LONDON – [29.04.10] The Indian government’s decision to ban cotton exports looks like having an unfair impact on the growers of Fairtrade and organic cotton in India, as upstream profits from soaring cotton prices fail to trickle back into Indian farmer’s pockets.
The export ban on cotton follows on from a decision by the Indian authorities to lower cotton export tax rebates in the wake of higher demands from a rapidly recovering Chinese economy. This has helped to drive up the price of cotton by 80% to a 15-year high.
In the meantime, exporters of Indian cotton lint have flourished, but this has lead to a shortfall in the amount of cotton available for India’s own textile manufacturing sector – a fierce competitor of China – and it was this lack of raw material which caused India to slap a ban on cotton exports to protect its own textile sector.
This drastic action has not only left Indian cotton farmers counting the cost of lower domestic market prices (which fell sharply after the ban), but has also left western retailers asking if they need to increase the cost of their cotton clothing to counter the rising costs along the supply chain.
The problems that the conventional cotton farmers in India face are magnified when it comes to organic and fair-trade cotton growers and their impoverished communities. After all, the whole point of organic and Fairtrade is to help out these communities – not shut them out when times are good.
“We have a situation where the price of cotton is going up but the farmers are not benefitting,” said Graham Burden of UK consultancy Sustainable Textile Solutions, who noted that “the price of the Fairtrade and organic is rising in line with the price of conventional cotton”, but he suggested that in future there should be some mechanism which protected organic cotton from rapid price fluctuations or some sort of rebate which could be given back organic and Fairtrade cotton farmers.
Barbara Crowther of the Fairtrade Foundation said,“International cotton traders may be earning higher prices, but these rarely trickle back down to the farmers themselves. Prices have been pushed up sharply by a mixture of roaring demand from China, a crop wipe-out caused by an Indian monsoon and higher costs of fertilisers, seed and transport fuel,” she told the Mail on Sunday.
In this highly unusual situation, some cotton spinners and fabric suppliers are now able to pass on some of these costs up the supply chain, with the result that retailers may actually have to consider paying more for basic cotton items such as socks and t-shirts where cotton makes up a high percentage of the garment cost.
