The Government's reported move to levy a 10 per cent duty on raw cotton exports is ill-conceived, apart from being anti-farmer and against the principles of free trade. Consider the timing of the proposal — hardly a month before picking of the new crop is to commence. Moreover, the indications are that we will have a bumper harvest this year, thanks to good rainfall in major cotton-growing areas. Announcing curbs on shipments just when the crop is arriving in mandis would only depress prices for farmers, giving the BJP and its alliance partners in Gujarat, Maharashtra and Punjab yet another stick to beat the Congress-led Centre with. This will probably force the latter to respond by making the Cotton Corporation of India undertake massive procurement operations to ensure farmers get at least the official minimum support price. How much of kapas (unginned cotton) can it procure and what will be the fiscal cost in such an event?
The Textile Ministry has apparently recommended that the 10 per cent duty be imposed only on quantities in excess of a declared 'exportable surplus'. But why should the Government determine what constitutes surplus and what may be exported? Doesn't this take us back to the days of babus fixing quotas in the name of protecting local industry or promoting the export of value-added items? Such official interventions inevitably favour one lobby — in this case, it could even be cotton exporters who gain from depressed kapas prices during harvest time — over the other. They have no place in an era of liberalisation. When cotton is freely importable at zero duty, there is no reason for restriction on exports, that too in what is likely to be a record production year. Also, if the Government were to clamp an export duty on raw cotton, what will stop similar curbs being extended on yarn shipments citing the same 'domestic value-addition' argument?
The timing may be also faulted from a balance of payments perspective. India is badly in need of foreign exchange; between 2009-10 and 2012-13, the country's agricultural product exports have gone up $17.7 billion to $40.6 billion, led by rice ($6.2 billion), guar gum ($3.9 billion) and cotton ($3.7 billion). The rupee's recent weakening and the bounty from a well-distributed monsoon could give a further boost to farm exports. With the Government having rolled back controls on export of a host of agri-products, from foodgrains to cotton, sugar and milk powder, there is no defence for their reintroduction, especially in the face of lobbying. Doing so will kill one of the few growth drivers left in the economy — rural incomes. Farmers, like corporates, deserve a predictable policy environment. It is time we have in place a long-term farm export policy, which insures against opportunistic and knee-jerk restrictions.
