well thought out strategy, which inter-alia aimed at the following:-

          a) Close coordination with the Agriculture Department of State at district level:

 1.A.8.   The Office of the District Deputy Director of Agriculture (Extension) was actively associated with the
          selection of villages, the selection of beneficiary farmers in keeping with the guidelines for
          implementation of Special Component Plan (SCP) for SC and Tribal Sub-Plan (TSP) for ST and
          Gender Budgeting giving preference to Women cotton growers.

          b) Involvement of Scientists from KVKs- Bhilwara, Banswara and ARS, Banswara:

 1.A.9.   The scientists from Krishi Vigyan Kendras of Bhilwara and Banswara and also Agriculture Research
          Station of Maharana Pratap Agriculture University, Udaipur were invariably involved in Awareness
          Programmes, Farmers‘ Field Visits, Kissan Gosthis and Kissan Melas with a view to disseminate the
          knowledge regarding new technologies of cotton crop management in general and effective pest
          management in particular among the participating cotton growers.

          c) Implementation Committee at District Level:

1.A.10.   The District Level Implementation Committees were set up at Banswara and Bhilwara with the Deputy
          Director of Agriculture – Extension, Scientists from KVKs/ARS Bhilwara and Project Coordinator of the
          CITI-CDRA as its members. The Implementation Committees met periodically to review the progress
          of cotton crop in the district and made recommendations in respect of the inputs to be supplied to the


                                                                                                             100
          beneficiaries. Special emphasis was laid on the pesticides / fertilisers and bio-agents to be distributed
          among the beneficiaries, on need basis and within the budgetary ceiling of Rs.1400/- per FLD. The
          members of the implementing Committee were also associated with awareness programmes and
          kissan melas.


          Implementation of the FLD Programme

1.A.11.   To supervise effectively and undertake continuous surveillance of the cotton crop, the CITI-CDRA
          deployed Project Coordinator and required scouts at each district. The scouts were selected by the
          implementation committees in the respective districts. They were given training by the scientists from
          KVKs and ARS, Banswara, Officers from the Department of Agriculture, Scientists from Bayer Crop
          Science, Mumbai and the Project Coordinators. The scouts were selected by the Project Coordinators
          in consultation with the concerned Deputy Directors of Agriculture. All of them were provided with
          magnifying glasses for conducting on the field survey/inspection of the fields of participating cotton
          growers. In Banswara - 6 and in Bhilwara – 9 training camps were conducted with the assistance of
          the State Agriculture Officers by the Project Coordinators.

1.A.12.   A Bench Mark Survey was undertaken of all the participating farmers to ascertain their cultural
          practices, the economics of cotton cultivation, the usage of pesticides / insecticides, the yields
          obtained, the varieties grown, etc to facilitate impact assessment of the project implemented in these
          villages. Various inputs were distributed under FLDs in both the districts.


          Results of execution of the FLDs on Production Technology:

1.A.13.   The results of the FLDs on P.T. were very encouraging as would be evident from the following data:-

          _________________________________________________________

          Bhilwara District (800 FLDs)

          Gain in terms of money in Bt. Cotton over the Local Varieties cultivated in Bhilwara District:-

          1.      Local Cotton Variety - Average Yield:                 12.00 quintals/hectare;

                  (Projected by the Agriculture Department)

          2.      Bt. Cotton – average yield in Non FLDs:               21.00 quintals/hectare;




          3.      Average Yield in FLDs:                                 28.35 quintals/hectare;




                                                                                                              101
4.       Farmer incurred extra expenditure for Bt. Cotton in terms of Rupees/hectare:-

              a) Seed Cost              Rs.3000.00;

             b) Micronutrients, etc.    Rs.1100.00;

             c) Extra Labour charges Rs.2500.00

                Total:                  Rs.6600.00

Other expenditures are common in both the cotton.

5.       Saving of 4 Insecticidal sprays each costing Rs.750/-: Rs.3000.00

6.       Extra expenditure on Bt. Cotton: (Rs.6600/- - Rs.3000/-) = Rs.3600/-;

7.       Prevailing price: Rs.2850/- peer quintal

8.       Gross Profit per hectare: a) Bt. Cotton= Rs.59850/-, b) Local Variety = Rs.34200/-;

 9.      Extra Gain over Local Variety: Rs.59850/- - (Rs.34200/-+Rs.3600/-) = Rs.22050/-;

10.      Extra Gain in FLDs: (Rs.80797/- - Rs.37800/-) = Rs.42097/-;

11.      Increase in the percentage in terms of Rs. Gain:-

      a) In Non-FLDs: 158.3%,          b) In FLDs: 213.7%

Exhibit 1.A.1: Bhilwara district (800 FLDs)

Yield                                                                      Kg/Ha

Average yield (Seed cotton) in demonstration fields                          945

Average yield in control fields                                              237

Last year‘s average yield for the district – Lint / Ha                       237

Source: CITI-CDRA, D&B India




                                                                                               102
          Exhibit 1.A.2: Banswara district (400 FLDs)

                                                                                             Non-
                                                               Irrigated
          Yield                                                                         irrigated
                                                                 (kg/ha)
                                                                                          (kg/ha)

          IT 905 (BT)       (Demonstration fields)                  495                      359


          DCH-32(local)    (Check fields)                           265                      179

          PCH 406 (BT)      (Demonstration fields)                  337                      290

          DCH-32(local)    (Check fields)                           237                      194

          Last year‘s average yield in kg of lint per
                                                                                             340
          hectare

          Source: CITI-CDRA, D&B India


          Summary of collaborative project “Cotton Productivity Improvement – 150%”
          implemented in Banswara district of southern Rajasthan, during 2008-09

1.A.14.   CITI-CDRA is implementing a collaborative project for enhancing cotton productivity and production in
          Banswara District in collaboration with State Government of Rajasthan and Bayer Crop Science,
          Mumbai with an outlay of Rs.12.00 lakhs. The Project is targeted to enhance cotton productivity in the
          district by 150% (from 470 kg/ha of lint to 605 kg/ha) in the next three years (at the end of 2010-11).
          The Project is implemented in 9 clusters, covering 100 gram panchayats and 562 villages with an
          area of 9,900 hectares and 24,500 cotton growers. It is proposed to extend the project area to 50,000
          acres by covering Bhilwara and Rajsamand districts (covering further 25000 acres) during 2009-10.


          SIMA-CD&RA (The Southern India Mills Association–Cotton Development and
          Research Association)

1.A.15.   SIMA-CD&RA is endeavours to supplement the efforts of central and state governments to improve
          production, productivity and quality of extra long staple (ELS) cotton in the country. The main efforts
          undertaken by SIMA-CD&RA include extensive development and research activities, popularising
          location specific and cost effective production techniques at farm level in the states of Tamil Nadu,
          Karnataka and Andhra Pradesh.

1.A.16.   SIMA-CD&RA has also undertaken a project for restoration of Suvin with improved fibre properties,
          stable yield and crop duration. There is an improvement in Suvin plant population has been noticed. It
          has also initiated to maintain the purity and the fibre quality standards of DCH-32.




                                                                                                             103
1.A.17.   Additionally, SIMA-CD&RA Identified and developed an early maturing variety SIMA-1 with a short
          duration of 130 days is another land mark under the breeding work carried out by the association.
          It has proved its superiority in yield over the existing variety, MCU-7 in the rice-fallows of Tamil Nadu,
          where crop duration is a limited factor. Its fibre properties and spinning performance are at par with
          MCU-7, the area under cotton in rice-fallows is expected to increase with the spread of SIMA-1.

1.A.18.   SIMA-CD&RA had undergone 6 years of inter-specific hybrid (SIMA-HB-3) trial in Tamil Nadu,
          Karnataka and Andhra Pradesh under All India Co-ordinated Cotton Improvement Project (AICCIP) -
          South zone. These trials showcased below mentioned results.

                   Fibre properties of SIMA HB-3, particularly micronaire and strength are better than TCHB –
                    213 and DCH-32.

                   Strength to length ratio is also better than TCHB-213 and DCH–32.

                   Standard CSP value for carded 80s / 100s is better than TCHB-213 and DCH-32.

                   The U% and neps of the yarn 80s / 100s lie in ―Good‖ category and better than TCHB-213
                    and DCH-32.

                   Suitable for drought situation–Summer/Winter/Irrigated conditions. Purataasi pattam is highly
                    suitable for yield and quality as well. (Temp:32-40 degree Celsius day and 22 degree Celsius
                    night)

1.A.19.   SIMA-CD&RA has been providing over 500 M. tonnes seeds annually in MCU-5, MCU-5 VT, LRA-
          5166,MCU-7, LRK-516, Surabhi, Supriya, Suvin, SIMA-1, L-389 and hybrids such as Savitha, TCHB-
          213, NHH-44 and HB-3, popularly known as ‗SIMA Seeds‘. These seeds are popular not only in the
          Southern States, but also in other States like Maharashtra, Madhya Pradesh, Gujarat and Orissa. The
          following table furnishes the data on the seeds produced and distributed to the cotton growers and the
          area covered.

            Exhibit 1.A.3: SIMA-CD&RA: Seed production and distribution

            Period                             Seeds distributed (M. tonnes)         Area covered in hectares

            1985-86 to 1989-90                                              966                         1,26,226

            1990-91 to 1994-95                                            2,037                         2,74,624

            1995-96 to 1999-2000                                          2,026                         3,36,033

            2000-01 to 2006-07                                            1,810                         1,77,180

            Total                                                         6,889                         9,14,063

          Source: SIMA-CDRA, D&B India




                                                                                                               104
1.A.20.   SIMA-CD&RA also identified many improved production techniques to reduce the cost of cultivation.
          Studies conducted by SIMA-CD&RA showcased that application of bio-fertilisers (Azospirillum and
          Phosphobacteria) on 21st day after sowing, increased 20% seed cotton yield and reduced the
          fertiliser cost by 20-05%. Skip row planting was found to give 24% higher yield than normal planting
          method besides saving 40-45% irrigation of water requirements. The trials on drip irrigation
          showcased that it produced 50% higher yield over the conventional method of flood irrigation. All
          these results have been incorporated into cotton cultivation for adoption by the cotton farmers in the
          development scheme areas of SIMA-CD&RA.

1.A.21.   SIMA-CD&RA continued to distribute bio-fertilisers (Azospirillum, Phosphobacteria and Rhizobium) as
          a value addition along with seeds. Application of bio-fertilisers reduces the cultivation cost, usage of
          fertilisers and minimizes soil pollution and saves the ecosystem. The following table depicts the
          production and supply of bio-fertilisers to cotton producers.

            Exhibit 1.A.4: SIMA-CD&RA: Production and supply of bio-fertilisers

            Period                                  Bio-fertilisers supplied in (M. tonnes)

            1992-93 to 1994- 95                                                      179.38

            1995-96 to 1999-2000                                                     144.95

            2000-01 to 2006-07                                                        64.22

            Total                                                                  388.550

          Source: SIMA-CDRA, D&B India




                                                                                                             105
1.A.2. COMPOSITION OF THE SUB-GROUP ON COTTON TO
FORMULATE NATIONAL FIBRE POLICY

S. No   Name                                                                        Designation

   1.   Shri J. N. Singh, Joint Secretary, Ministry of Textiles                     Convenor

   2.   Shri Shishir Jaipuria, Chairman, Confederation of Indian Textile Industry   Co-convenor

   3.   Shri S.C. Grover, CCI                                                       Member

   4.   Shri D.K.Nair, Confederation of Indian Textile Industry                     Member

   5.   Shri Rakesh Vaid, AEPC                                                      Member

   6.   Shri vimal Kirti Singh, AEPC                                                Member

   7.   Shri V.S. Velayutham, TEXPROCIL                                             Member

   8.   Shri Siddarth Rajagoapl, TEXPROCIL                                          Member

   9.   Shri Dhiren N. Seth, Cotton Association of India                            Member

   10. Shri J. Thulasidharan, SIMA                                                  Member

   11. Shri T. Kannan, Thiagrajar Mills Ltd.                                        Member

   12. Shri Suresh A. Kotak, Kotak & Co. Ltd.                                       Member

   13. Shri M. Senthil Kumar, Palladam Hi-Tech Weaving Park                         Member

   14. Shri Manikam Ramaswami, Loyal Textile Mills Limited                          Member

   15. Shri S.V. Arumugam, Bannari Amman Spinning Mills Ltd.                        Member

   16. Dr. M.S. Mathivanan, PDEXCIL, Mumbai                                         Member

   17. Shri A.L. Ramachandra, Vijayeswari Textiles, Coimbatore                      Member




                                                                                               106
107

								
To top