Bumper crop and grim outlook for garment exports has led to a price crash in mandis ahead of peak arrivals.

Banwari Lal’s disappointment is obvious from his face. Sitting on a charpoy beside a heap of narma/kapas (raw un-ginned seed-cotton) at the Abohar mandi in Punjab’s Fazilka district, the 50-year-old recounts bringing his crop earlier in the day. After waiting for two hours for his 15 quintals produce to be auctioned, he had to settle for a rate of Rs 4,285 per quintal. Last year, the same traders had quoted between Rs 5,700 to Rs 6,200 for the narma lots that he had brought at different times.

“How can prices go down like this? We grow based on what we got last year. Shouldn’t the government have some mechanism to prevent such wild price fluctuations, which adds to our debts? Selling at below Rs 5,000 per quintal is a big loss and we don’t want any loan waivers,” says this farmer who owns 15 acres at Khippanwali, a village not far from Abohar town.

Last year’s good realisations had led Banwari Lal to increase his narma area from four to seven acres, while dedicating the remaining eight acres to paddy. “I’m worried because there is more crop to sell from the next couple of pickings. The traders say prices could come down further,” he sighs.

Harvesting and marketing of cotton in southwest Malwa belt — mainly Fazilka, Muktsar, Bathinda, Faridkot, Firozpur, Moga, Mansa and Barnala districts — started just over a week back, with the first pickings completed. Farmers here harvest between 10 to 14 quintals of narma over three pickings. Currently, the 25-odd cotton mandis in Malwa are receiving 1,000-3,000 quintals daily, with arrivals peaking after October 15. Punjab expects to produce 12.5 lakh bales (of 170 kg each, in terms of lint or the white fibre obtaining after ginning) this year, compared to 8.90 lakh bales in 2016-17.

“Higher production is bad news for us, though the traders are attributing the lower rates also to GST (goods and services tax). We don’t know whether they are telling the truth,” complains Resham Singh from Kundal village in Abohar tehsil, who, too, realised only Rs 4,265 per quintal for the three quintals that he sold on Tuesday. Singh farms seven acres, of which two acres he has leased for an annual rent of Rs 80,000. With Rs 6-lakh of outstanding loans against him, his message is the same as Banwari Lal’s: “Saanu apni fasal di kimat de dave sarkar, karja asin aape dekh lawange (let the government guarantee us a proper rate, we’ll take care of our debt)”.

Around 80 km away, the scene at the Bathinda mandi is no different. Here, too, narma is quoting in the Rs 4,200-4,300 range. Sikander Singh, who grows cotton on his entire 3.5 acres land at Phus Mandi village near Bathinda, has received not even that. “The traders paid Rs 3,940 per quintal, saying that my crop had excess moisture. Now, was it my fault that it rained just when the first picking had started? We have no control over nature. Shouldn’t the government help us in such situations?” he asks, guarding his just-sold eight quintals. The farmer has the responsibility to look after his narma till the time it is lifted by the arhtiya (commission agent) or trader who has placed the winning bid.

Cotton prices have witnessed wide oscillations in the past five years. In 2012-13, Punjab’s farmers got Rs 3,500-4,000 per quintal, which rose to Rs 4,500-5,100 in the following two seasons, only to crash to Rs 4,200-4,300 in 2015-16. Last year, the rates touched Rs 5,700-6,200 per quintal. But now these are back to Rs 4200-4,300 or just around the minimum support price of Rs 4,220 per quintal. The state-owned Cotton Corporation of India is supposed to purchase from farmers when market prices fall below that rate.

“The mandi officials are equally responsible. They just sit in their office and hardly check what’s going on in the mandi, because of which traders do whatever they want. At the time of weighing, they give all kinds of reasons, from high moisture content to short fibre length, to bring down rates”, alleges Balwinder Singh, a 10-acre farmer from Katar Singhwala village in Bathina, who has so far sold 15 quintals at Rs 4,250/quintal.

Traders, however, blame the current prices mainly to a bumper crop. “Our mandi alone is likely to see arrivals of around three lakh bales this year, when these had not crossed even two lakh during the last five years. Also, narma realisations depend not just on the rates for lint, but also for seed. Cotton-seed (used in extraction of oil) is now selling at Rs 1,800-1,900 per quintal, whereas these were Rs 2,800 last year”, notes Anil Nagori, president, Abohar Mandi Arhtiya Association.

But Suresh Kumar Gupta, managing director of Punjab Spintex Limited, a Bathinda-based cotton yarn manufacturer and exporter, has another explanation for the sharp fall in narma prices. That has to do with the Centre’s decision to slash the duty drawback rate for cotton garments from 7.7 per cent to 2 per cent with effect from October 1. “The bumper cotton crop from Punjab gave us hope of great business this year. The new rates (basically a refund of duties on imported inputs used for exports) are nothing short of a surgical strike on the domestic garment industry by the Narendra Modi government”, claims Gupta.

According to him, kapas rates had started at Rs 4,900/quintal a week ago and the fall thereafter is at least partly on account of the reduction in drawback rates for garment exporters. It has, in turn, translated into lower demand for kapas. “The drawback was an incentive, especially when our garments attract 10-12 per cent import duty in both Europe and the US, whereas the Bangladesh is able to export to the former and Pakistan to the latter at zero duty”, he adds.

All this has, of course, ultimately hit farmers like Banwari Lal and Resham Singh.