Dear Members,
It gives me a great pleasure to extend a warm welcome to you all at this 89th Annual General Meeting of our Association.
The Directors' Report and the Audited Accounts which have already been circulated to you cover the working results and activities of the Association for the financial year ended 31st March, 2011. ˙With your permission, I take them as read.
Friends, before I move the resolution on approval and adoption of Annual Accounts, I would like to share with you some of my thoughts on the recent developments in our economy which are expected to have implications on our cotton sector, and the problems and prospects that our cotton sector faced and the important activities undertaken by the Association during the last one year.
Indian Economy
There was expectation that having come out of the impact of the global economic crisis of 2008-09 and achieved reasonable growth in 2010-11, our economy would achieve an impressive growth during 2011-12. But recent indications are that the growth would be moderate this year. During the April-September period this fiscal, IIP (Index of Industrial Production) growth stands at 5.0%, as against 8.2% in the same period last year. ˙India's economy grew by 7.7% in the April-June 2011 period, the slowest in six quarters. Judging by the latest set of IIP data, one can expect the full year's growth to be well below 7.5%, which is a far cry from the 8.6% growth witnessed in 2010-11. This is despite the Government's FY 12 budget estimate of 9%, which seems unlikely in view of the current state of the economy.
Inflation has been rising for months now and the unabated price rise has a vicious effect on the economy. It pushes up the interest rates, which affect the cost of production and reduce liquidity in the economy, which in turn impact the industry, especially the manufacturing sector. The RBI has increased the interest rates 13 times since March 2010.
Domestic cotton scenario
Cotton Season 2010-11
The seasonal conditions during 2010-11 were, by and large, favourable for the growth and development of cotton leading to good productivity which enthused the farmers to boost the area under cotton. The area rose by 8 lakh hectares and reached 111.42 lakh hectares as compared to the previous year. Cotton farmers largely benefitted from the high prices prevailed in 2009-10. Since cotton fetched higher net returns compared to the competing crops, farmers brought additional area under cotton by switching over to cotton from other competing crops to some extent. Besides higher yields, farmers continued to reap benefits from the reduction in production cost owing to the advantage derived from the cultivation of cotton with Bollgard II technology which along with Bollgard I covered about 90 percent of the total area under cotton.
There has been a surge in India's cotton production in recent years due to the rapid expansion of area under GM Cottons. This uptrend was maintained in 2010-11 when production surged further to 325 lakh bales.
Estimates for 2011-12
With significant increase in the acreage under cotton, ˙wide spread rains across the cotton belt and the higher acreage under GM Cotton, the prospects of cotton crop in the cotton season 2011-12 augur well and the cotton production this season is expected to scale new heights. The cotton production during 2011-12 cotton season is expected to be not less than 340 lakh bales while the cotton consumption is likely to be below 250 lakh bales thus leaving a huge carryover stock.˙
World Cotton Scenario
The projected slowdown in global economic growth in 2011 and 2012 will affect consumption of textile products, and therefore demand for cotton fiber. The ICAC projects global cotton mill use to remain stable at 24.6 million tons in 2011-12. China, India and Pakistan, which account together for two-thirds of global mill use, are expected to spin only 1% more cotton in 2011-12 than in 2010-11.
While cotton consumption could remain stagnant in 2011-12, cotton production is expected to increase in reaction to the high cotton prices received by farmers last season. The ICAC expects global cotton production to rise by 8% to 26.9 million tons in 2011-12, the largest crop since 2004-05. The increase from last season is explained mostly by an expansion in cotton area to 36 million hectares, whereas the average yield could rise only slightly to 745 kg/ha. The global production increase in 2011-12 will be driven primarily by China and India. Production is also expected to increase significantly in Pakistan, Australia, Francophone Africa and Turkey. However, U.S. production is forecast down by 12% due to severe drought in the Southwest.
Global cotton trade is expected to increase by a moderate 2% to 7.8 million tons in 2011-12, driven by an increase in Chinese imports. While U.S. exports are projected to drop by 23% to 2.4 million tons due to reduced supplies, exports from Australia and Brazil could rise to record levels. As per ICAC projection, India's exports are expected to remain stable at 1.1 million tons.
As a result of the projected surplus of 2.3 million tons, global cotton stocks could rebound to 11.3 million tons by the end of 2011-12. The stocks-to-use ratio in the world outside China is expected to rise from 46% to 55%, which could translate into a significant decline in the season-average Cotlook A Index.
Problems Facing Indian Cotton Economy
India has the distinction of having the largest acreage (about 33% of the world cotton area) under cotton. In India, cotton is grown under diverse agro-climatic conditions spanning across ten States.
The average national productivity showed a remarkable improvement from 302 kg/ha in the year˙ 2002-03 to about 500 ˙kg/ha in 2011-12 due to stupendous work done by the Central and State Governments, CCI and NGOs under Technology Mission on Cotton through transfer of technology, nutrition management strategies and integrated pest management approaches and the advent of Bt technology. However, productivity of cotton is much below the world average yield mainly due to the lack of irrigation facilities.
Since there is not much scope for expansion of area under cotton in future nor it is desirable at the cost of reduction in acreage under food crops, the only avenue to increase availability of cotton in the Country is to increase productivity.
Since 33.0% of the global cotton area is in India, and the current yields are significantly lower compared to the four major cotton growing countries China, USA, Pakistan and Brazil, there is immense scope for yield enhancement in India, and this increase will have the greatest impact on global supply.
The recent increase of production in India signals hope and provide evidence that, new technologies can drive the change.
- Mismatch in Demand and Supply of Short Staple and Extra-long
˙ Staple Cotton
Although the country harvested a record cotton production of 325 lakh bales in 2010-11, there is a big mismatch between demand and supply of Extra Long Staple (ELS) cotton.˙ The annual production of ELS cotton in India is around 2 lakh bales mainly in Karnataka, Madhya Pradesh, Andhra Pradesh, Tamil Nadu and Orissa. Suvin, is the only G.barbadense variety currently in cultivation in parts of Tamil Nadu.˙ However, with an annual production of only 2.0 lakh bales in India as against the demand of around 9.0 lakh bales, substantial imports are required to bridge the gap. With the international prices remaining high and market resistance to increase the super fine yarn price, conversion of ELS cotton to high count yarn, is likely to become non-remunerative. Hence, urgent efforts are called for to increase the production and productivity of Indian ELS Cotton. According to the projections of textile industry, demand for ELS cotton is likely to touch 17 lakh bales by 2012. Better developmental efforts are thus called for to extend the ELS cotton area in the country while urgent research efforts to increase yield and quality will go a long way in making the ELS production more remunerative to the farmers.
Besides, the area under cotton cultivation for short staple cotton has suffered erosion due to the incursion made by GM Cottons. The production of this type of cotton has come down and it is necessary to give due attention in this area so that we do not face a shortage situation for short staple cotton.
- Restrictive and Inconsistent Trade Policies on Cotton Export Front
Today, India is the second largest producer, consumer and exporter of cotton and Indian farmers need highest appreciation for putting in best efforts, time and energy to make India reach this coveted position.
The only way to reward our cotton farmers is to allow them to receive a good price for their produce. Frequent policy changes on the cotton export front not only cripple export performance of the Country and lead to erosion of confidence of the International market for India as a regular supplier but also deprive cotton farmers from realizing a value for their produce which is equal to their counter parts in USA, China, Uzbekistan and several African Countries.
Policy distortions on the cotton exports front added significantly to the challenges faced by the cotton industry of India recently. Refund of domestic duties borne by exports remained suspended from 21st April 2010 to 31st March 2011 in the case of DEPB and from 29th April 2010 to 30th September 2011 in the case of Drawback. On 1st December 2010, a quantitative ceiling of 55 lakh bales was announced for cotton exports during 2010-11, which had already been registered in full by that date. Such virtual ban on exports is not warranted for, as per government data, production is increasing rapidly and domestic consumption is not keeping pace with production increases. ˙I strongly believe that free and consistent trade policy on the cotton export front is essential for the overall growth of the entire cotton and textile sector and I sincerely hope that the lessons have been learnt from the consequences of the knee-jerk measures taken last year which would not get repeated.
The Association continued its efforts and held a series of meetings with the concerned authorities to sensitise the Government on the current woes of the cotton community.
Road Ahead
Friends, during my tenure as President of the Association, I have tried to ensure that the Association strengthens its position in dealing with the development of cotton trade. The Association, through its wide ambit of activities, aims to improve the trade's competitiveness and brand image in the world markets. Some of the unfinished projects the Association embarked during three years of my tenure as President are as follows:-
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Setting up of Cotton School - As I have shared with you all umpteen number of times, it is my dream to set up a Cotton School of International standard in India to impart cotton education in a cost effective manner and provide opportunity to youngsters from less privileged backgrounds to develop flourishing cotton careers without travelling to overseas. We have done all our homework in this regard and will hopefully succeed in setting up such a cotton school in near future.
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Cotton Promotion Programmes - It is my ardent desire to enhance usage of cotton in India through cotton promotion programmes.˙ I am happy to mention that through dedicated and hard work of the Cotton Promotion Committee, we are ready to embark on an ambitious cotton development programme beginning with phase I of a School Contact Programme, which is expected to include 20 school in Mumbai with total number of target students being 6000.
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Scheme Relating to Quality Control System - The Association has a plan to create opportunities for members of the trade through a scheme relating to Quality Control System which includes a proposal to revive the system of registered panel for controllers, certification of quality and weight, location of stock, etc. This scheme will fulfill the requirements of pre-certified stocks for futures and transferable instruments as also for the purpose of selling ready stocks. This scheme has the potential to work as a warehouse receipt system and cater to the specific requirements of the cotton trade.
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Streamlining the Dispute Redressal System at CAI - Given the recent divergent movement of prices, the need to maintain the sanctity of contracts for protecting the interests of all those who trade cotton cannot be over emphasized. I strongly believe that it is necessary to maintain good trading relationships and ensure contract sanctity. The Association provides arbitration and conciliation facilities for resolving disputes in an impartial and effective way. The Association has undertaken a comprehensive exercise to streamline its dispute redressal system to make the same more effective.˙ Further, in order to add more teeth to the dispute resolution system available at the CAI, we are in the process of establishing a system through which it would be possible to monitor and publicise the details of such parties who do not fulfill the awards given by the CAI. This practice works wonderfully in the International markets where all concerned are cautioned about the non-fulfillment of arbitration awards by such parties.
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Expansion of Network of Cotton Testing Laboratories - With a view to increasing the instrument-based testing of cotton in India to be at par with international standards, the Association has set up cotton testing laboratories in Mumbai, Rajkot, Aurangabad, Akola and Warangal. This year, the Association has set up another laboratory in Indore. The CAI has an ambitious programme of expanding the network of its laboratories in all major cotton growing and producing States of the Country for providing cotton testing facilities locally in a cost effective manner. The offices at all such location will, apart from providing testing facilities to the all the segments of Indian cotton and textile industry of the country, also conduct field surveys to strengthen the CAI resources for collection of crop related data and propagate the cause of cotton on a larger scale.
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Export Promotion/Import Orientation Tours - Gentlemen, in order to sustain the prominent position our Country has in the world cotton market, it is necessary to promote Indian cotton in the established as well as non-traditional and emerging markets and enhance share of Indian cotton in the world markets through innovative strategies. This is possible only with the consistent and coordinated efforts of all concerned.
I am confident that all our members will extend their valuable support to the management of the Association in the tasks ahead.
Valuable Government Support
Friends, I must acknowledge herein the support received from the various policy formulations of the Ministry of Textiles, Ministry of Agriculture and Ministry of Commerce & Industry through participatory development. The various policies formulated with objectives to maintain the export growth momentum, increasing production and productivity in cotton, have substantially enabled the entire cotton and textile industry to withstand the recessionary pressures and develop competency in the global market.
I must also mention that alongside these initiatives, it would not have been possible to overcome the various challenges faced during my tenure as President, without the valuable contributions, support and encouragement received from all our members. I am confident that with the concerted efforts and continued guidance from the cotton trade, the Association will scale new heights of excellence in the years to come.
Acknowledgements
Before I conclude, I would like to take this opportunity to place on record my sincere thanks on behalf of the Board and members of the Association to Shri Anand Sharma, Hon'ble Minister for Commerce & Industry and Textiles for his encouraging support and guidance in expanding exports and Shri Sharad Pawar, Hon'ble Union Minister for Agriculture for his valuable guidance on all matters relating to cotton. Our thanks are also due to the erstwhile Minister of Textiles Shri Dayanidhi Maran.
I also wish to convey our deep gratitude to Smt. Rita Menon, Secretary (Textiles), Shri P.K. Basu, Secretary (Agriculture), Shri Rahul Khullar, Secretary (Commerce) for their positive approach in resolving the various issues confronting the cotton trade.
Our thanks are also due to Dr. Anup Pujari, DGFT, ˙Shri V. Srinivas, Joint Secretary (Textiles) and Shri Subhash Chandra Garg, Joint Secretary (Agriculture) for their understanding of various issues confronting the cotton sector and last but not the least, Shri A.B. Joshi, Textile Commissioner for his continued support.
I would also like to convey my sincere thanks to my Vice-President Shri Nayan C. Mirani, Additional Vice-President Shri Sanjay V. Udeshi, and Hon. Treasurer, Shri Shirishbhai Shah for sharing my responsibilities and making my task lighter and easier. I also thank my colleagues on the Board and other Committee members for their active cooperation and support.
I also sincerely thank Cotton Corporation of India for their continuous support to the cause of the Indian cotton economy. Our thanks are also due to all our Upcountry Cotton Trade Associations and the Co-operative Societies, who have wholeheartedly extended their co-operation and support to the Association from time to time.
I also thank the media for extensively covering press releases and events/functions of our Association from time to time and presenting the various problems of the trade with understanding and sympathy.
Finally, I would like to thank Secretary and his team of Officers and Staff for carrying out their responsibilities with a sense of dedication and commitment.
Thank you.
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