CHAPTER-IV

A STUDY OF DIFFERENT COTTON MARKETING CHANNELS IN

INDIA, KARNTAKA AND BELLARY DISTRICT

4.1 Introduction:
Marketing of agriculture produce is as important as the production itself.
In fact, production and Marketing are intertwined and have a symbiotic
relationship. Baker (1999) says that the organization of production and the
organization of marketing are best viewed as two parts of the same process. In
India, agriculture production has attained tremendous growth due to the
remarkable changes in inputs and technology, but marketing still remains a
weak link in the field of agriculture. Marketing technology of agriculture
produce has not received as much attention as the production technology in our
country. The impact of new production technology cannot be sustained unless
simultaneous efforts are made in the direction of effecting improvements in the
marketing system as a whole. Inefficient marketing system becomes a
stumbling block to increasing agriculture production and farmers revenue.

It is generally held that unless adequate arrangements are made for

marketing, agriculture production efforts will themselves receive a setback
causing vide spread frustration among farmers. According to National
Commission on agriculture, Agriculture marketing is a process, which starts
with the farmers decision to produce a saleable farm commodity and it
involves all aspects of the marketing structure or system both functional and
institutional with technical and economic consideration including product
assembling, processing, distribution and use by the final consumers. The
significance of agriculture marketing is highlighted by S.S. Acharya says that
the marketing system has a critical role creating marketing environment
because it not only performs various physical functions in carrying the products
from the farm gate to the consumers but also discovers the prices and transmits
the price signals from one stage of the marketing chain to the other. Even as far

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back as the 1950s, it was held that if there is any factor to be singled out as the
fundamental limiting factor upon the pace of development, it is the marketable
surplus of agriculture, rather than the total product or the productivity of
agriculture in general. The High Power Committee for Redressed of Regional
Imbalance, in its Report observes that perhaps, next only to irrigation and
credit, it is marketing facility that can promote agricultural growth and reduce
regional imbalances in the agriculture sector. Further, the Committee observes
that unless the marketing side is tackled effectively, no amount of production
inducing measures can bear the full fruit.

The system of agriculture marketing is saddled with a long chain of

middlemen between cultivators and the ultimate consumers and they take away
the lions share of the prices paid by the consumer. In many commodities the
producers share in a consumer rupee is less than 50 percent because of the
increase in marketing costs and marketing margins. In the market, the farmers
are invariable exploited by middlemen. The malpractice, involving
manipulation of weights and measures and arbitrary deduction from both the
buyers and sellers, are still prevalent. In addition, there are inadequate
arrangements for grading, standardization, market information, storage and
transport.

4.2 Cotton Marketing in India:

Agriculture marketing, which used to be a simple process in the past, is
now becoming highly complex. It involves a large number of intermediaries,
physical and facilitating services across the country in handling a large number
of agriculture commodities which are seasonal, bulky and some of them highly
perishable. The marketing process is further complicated as a majority of the
farmers is of small, illiterate, unorganized, scattered all over the country and
has very little time and knowledge of marketing of their produce. Further,
already being in debt, they are forced to sell their meagre marketable surpluses

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immediately after harvest in the village itself or in the nearby primary rural
markets or to the village money lender at an unfavourable price.

If we go through the marketing system in our country with reference to

cotton, it has been classified as:
1) Kapas (cotton with seeds)
2) Lint (ginned cotton)
3) Cotton wastes
4) Cotton Seeds.

Cotton is often sold in regulated markets, except in Maharashtra and at

from gate price and 90 to 95 percent of the kapas is sold at the market centre
and has 5 percent of the total production of kapas is sold at the villages.

The processor sells the lint, that is, ginned cotton. Even in the
commodity exchanges, the lint sale is taking place. Cotton wastes trade and
cotton seeds trade are taking place mostly in the cotton mills premises. Before
entering into the manufacturing of textiles, cotton is processed. Ginners,
spinners and others do the processing. Ginning units are located at a few places
and the traders purchase the new cotton, namely, kapas and gin it into lint.

4.3 The market functionaries involved are:

I. Cotton Corporation of India;
II. Brokers and Commission Agents;
III. Traders
IV. Ginners.

Cotton Corporation of India:

The Cotton Corporation of India (CCI) was established during the year
1970 (31.07.90) as a company. Its objective is to act as the canalizing agent for
imports to producers and procuring raw cotton for textile mills, both in the

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public and in the private sectors. During the year 1978, due to change in the
Textile policy, the role of CCI was enlarged to include price stabilization
through cotton buffer stock operation (BSO). The CCI is to purchase sizable
quantities of cotton, particularly of long and extra-long staple cotton, with a
view to protect the interests of the cotton growers, who produce certain
varieties as a substitute for Egyptian and Sudanese cottons.

The Cotton Corporation of India has purchased 2,750,169 bales during

2004-05, due however to increase in the price of cotton, the CCI has not
purchased the price support cotton (kapas), since the open market price is more
man the support price after 1987 onwards. The quantity purchased depends on
the demand of the institutional buyers. The CCI is purchasing kapas and
transporting it to assigned units for pressing into bales and stored. It is then sent
to institutional buyers like the National Textile Corporation (NTC), State
Textile Corporation (STC) and Co-operative Mills and Khadi and Village
Industries Commission. In order to stabilize cotton prices in the country, and to
earn foreign exchange, the CCI exports cotton as per the quota released by the
Union Government.

Brokers and Commission Agents:

Cotton mills are functioning in certain centres only. The mill owners
usually buy what they need either through brokers or commission agents. It is
customary that while buying, the terms and conditions of contract are mutually
agreed upon, well before making the purchases. The brokers get brokerage
charges for the services rendered. In the case of commission agents, they get a
percentage as commission. But most of time, trade transactions take place on a
credit basis. The price is fixed for a bale of cotton, which is 170 kg, which is
later ginned cotton variety-wise. The traders; purchase of kapas, that is raw
cotton ginned, from the ginning units or even from private ginning units. It is
then pressed as bales and transported.

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Cotton Traders:
The people who purchase are called the traders, according to the
Marketing Act. The traders enter into the Regulated Markets after having
obtained license from the concerned Market Committee. They also purchase
raw cotton (kapas) through the agents at the farm gate. They sell then to their
customers with 2 percent to 3 percent marginal profit on cash sales and 5
percent to 8 percent on credit sales. As per the terms and conditions, the traders
gin kapas and then sales take place over the phone.

Cotton Ginners:
The ginners are located in important market centres where the un seeded
cotton, that is, kapas is ginned. Ginning is process by which the seeds are
removed from the raw cotton. Once ginning is done, the product received it is
called lint. Cotton seeds are mostly used for manufacturing cottonseed oil. It
has very good potential for the manufacturing of refined oils and Vanaspathi
and the oil could be used for medicinal purposes. Cotton seeds are also used as
a cattle feed, especially for mulching cattle (cow or buffalo to have more milk).
About 70to 80 percent of the ginners are thus rendering services to their
customers in the district of Mysore. They also enter the markets and
purchase raw cotton for ginning the same, press and make them into bales and
sell them to their customers under their own trade manes, usually in the trade
name of the mill owners (units). About 20 percent of the ginners may also own
textiles units and thus use their own ginned cotton in the mills for cloth
production.

4.4 Regulation of Cotton Trade by Market Committees:

Cotton is notified by the State Government as kapas (raw cotton),
ginned cotton (lint), cotton seeds and cotton wastes. If the notification is not
specified, then the market functionaries go to the court of law and request the
court for non-regulation. The court upholds the law or regulation if there is any
flaw in the notification of the commodities. The Market Committee, before

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implementing it, takes care as to whether the particulars commodity has been
notified in the official gazette of the concerned Government or in the Gazette
Notification.

The second important thing is the issue of Licence, in the case of

Traders, Commission Agents, Brokers, Ginners, Pressers and Processors. The
State Government should, mandatorily, and clearly specify in the definition
clause the different market functionaries operative in a given crop context. In
some states, Marketing (Regulation) Act, brokers and commission agents have
not been recognized. Hence, it is very difficult for the Market Committee to
regulate efficiently. It is high time that the State Government takes action and
amends the Act suitably, considering the pros and cons of such an exercise.

Three major groups market both cottonseed and lint: private traders,
state-level cooperatives, and the CCI. Of these three groups, private traders
handle more than 70 percent of cottonseed and lint, followed by cooperatives
and the CCI. Normally, Indian farmers sell their cotton in the form of kapas or
seed cotton, mostly in a regulated market, which was established under the
State Agriculture Product Markets Act.

4.5 Important cotton Assembling Markets in India:

The following are the major assembling markets for cotton producing
states in the country:

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Names of States Name of the Markets

Andhra Pradesh Guntur, Adilabad, Warangal, Khammam, Nirmal

Gujarat Keshod, Bardoli, Jatepurpavi, Gondal, Balasienor,

Rajkot, Babra, Amreli, Sabarkntha, Visnagana, Vijapur,
Halvad, Unai, Manavadar, Bevsa, Mansa

Hariyana Hisar, Fatehabad, Sira, Bhiwani, Rothak,

Panipath, Jind, kaithal, Gurgoan

Karnataka Bailhongal, Bellary, Bijapur, Gadag, Haliyal, Hubballi,

Kottur, Jamakhandi, Raichur, Ranibennur,
Savadatti, Santhesargour, Yellapur

Madhya Badwani, Betul, Chindawara, dhar,Dewas, Harda,

Pradesh Jhabua, Khandwa, Khargone, Ratlam, Sajhapur

Maharastra Nagpur, Narkhed, Nanded, Yatmal, Hinganghat,

Wardha, Pulgaon, Akola

Orissa Roygoad, Karaput, Kalahandi, Navaranpur, Bolasngar,

Dhenkenakal, Ganjam

Panjab Bhatinda, Ferojpur, Sangur, Muktsar, Faridkot, Mansa

Rajastan Hanumangarh, PiliBanga, Srignaga-Nagar, Palampur,

Sangriya,Suratgarh, Sri Vijayanagr, Shauslankar,
Rawatsar, Kherthal, Bijaynagar, Rajsighnagar.

4.6 Cotton Marketing Channels in India:

Any marketing channel is a group of inter-related intermediaries who
market the produce from the farmers to consumers. private and institutional
channels are the important marketing channels n the movement or distribution
of major agricultural commodities. It has been estimated that about 80

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percentof the marketed surplus of kapas and lint is handled by the private
marketing channels and remaining 20 percentby the institutional marketing
channels, including the co-operatives and the cotton corporation of India. The
most prevalent institutional channels are:
A. Channel-I: Producer-Village Trader-Itinerant Trader-Wholesaler (in
regulated market)-Miller-Consumer.
B. Channel-II: Producer- Village Trader/Merchant-Commission agent-Miller
- Consumer.
C. Channel-III: Producer-village merchant-Itinerant trader-Miller-Consumer.
D. Channel-IV: Producer-Village Trader-Wholesaler (in unregulated
market)-Lint Market- Commission Agent-Miller Consumer.
E. Channel-V: Producer Co-operative Society-Co-operative Ginning and
Pressing Factory Terminal market-Miller-Consumer
F. Channel-VI: Producer-Cooperative Marketing Federation-Terminal
market-Consumer
G. Channel-VII:- Producer-state Govt .Agencies-Central Government
procurement Agencies.
H. Other three channels are also in existence:
A. Producer -Trade-CCI-miller -Consumer.
B. Producer -CCI-Miller -Consumer.
C. Producer- Miller Consumer

Among the channels, Channel VII is the most common in institutional

channel, followed by channel VI.

The marketing of any product involves a careful consideration of the

four, constituting the marketing mix, namely, product price promotion and
place. At the farmers level, the choice product is dictated by the soils and
climatic conditions and the impetus received from the forces of demand. The
price is determined mostly by the buyer who has relative dominance over the
market as compared to the individual farmers. In fact the government set up the

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cotton corporation of India to a support price to the farmers. It can be said that
little or no promotional work is undertaken at the level of grower.

Cotton marketing channels in the study area:

A. Producer- village traders
B. Producer-Commission agent- village traders-ginning mills
C. producer- village traders- commission agents- ginning mills- traders-
consumer In a developing economy the growth of agriculture sectors
is crucial in the promotion of development of others sectors like
industry and services the main economic sectors of any economy.

4.7 Trading and Marketing Policy for cotton:

Trade Policy for Cotton:
On July 8, 2008, the Government of India removed the import duty
(14.7 percent cotton. The tariff levels on cotton textile products remained
unchanged in 2009 Indian budget that is effective for IFY 2009/10
(April/March). On July 22 2008 the Ministry Commerce issued a notification
that imposes the condition that states "The contracts for exports of cotton shall
be registered with the Textile commissioner prior to shipment. Clearance of
cotton consignments by customs could be done after verifying that the
contracts have been registered. This was done to enable the Government to
monitor Indian exports of cotton as well cosmetic cotton supply situation.
Earlier, export statistics were made available to the government with lag 01 4-6
months alter physical exports since the directorate general of commercial
intelligence takes some time in collecting, and tabulating the custom statistics
from each port.

On February 17, 2009, the government announced the Vishesh Krishi

Gram Upaj Yojan to benefit to exporters of raw cotton to encourage cotton
exports and liquidate burdensome cotton stocks from the domestic market. The
benefits we been extended on a retrospective basis for cotton exports from

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April 1, 2008 to June 2009, wherein exporters are entitled to 5 percent duty
credit scrip on the FOB value, which can be traded and used for availing duty
script on imports. The Indian textile industry has strongly opposed the move as
the policy to subsidize cotton exports will give undue benefit to their
competitors from China Pakistan, Bangladesh and Indonesia in the global
cotton textile market.

However market sources believe that the government may extend the
June 30, 2009 deadline further through the MY 2009/10 season if the current
price parity between the domestic and international market does not change
substantially in favour export. With the expiration of the MFA in January 2005,
Indian exports of all textile products have liberalized. In an effort to promote
the export of value added cotton textiles, the GOI provides various incentives.
Export oriented units (BOUs) and firms importing against an advance license
receive a duty drawback zero duty for EOUs and duty discounts for others) on
imports of raw materials for the export of value-added goods. Under the Export
Promotion Capital Goods plan, imports of capital goods and machinery are
allowed at reduced duty rates against export obligations.

In recent annual supplement to the foreign policy, the government

announced that leather product exports will get direct government assistance of
2 percentof their FOB value of exports to the U.S and E.U.as duty fees scripts.
The scheme will be that textile and leather products exporter will get direct
government assistance of 2 per value of exports to the U.S and as duty free
scripts. The scheme will be effective for the period April August and sum of
Rs.32.5 ($.65million) has been allotted for the scheme.

Cotton Marketing Policy:

India should be in the cotton export market for the next few (3-4) years.
Until is domestic consumption catches up with production. Most exports are
expected to be of medium-to-long staple cotton (25 to 32 mm length) to

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neighbouring countries China, and the Far East countries. Post expects India to
continue to support ELS and quality long staple cotton (28-34 mm), with
occasional imports of short staple cotton (below 22 mm) when international
prices are favourable. The United States has been the leading supplier of cotton
to India over the past few years, but volumes have declined in recent years on
sufficient domestic supplies. Indian Mills importing U.S. Pima and upland
cotton are appreciative of its quality and consistency. However U.S. cotton
faces severe competition from neighbouring countries like Egypt.

Cotton Textile Industry Policy:

India is the second largest producer of textiles and garments after China
and has a re of 3.9 percentin the global textile trade. The textile industry is
largely cotton based contributing about 12 percentto the country's total export
earnings,11 percentof industrial production, 4 percent to GDP and provides
direct employment to over 33.17 million people, the second largest
employment after agriculture. Post MFA (2005/06), the textile industry had
been progressing well for three consecutive years on sufficient raw material
supplies and strong export and domestic demand. However, the textile industry
has been being severe challenges since late 2007 due to an increase in the price
of raw material depressed global demand for textiles, and other infrastructure
problems. Consequently, growth in the production of textile is to come down in
IFY 2008/09 compared to last years.

The sharp weakening of value of the Indian rupee since February 2009
has improved export price realization in rupee term. Consequently, industry
sources report an improvement in export for textile products. Export demand
for Indian textiles expected to recover in IFY 209/10 provided the Indian rupee
remain stable. Domestic demand for textile is expected to grow on continued
strong growth in the economy and an expanding population. Consequently
industry sources export a turnaround in the textile industry, with the production
in IFY 3\2009/10 forecast to increase by 4-5percentover the previous year.

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 The Indian textile industry includes an organized sector (large-scale
spinning units and composite mills) and an unorganized, sector (small-scale
spinning units power looms handlooms hosiery units). More than 95 percent of
yarn is produced in the organized sector. The weaving industry is mainly
supplied by the unorganized sector, with power looms accounting for 602
percenthandlooms for 18 percent and hosiery units 17 percent of total cloth
production. The organized sector weaving mills account for the remaining 5
percent of cloth production.

4.8 Prices Analysis of Cotton in India:

Prices of cotton influenced by area, production, use of cotton by mills,
exports, exchange and government policies. More than 25 varsities of cottons
are cultivated in India and have different staple lengths. Normally prices are
quoted for lint (per candy) from of cotton.

4.9 Assembling of Cotton and Distribution:

In the case of cotton assembling, the most important stages are
marketing since at this point; only the grower converts his corps into cash. A
major portion of the cotton crop is assembled by ginning factory owners, cotton
growers, cotton manufactures.

It indicates that-Cotton price have been huge variation in the last 6-7
years. Prices of S-6 variety were quoting in the range of Rs.15000-19000 per
candy with average prices of Rs.16650 during 2001-02 Prices moved sharply
20o1-02 and 2003-04 where prices touched all the time high of Rs. 24000 per
candy. Declined imports and stagnant output during these two years led to
sharp rise in prices. While the MSP has generally had little direct impact on
cotton production incentives, a number of domestic regulatory measures have,
historically, tended to suppress domestic cotton prices.

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 In case of cotton distribution, the important stages are marketing since at
the at this point; only grower convert his crop into cash. A major portion of the
cotton crop is assembled by ginning factory owners, cotton manufactures and
commission agents or brokers who visit the cotton growing villages and make
purchases through village deals who act as commission agents or brokers. The
several ways of selling adopted by the cotton growers in various parts of the
state may be grouped as under:

1. Selling Cotton Crops

2. Selling the cotton in villages
3. Selling the cotton in market yards
4. Selling the cotton through Co Operative Marketing Societies
5. Selling the cotton to Cotton Corporation of India

The cotton produced in Karnataka is marketed by the farmers mostly

regulated markets. Totally, 74 Agricultural Produce Market committees in the
state have notified cotton as a regulated commodity under Karnataka
agricultural Produce Marketing (Regulation) Act 1966. The objective the
regulation is to bring in better marketing practices, such as prompt weighment
of produce, competitive method of sale, fixation of market charges and timely
of sale produce to the farmers. Another objective of the KAMP(R) Act is to
provide basic infrastructural facilities for the trade of notified commodities.

4.10 Cotton Arrivals and Prices in Karnataka Market:

The major regulated markets for cotton in Karnataka are:
1. Ranebennur, Bailhongal, Savadatti, Bijapur, Dharwad, Haveri,
Belgaum, Santhesargour, Naragundha, Chithradurga and Bellary.
2. Ginning and spinning mills are located in Haveri, Ranebennur,
Gangapura, Amminabhavi, Gadag, Bellary and Hubli in Karnataka.

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 3. Almost all ginning and spinning mills are located in Haveri,
Ranebennur, Gangapura, Amminabhavi Gadag, Bellary and Hubli in
Karnataka,

Whereas Bellary district, all cotton growers and farmers sell their
produce only as raw cotton. A detailed description of the major markets
arrivals, prices and their transactions is given below tables.

Cotton Arrivals in Major Market in Karnataka in Quintals:

According to under the table 4.1 shows the, cotton arrivals varied so
much across the major markets in Karnataka that it is difficult to see either a
regular pattern of change. For example, the highest amount of arrivals in the
major markets of Karnataka in year 2001-02 was of the order of 442,322
quintals in Bijapur market and the same year was 70,387 quintals at the
Naragundha market. Over the space as well as over time, the arrivals have
shown an irregular pattern. There has been any consistency in their increase or
fall over the year in cotton arrivals at the major markets of the state. The
arrivals in the latest year for which data are available 2011-12, the highest
amount of arrival Ranebennur with 688,575 quintals whereas the lowest
arrivals were in heavy arrivals fluctuated over the years and over the space.

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 Table-4.1
Cotton Arrivals in Major Markets in Karnataka (Arrivals in quintals)

Markets 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Ballari 96,654 106,686 67,103 47,474 63,916 14,326 76,582 48,130 21,000 35,412 23,452
Santhesaragour 188,355 185,045 198,714 162,170 128,482 159,122 177,403 108,865 138,540 74,697 88,474
Bylahongala 255,756 194,447 210,421 122,274 98,496 57,317 177,713 126,124 118,585 131,818 179,000
Savadahti 158,750 108,224 50,121 33,740 29,274 19,000 40,372 39,344 34,726 41,614 60,740
Bijapur 442,322 470,822 530,798 368,543 374,750 149,123 155,671 110,964 97,753 270,691 349,453
Dharwad 83,835 51,391 42,625 39,882 28,059 15,311 35,188 17,710 4,577 11,649 19,239
Hubli 132,832 116,222 89,724 108,566 127,677 61,796 173,237 995,729 35,363 83,227 96,626
Naragundha 70,387 59,910 22,719 16,535 34,936 4,415 13,016 26,993 10,541 20,967 7,409
Ranebennur 365,810 271,420 337,249 379,502 212,890 173,795 379,287 343,424 501,542 529,713 688,575
Chitrradurga 186,569 118,578 75,833 110,189 65,121 17,574 127,323 89,548 109,453 112,708 135,369
Source: Karnataka State Agriculture Marketing Board

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 Table-4.2
Cotton prices in major Cotton Markets in Karnataka (Prices in Rupees)
Market Name 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Ballari 1,903 1,706 1,823 1,654 2,121 2,274 1,620 1,909 2,700 2,698 2,719
Santhesaragour 1,900 1,907 2,013 1,845 1,973 2,175 1,807 2,037 2,301 1,867 2,466
Bylahongala 2,444 2,697 3,344 1,654 2,500 2,771 1,917 2,467 2,624 2,937 2,998
Savadahti 2,039 2,091 2,594 3,810 3,198 2,694 2,546 2,077 2,558 2,488 2,933
Bijapur 2,000 2,072 2,113 2,170 1,810 2,339 1,995 1,818 2,200 2,199 2,581
Dharwad 2,300 2,649 3,100 2,149 2,313 2,818 1,945 1,883 2,099 2,500 2,399
Hubli 1,980 2,611 2,669 2,039 2,200 2,812 2,335 1,446 1,983 2,366 2,671
Naragundha 1,908 1,543 2,150 1,800 1,543 2,421 1,712 1,516 1,623 2,199 2,307
Ranebennur 2,144 2,196 2,653 2,320 2,849 2,818 1,967 2,101 2,077 2,417 2,788
Chitrradurga 2,100 2,400 2,381 1,899 2,500 2,860 2,399 2,599 2,899 2,449 2,887
Source: Karnataka State Agriculture Marketing Board

Cotton Prices to a quintal of arrivals have never been consistent either in space across the market or in time over the years are clearly borne
by the Table-4.2. There have been a general increase over time is however borne out by the fact that for example in Bellary the price to a quintal
was Rs. 1,903 in 2001-02, it is declined over the three years consistently only to pick up again to Rs. 2,121 in 2005-06 and 2,274 in the next year
only to fall again the year and picking up to at Rs. 2,719 to a quintal in 2011-12. The patterns of change were different and inconsistencies in any
market and over time in relation to that market. The highest ever recorded price of a quintal of cotton arrivals was Rs.3,810 at the Savadathi market
and in the year 2004-05 and the lowest ever recorded was Rs.1,516 at Naragundha in 2008-09.

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 Table-4.3
Values of Cotton Arrivals in Major Cotton Markets in Karnataka (Values in Million Rupees)

Market Name 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Ballari 183.95 182.01 122.35 785.64 1355.65 325.87 124.06 91.93 56.70 95.56 63.79
Santhesaragour 357.88 353.06 400.06 299.38 253.53 346.14 320.68 221.84 318.83 129.46 218.21
Bylahongala 625.10 524.62 703.75 202.28 246.24 158.86 340.77 311.16 311.28 387.25 536.74
Savadahti 323.70 226.35 130.03 128.60 93.63 51.20 102.8 81.74 88.86 103.58 170.16
Bijapur 8084.64 975.80 1121.99 800.06 678.30 348.95 310.56 201.83 215.07 595.52 902.20
Dharwad 192.83 136.19 132.12 85.75 64.93 431.61 684.41 333.56 96.11 291.34 461.73
Hubli 263.10 303.52 239.49 221.43 280.89 173.77 104.68 144.05 70.13 196.93 258.09
Naragundha 134.36 92.47 48.87 297.63 539.37 106.91 222.85 409.34 171.18 212.7 270.99
Ranebennur 782.83 596.04 894.90 880.80 606.74 489.88 746.13 721.55 1041.80 1280.57 1920.00
Chitrradurga 391.80 284.59 280.58 209.36 162.80 50.26 305.58 236.80 317.41 276.13 390.88
Source: Karnataka State Agriculture Marketing Board

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 The inconsistencies of the arrivals and prices impact on the values of
cotton arrivals in the various markers in the stat and over time as shown in the
Table-4.3 and Bellary market is a good example for such variations with
inconsistent values of cotton arrivals: 183.95 million in 2001-02, in Bellary has
turned into Rs. 785.64 million in 2004-05 and Rs. 1355.69 million in 2005-06.
Then the value of arrivals fell quickly over the next four years to reach just Rs.
56.7 million and then swing a little bit and reach Rs. 63.79 million in 2011-12.
In no other market, such inconsistency in values is so prominent. Ranibennur
recorded consistently high value of cotton arrivals, with the exception 2006-07
when the value of cotton arrivals was Rs. 489.88 million. In the last three years,
the value of cotton arrivals were very high, Rs. 1041.80 million in 2009-10
Rs.1280.69 milion in 2010-11 and million in 2011-12.

4.11 Description of the Study in selected Regulated Markets in Bellary

district:
There are seven regulated markets operating in the seven talukas of the
district. The study relates to the marketing of cotton in the five important
agricultural produce markets in the study area, namely Hagari Bommanalli,
Hospeta, Siraguppa, market and Kudligi (Kotturu), Bellary cotton market.
Cotton has been an important commercial crop of the district and major
proportion of its output comes for sale in these through the markets in the
surrounding area. These markets have been connected well road transport, with
the important adjoining villages in which the crop raised.

4.12 Marketing Scenario of Cotton

Marketing of agriculture is as important as production itself. In fact,
production and marketing are intertwined and have symbiotic relationship.
Baker says that, the organisation of production and the organization of
marketing are best viewed as two parts of the same process (Baker). In India
agricultural production has attained tremendous growth due to remarkable
changes in inputs and technology, but marketing still remains a weak link in the

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field of agriculture. Marketing technology of agriculture produce has not
received as much attention as tge production technology in our country. The
impact of new production technology cannot be sustained unless simultaneous
efforts are made in the direction of effecting improvements in the marketing
system as a whole Inefficient marketing system becomes a stumbling block to
increase agriculture production and farmers revenue. It is generally held that
unless adequate arrangements are made for marketing, agriculture production
efforts will receive a setback, causing widespread frustration among farmers.
According to National Commission on Agriculture, Agriculture marketing is a
process, which starts with the farmers decision to produce a saleable farm
commodity and it involves all aspects of the marketing structure, both
functional and institutional with technical and economic considerations
including product assembling, processing, distribution and end use by the final
consumer.

The significance of agriculture marketing is highlighted by S.S. Acharya

who says that The marketing system has a critical role creating marketing
environment because it not only performs various physical functions in
carrying the products from the farm gate to the consumers but also discovers
the prices and transmits the price signals from one stage of the marketing chain
to the other.

Even as far back as 1950s, it was held that, If there is any factors to be
singled out as the fundamental limiting factor upon the face of development, it
is the marketable surplus of agriculture, rather than the total product or the
productivity of agriculture in general. The High Power Committee of the
Redressed of Regional Imbalance in their report observes that Perhaps, next
only to irrigation and credit, it is marketing facility that can promote agriculture
growth and reduce regional imbalances in the agriculture sector. Further, the
Committee observes that, unless the marketing side is tackled effectively, no
amount of production inducing measures can bear full fruit.

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 Agriculture marketing, which used to be a simple process in the past, is
now becoming highly complex. It involves a large number of intermediaries,
physical and facilitating services across the country in handling a large number
of agriculture commodities, which are seasonal, bulky and some of them highly
perishable. The marketing process is further complicated as a majority of the
farmers are small, illiterate, unorganized, scattered all over the country and
have very little time and knowledge in marketing of their produce. Further,
often being in debt, they are forced to sell their major marketable surplus,
immediately after harvest in the village itself or nearby primary rural markets
or the village money lender at an unfavourable price.

The system of agriculture marketing is saddled with a long chain of

middlemen between cultivators and the ultimate consumers and they take away
the lion share of the price paid by the consumers. In many commodities
(perishable commodities), the producers share in a consumer rupee is less than
50 percent because of the increase in marketing costs and marketing margins.
In the market, the farmers are invariably exploited by the middlemen. The
malpractices, involving manipulation of weights and measures and arbitrary
deductions from both buyers and sellers, are still prevalent. In addition, there
are inadequate arrangements for grading, standardisation, market information,
storage and transport.

The marketing of cotton commences from the close of harvesting of

Kapas (cotton with seeds) and ends after the Mills procure the lint. Between
these two points, cotton passes through several stages, namely the sale of
Kapas in the primary and secondary markets, ginning and processing, storage,
transport to terminus markets and sale of lint to the consuming mills.

In the primary market, the Kapas is sold by the growers to the village
merchant or itinerant merchant without the intervention of any intermediaries.

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However, in recent years, direct sales in the village have dwindled,
considerably. A majority of the growers now dispose of Kapas in the secondary
market that is at important trade centres. Here, the produce is bought by the
stockist, ready dealers, ginners, brokers or commission agents and by the mills
themselves, which own ginning factories.

In the secondary wholesale market, the business is conducted in

accordance with local customs and practices. In some markets, Trade
Associations have been formed that the business is conducted according to the
bylaws of the association. In centres where regulated markets have been
established, the bylaws have been formed by the market Committee and
approved by the State Government of the transaction. Open auction system for
each individual sellers produce is generally followed in most of the secondary
markets.

In the terminal markets, cotton lint is sold to the textile mills, exporters
and traders dealing with the consuming mills or engaged in inter-state trade.
Mumbai, Coimbatore, Ahmadabad and Kannur are some of the important
terminal cotton markets, of which Mumbai is the largest.

Apart from the above system of marketing farmers and farmers co-
operative cotton sales societies are functioning in many States. The first co-
operative cotton sales society was opened at Gadag in Karnataka i n 1917.
Later, such societies have been established in others parts of the country and at
present the co-operatives not only undertake the marketing of cotton but also
undertake its ginning and pressing. The functions of these co-operatives are to
provide growers and members with credit, supply agriculture inputs, process
produce and sell it to the mills.

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4.13 Organisation and Association of Indian Cotton Industry
Cotton trade in India is carried out through three major agencies, the
private sector, cooperatives sector and public sector, represented by the Cotton
Corporation of India (CCI). The private sector markets about 70 percent of the
produce. It has consists of traders, owners of ginner operations as well as
individual proprietors, partnership firms and private, limited companies. On the
other hand, around one fifth of the cotton crop in India is marketed by the
Cooperative sector. There are mainly three kinds of operations in vogue in this
sector, namely, the pooling system, commerce purchases and monopoly
procurement. The Cotton Corporation of Mumbai, a public sector marketing
agency, came into existence in 1970. It is a regulated company, fully owned by
the Government of India. Approximately, 6 percent to 8 percent of the total
crop is now handled by the fifteen centres of the CCI operating across the
country. The CCI activities cover price support operations as directed by the
Government from time to time in the interest of the farmers, commercial
purchases from the basis of their own judgements, purchase operation meet the
requirement of the state sector/private sector mills to the extent necessary and
also Export/ Import as per quotas allotted by the Government from time to
time.

The East India Cotton Association (EICA), established in 1921 is a

premier association, which has been instrumental in bringing about orderliness
in cotton trade and harmony among conflicting interest of the cotton growing
and consuming industries. It is the premier representative body of the buyers,
processors, consumers, cooperatives, brokers, sellers, importers, exporters and
all others market intermediaries of cotton. The EICA is a permanently
recognised body under the Forward Contracts (Regulation) Act 1952, for
trading in forward contracts. There are 19 Regional Association and eleven
marketing Societies, registered under the EICA to provide assistance to all
segments of the cotton industry. Coimbatore, Delhi and Mumbai are the major
spot cotton trading centres of India. Till recently, cotton grown in India was

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being traded solely in the spot market.. Trading in cotton futures contract was
resumed in India at Mumbai, after a gap of 32 years on December 5, 1998.

4.14 Technology Mission on Cotton:

Technology Mission on Cotton was launched in February, 2000 with the
objectives to increase cotton production, productivity and improvement in
cotton quality, to increase the income of cotton growers and ensuring abundant
supply of quality cotton to the textile mills. Science then, the TMC is being
implemented through its four Mini Mission (MM) for achieving the above
objectives.

Mini Mission-I deals with the research and development of cotton

production technologies and Indian Council of Agriculture research (ICAR) is
the nodal agency for its implementation. Min Mission-II deals with extension
and development activates for increasing production and productivity, which is
being implemented by the Department of Agriculture and Cooperation. Mini
Mission-IV is looking after the modernisation of ginning and pressing
factories. The Mini Mission-III and IV are implemented by the Ministry of
Textiles.

4.15 Problem of Farmers and Traders in Production and Marketing of

Cotton:
The Government derives substantial revenue from the cotton industry.
But the cotton growers are exposed to fluctuating fortunes year after year. A
discerning look at the scenario of the fluctuating cotton production and
marketing in India since independence would reveal that the cotton grower is a
helpless pawn in the complex system of marketing. Though everything is said
to have been done on behalf of the cotton farmer, his voice ironically has
remained unheard, for a long time. This is because of the unregulated
production and defective marketing system. In the year of low production, the
prices are generally high benefiting the cotton farmers. This benefit usually

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makes other farmers take up cotton cultivation with a hope that they would also
reap the returns as in the case of earlier farmers in the previous years. But due
to excess production they could not get the expected returns on account of
fluctuating fortunes in the prices.

Earlier the farmers of Bellary District had faced problems of drought

and other economic problems in the last some years. The farmers come across
several problems while producing and marketing cotton. In the study area all
cotton growing areas depend on rainfall conditions. Whereas in case of all
cotton grown on the rain-fed lands, the uncertainty of rain is a major problem
here. Pest outbreak is the most common problem in both the cases. The cotton
crop is the more prone to pest like boll worm and hence, it require higher doses
and larger number of sprayings as cotton is a commercial crop, it require
greater use of human labour and during the peak season the labour availability
is very limited.

The input required for the crop is not easily accessible to a majority of
the farmers as they have to travel a long distance and also not available on
time. The lack of availability of quality inputs was found to be a major problem
in cotton cultivation. The farmers also face problem like the lack of scientific
storage. Since cotton is bulky, it requires huge spaces to store. The prices of
agriculture commodities are not as constant as industrial goods.

The major reason is that they are seasonal in nature. So the lack of
remunerative prices is that they are seasonal in nature. So, the lack of
remunerative prices is a major problem among the farming communities,
everywhere, everywhere. In regulated markets or outside the village the
farmers incur various costs such as commission charges, hamali harges and
weighment charges and with these costs the farmers net return tend to reduce.
High transportation cost is a problem reported by the respondent farmers,
because the markets or traders godowns are located far away from the centres

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of production. The farmers also complain that the commission agents are not
paying them on the day of sale and they often delay their payments.

The farmers are of the opinion that the price quoted by the traders is not
the right price for their produce and so they demand higher prices. This is a
major problem for the commission agents. The commission agents also report
that the farmers are not willing to repay the loan to them. The problem faced by
commission agents in marketing are: delay in payment by the premises. The
traders cleared the premises of cotton only during the late evening hours. The
traders on the other hand faced the problems like the shortage in weighment
and false packing. Inferior quality cotton is mixed with superior quality, which
creates problems while ginning and pricing which deteriorates the quality of
lint.

Another peculiarity noticed in the cotton marketing is the dual grading

system followed by the buyers. This system allows an advantage in grading the
variety according to the buyers whims and fancies and the cotton growers have
to simply accept their grading assessment though their produce is of high
quality. As such, the interests of the cotton growers cannot be protected when
there are no standards grading of cotton. This dual grading system provides
scope for exploitation of the grower.

With a view to securing remunerative prices for the cotton grower as

well as to maximise the export earnings of cotton, the Cotton Corporation of
India (CCI) was established in 1971. The CCI attempted to streamline the
system but with little success. Keeping in view the points observed above, a
review of the whole situation regarding area, production, prices and marketing
and the final outcome of the trading results of the cotton growers is necessary.

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4.16 Conclusions:
Agriculture production and Marketing which was a simple process in the
past, but now it is becoming highly complex due to improper marketing system
in our country. Hence, this chapter gives detailed information about various
technologies and channels of cotton production and Marketing in India and
Karnataka.

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