How do farms in general and organic farms in particular relate to policies, institutions, organisations and processes that shape the context in which their activities take place? Figure 30 summarizes the main aspects that are relevant for cotton farms. In this, the figure combines the findings of the qualitative studies (for details see Annex 4.2) as well as general information.
Agricultural production and trade policies
Indian farmers still benefit from agricultural policies that – to some extent – provide subsidies and protect their markets. The government subsidises fertilizers and electricity in order to reduce production costs for farmers. Market intervention schemes and minimum support prices for some agricultural products, among them cotton, are supposed to ensure that farmers get prices covering at least the cost of production. However, the high subsidy bill is increasingly criticized, so that subsidies for agriculture in India are likely to decline in the future. In addition, with increasingly liberalized markets, prices for agricultural products may drop due to imports of goods from more competitive countries. At the same time, the reduction of import quotas and tariffs also opens up new export market opportunities for Indian farmers. In the case of cotton, the removal of the quotas under the Multi-fibre Arrangement in January 2005 has boosted export opportunities for Indian cotton textiles, but at the same time exposed Indian producers to global competition.
Developed countries are supposed to reduce market-distorting subsidies under the Doha agreement70. World market prices for some commodities such as sugar and cotton might
therefore even increase in the long term. As per the declaration of the ministerial conference in Hong Kong in December 2005, developed countries shall eliminate all forms of export subsidies for cotton by the end of 200671. However, as WTO negotiations have
recently come to a halt, it is uncertain in how far this will be implemented.
70 See http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm. 71
Figure 30: The relation of cotton farmers to the context of policies, institutions, organisations and processes.
Agricultural research and extension
The Indian government maintains a vast set-up for agricultural research, education and extension72. Since the mid-sixties, the main focus of this official agricultural research and
extension system has been on maximizing crop yields. The focus shifts only slowly to increasing farm incomes, taking into consideration the cost of production73. The
agricultural departments of a state maintain extension services covering all districts. They provide farmers with information on production technologies and facilitate access to the various government schemes. However, the outreach of the official agricultural extension service appears to be rather low in most regions.
72 See http://www.icar.org.in.
73 See http://krishakayog.gov.in/ncpdraft.pdf.
Policies, Institutions, Organisations, Processes
• Government provides subsidies for fertilizers and electricity (trend: reduction).
• Policies on liberalisation of agricultural trade (for cotton and rotation crops).
• Agricultural research and extension still mostly focus on maximizing yields, not on incomes.
• Agricultural extension services and companies provide information on farming technologies.
• Farmers do not have much confidence that the government will actively support them.
• Cooperative societies provide inputs on loan, but many farmers lost their credit standing.
• Farmers strongly depend on traders for inputs, loans and sales of cotton.
• Seed-companies promote Bt-cotton. • The suitability of Bt-cotton is discussed
controversially among authorities and in the media.
• Some companies and NGOs promote organic farming and run projects.
• The government promotes and supports organic farming to some extent.
• Authorities regulate organic production, certification and trade.
Farmers mainly depend on technical advice provided by companies that sell seeds, fertilizers and pesticides. The farmers we interacted with during our studies generally showed little confidence that the agricultural departments can effectively support them in solving their problems of decreasing net returns.
In the case of Maikaal bioRe, as in most other organic cotton initiatives, the role of the agricultural extension service has partly been taken over by the project’s own extension system that provides training and advice on organic farming practices to the associated farmers. In some Indian states, including Madhya Pradesh where the case study is located, the agricultural departments started promoting organic farming methods, such as vermi-composting, green manures and botanical pesticides. While this promotion scheme is still in its infant stage, in the future it could complement and ultimately even replace project based extension systems for organic farming.
Cooperative societies, input traders and money lenders
Cooperative societies are widespread in rural India, providing the farmers with agricultural loans on moderate interest rates of 10–15% per annum, and distributing fertilizers. However, many farmers have not been able to pay back their loans in years of poor crop performance or low cotton prices, and hence lost their credit standing. For purchasing farm inputs they are left with no other option than taking up loans from traders or private money lenders, at interest rates of 30% per annum and more. In many cases this has led to a strong dependency relation: to pay back the loans, farmers need to sell their harvest to the traders or money lenders who deduct due loans and interests from the sales value. Due to this dependency, traders can frame the loan conditions to the farmer’s disadvantage, or even manipulate rates and calculations. In the case of Maikaal bioRe, this dependency on traders and money lenders is reduced considerably, as inputs are provided by the company on interest free loans.
Promotion and rejection of Bt-cotton
A comparatively new feature in the context of changing structures and processes is the spread of Bt-cotton. International seed companies and their local counterparts promote Bt-
cotton with extensive advertisement, promising low pest infestation and high yields. Some NGOs and farmer organisations lobby against the use of Bt-cotton. Both proponents and
critics have published a number of controversial studies on the benefits and failures of Bt-
cotton in India (see for example Quaim and Zilberman, 2003; CSA, 2006; Narayanamoorthy and Kalamkar, 2006). The topic has been taken up by the media, not only in Western countries, but also in India, resulting in a highly controversial discussion in society. The preference of most European consumers for agricultural products without GMOs may ultimately lead to a disadvantage for Bt-cotton fibre in export markets.
The Indian government shows some ambiguity in the question of whether to promote or ban genetically modified cotton varieties. On the one side, the Central Institute for Cotton Research CICR is launching genetically modified cotton varieties. On the other side, the government of Andhra Pradesh has banned some Bt-cotton varieties and convicted the
seed company to pay compensation to the farmers who faced losses. Many cotton farmers have tried cultivating Bt-cotton, with mixed success (see section 5.2.1).
Strategy development
Strategy implementation
Promotion and regulation of organic farming
In India, several companies and NGOs promote and facilitate organic cotton farming and organize initiatives. While their activity is limited to few areas within cotton producing regions, the presence of an organic farming initiative in such an area can influence decision-making also of the farmers who are not directly associated with it. Most farmers in the Nimar region have probably heard about the Maikaal bioRe initiative and thus know of the option to farm organically.
In 2001, the Indian Ministry of Commerce has launched a National Programme for Organic Production with the aim to promote exports of organic products74. As part of this
programme the Indian government defined national standards for organic production and an accreditation system for organic certification agencies. A year later, the Planning Commission (2002: 528) has identified organic farming as a major thrust area in the 10th five-year plan. In 2003, the Ministry of Agriculture followed suit with setting up a National Institute of Organic Farming near Delhi and formulating a National Organic Project in order to promote organic production. Up to now these programmes have not had much impact on the field level, but the situation might change in the near future.
A special feature of organic farming is that standards and certification requirements regulate farming practices. These are defined on two levels: by the Indian government for the domestic production and all exports, and by the importing countries’ authorities. There are efforts to achieve more harmonisation between different organic standards and certification procedures75, but up to date variance in requirements of different organic
standards still pose considerable hurdles to farmers in developing countries who wish to export organic products.