Regulations and Incentives: What Africa can learn from India

Cotton Analytics

Terry Townsend

Terry@CottonAnalytics.com

Regulations and Incentives: Why Some Countries Expand Cotton Production and Others Don’t

Prior to 2002/03, India and Africa produced about the same amount of cotton. Today, India produces four times more than Africa. What happened and why?

During the 1990’s, cotton production in India rose from 2 million tons to 3 million, but then dropped back to about 2.3 million in 2002/03. Meanwhile, cotton production in Africa rose from 1.3 million tons in 1990/91 to a record of 2 million tons in 2004/05. However, even though Africa and India followed a similar trajectory prior to 2002, the paths since have been far different. Since the mid-2000’s, Indian cotton production has gone up to 6.5 million tons while African production has gone down to about 1.6 million.

 

India and Africa have similar resource endowments, suggesting similar cotton production potential. Both have populations of around 1 billion that are largely rural with long traditions of smallholder agriculture dominated by labor-intensive practices. Africa is about ten times bigger than India, but India is blessed with adequate water for the most part, while about one-third of Africans live in areas of water scarcity. Nevertheless, on the basis of availability of land, water, labor and heat units, Africa could produce at least as much cotton as India. Indeed, for decades until the mid-2000s, yields in Africa were higher than yields in India, indicating that on the basis of agronomic conditions alone, Africa can indeed out-produce India or at least produce as much.

 

India

The increases in Indian production have been relatively uniform across the three major regions. In 2002/03, when national production was just 2.3 million tons, the northern states (Punjab, Haryana, and Rajasthan) accounted for 16% of the total, and by 2012/13 when the national total was 6.1 million tons, the north still accounted for 15%. The central states (Gujarat, Madhya Pradesh and Maharashtra) accounted for 55% of production in 2002/03 and 58% recently. The southern states (Andhra Pradesh, Karnataka, and Tamil Nadu) produced 20% of the Indian total in 2002/03 and 27% in 2012/13.

The variances in culture, language and agronomic practices across India are enormous, ranging from irrigated agriculture in the North, to semi-arid rainfed regions in the central states, to areas in southern India with ample rainfall. Further, under the national constitution, agriculture is the purview of state governments in India, suggesting that differences in state-level policies could lead to differences in rates of production growth. Nevertheless, the largely uniform increases in production across regions in India suggest that national factors, not state-level factors, are the underlying causes.

Africa

In contrast, changes in production across Africa have been very uneven, suggesting that national forces in each country, rather than macroeconomic factors that affect all producers, have played a significant role in the stagnation in yields and production.

Cotton production in North Africa shrunk from 670,000 tons in the early 1980s to 120,000 tons recently. Production in Egypt was fully controlled by the state until the mid-1990s, and as liberalization has proceeded and farmers have been allowed to choose their cropping patterns based on prices and resource availability, production has fallen. Similarly in Sudan, the government has progressively relaxed controls over farmers’ choices, and cotton production has declined under competition from food crops. North African production was 120,000 tons in both 2012/13 and 2013/14.

Production in West Africa, including the Franc Zone, reached 1 million tons in 2004/05, dropped to less than 500,000 tons in 2010/11 and has since recovered to 960,000 tons in 2013/14 and production in 2014/15 is forecast at one million tons again, the same as ten years earlier. Political uncertainty in Mali and Cote d’Ivoire, difficulties controlling side-selling or pirate buying, and ineffective systems to supply inputs to growers in some countries, have undermined long term efforts at industry growth. On the other hand, the agronomic characteristics of the region are highly favorable for cotton, and with improvements in input supply, production could expand.

Production in Eastern and Southern Africa was between 400,000 and 500,000 tons in the early 1990s, rose to 600,000 in the mid-2000’s, but has slipped back below 500,000 tons again. Production is estimated at 425,000 tons in 2013/14. The incentives and constraints governing cotton in Eastern and Southern Africa and Western Africa are similar. Low yields, but abundant land and adequate rain, difficulties providing inputs and controlling side-selling/pirate-buying, remain the determining factors influencing the levels of production in both regions.

 The dramatic divergence between success in India and stagnation or decline across Africa begs the question: What can Africans learn from Indians?

India represents a triumph for the use of biotechnology. Since adoption in India in 2002, biotech cotton varieties significantly contributed to rising yields and production, increases in farmers incomes and reductions in insecticide use.

Another factor driving Indian cotton production higher is the success of the Technology Mission on Cotton (TMC). The TMC was a four-pronged effort sponsored by the national government and supported by industry to improve production practices, improve ginning and reduce contamination, and improve efficiency in transportation. The TMC reached almost every cotton farmer in India, approximately 35 million, as well as all gins, warehouses and pressing facilities.

A third factor that contributed to a tripling of cotton production in India in a decade is the work of the Cotton Corporation of India (CCI), an arm of the Ministry of Textiles of India. CCI stands as a buyer of last resort during periods of falling prices and thus ensures that seed cotton is procured from farmers at no less than minimum support prices (MSPs) established by government for each variety and location. By providing small holders with a minimum price guarantee, CCI has buttressed farmer’s confidence in cotton as an engine of income, thus encouraging increased area and investments in inputs.

Agriculture is complex, and there are always many culprits associated with poor performance. The major factors that affect yields are technology, technology extension to growers, logistics covering the purchase, transportation and ginning of seed cotton, and input use. Despite facing many of the same constraints as those in Africa, India has been able to over come constraints to increased yields and expanded production to a greater extent than Africa has.

Governance structures in the cotton sector of Africa have been studied in great depth. Different countries have different cultural, historical and political experiences, and any solutions must be tailored to local situations. Nevertheless, there is now overwhelming empirical evidence that successful cotton sectors require the development and adoption of latest technologies, nationwide efforts at quality improvement and input delivery, and programs to shield small holders from disastrous downward spikes in cotton prices. The steps taken in India to address these issues may hold promise for African producers.