Economic Development - 6 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Cotton Production in India

Context

• Cotton, as a versatile crop, serves multiple purposes by providing food, feed, and fiber used in textiles, cooking oil, and livestock feed. Additionally, it plays a crucial role in generating income and employment opportunities for numerous farmers in India.
• Despite its significance, there has been a notable decrease in cotton production and yields in recent years, presenting a substantial challenge for both the agricultural and textile sectors in the country.

What is the Significance of Cotton for India?

• About:
  • Cotton is one of the most important commercial crops cultivated in India and accounts for around 25% of the total global cotton production.
    • Due to its economic importance in India, it is also termed as “White-Gold”.
  • In India, around 67% of India’s cotton is grown on rain-fed areas and 33% on irrigated areas.
• Growing Conditions:
  • Cotton cultivation necessitates a hot, and sunny climate with a long frost-free period. It is most productive in warm and humid climatic conditions.
  • Cotton can be successfully grown in a range of soil types, including well-drained deep alluvial soils in northern regions, variable-depth black clayey soils in the central region, and mixed black and red soils in the southern zone.
    • While cotton exhibits some tolerance to salinity, it is highly sensitive to waterlogging, emphasizing the importance of well-drained soils in cotton farming.
• Species of Cultivated Cotton:
  • India is the country to grow all four species of cultivated cotton Gossypium arboreum and Herbaceum (Asian cotton), G.barbadense (Egyptian cotton) and G. hirsutum (American Upland cotton).
  • Majority of the cotton production comes from ten major cotton growing states, which are grouped into three diverse agro-ecological zones, as under:
    • Northern Zone: Punjab, Haryana and Rajasthan
    • Central Zone: Gujarat, Maharashtra and Madhya Pradesh
    • Southern Zone: Telangana, Andhra Pradesh, Karnataka and Tamil Nadu
• Significance:
  • Cotton, often likened to coconut, serves as a source of three essential components:
    • Fiber: The white fluffy fiber or lint, constituting about 36% of the raw unginned cotton, is the primary source for the textile industry. The rest is seed (62%) and wastes (2%) separated from the lint during ginning.
      • Cotton commands a two-thirds share in India's total textile fiber consumption.
    • Food: Cottonseed contains 13% oil, which is commonly used for cooking and frying.
      • Cottonseed cake/meal is India's second-largest feed cake, following soybean.
    • Feed: The leftover cottonseed cake, comprising 85% of the seed, is a valuable, protein-rich feed ingredient for livestock and poultry.
      • Cottonseed oil ranks as the country's third-largest domestically-produced vegetable oil, following mustard and soybean.

What led to Rapid Increase and Subsequent Decline in Cotton Production in India?

• Surge:
  • Period of Growth (2000-01 to 2013-14): India experienced a significant increase in cotton production during the period from 2000-01 to 2013-14, primarily credited to the adoption of Bt (Bacillus thuringiensis) technology.
  • Introduction of GM Cotton Hybrids: The surge in production was linked to the widespread adoption of genetically-modified (GM) cotton hybrids incorporating Bt genes. These genes were engineered to combat the American bollworm insect pest.
  • Increased Lint Yields: The adoption of Bt technology resulted in a substantial increase in lint yields, rising from 278 kg per hectare in 2000-01 to 566 kg per hectare in 2013-14.
  • Corresponding Rise in By-Products: The surge in cotton production also led to increased production of by-products such as cottonseed oil and cake.
• Decline:
  • Emergence of Pink Bollworm (Post-2013-14): The decline in cotton production and yields post-2013-14 was primarily attributed to the emergence of the pink bollworm (Pectinophora gossypiella).
  • Impact of Pink Bollworm: Pink bollworm larvae, when invading cotton bolls, caused a reduction in cotton production and a decline in the quality of cotton.
  • Resistance to Bt Proteins: Unlike the American bollworm, the pink bollworm is monophagous and primarily feeds on cotton. This led to the development of resistance against Bt proteins in continuous cultivation of Bt hybrids.
  • Geographical Spread: Pink bollworm infestations were reported in various states, including Gujarat, Andhra Pradesh, Telangana, Maharashtra, Punjab, Haryana, and northern Rajasthan, indicating a widespread impact.
• Current Pest Management Strategies:
  • Challenges with Traditional Insecticides: Traditional insecticides had limited success in controlling pink bollworm larvae.
  • Mating Disruption Method: A different approach called "mating disruption" has been employed. This involves using Gossyplure, a synthesized pheromone signaling chemical emitted by female pink bollworm moths.
  • Artificially Synthesized Pheromone: The artificial pheromone disrupts the mating behavior of male moths, preventing them from locating females and engaging in mating.
  • Approved Products: Two approved products for mating disruption are PBKnot, which uses ropes with synthetic chemicals on cotton plants, and SPLAT-PBW, an emulsion that disrupts pink bollworm mating.

Note: Monophagous refers to an organism primarily feeding on a single specific type of food or host.

What are the Other Issues Associated with the Cotton Sector in India?

• Yield Fluctuations: Cotton production in India can be quite unpredictable due to several factors.
  • Limited access to irrigation systems, declining soil fertility, and erratic weather patterns, including unexpected droughts or excessive rainfall, contribute to the uncertainty surrounding cotton yields.
• Smallholder Dominance: The majority of cotton farming in India is carried out by small-scale farmers.
  • These farmers often rely on traditional agricultural practices and have limited access to modern farming technologies, which in turn affects overall cotton production.
• Limited Market Access: A significant number of cotton growers in India face constraints in reaching markets and are compelled to sell their harvest at reduced rates to intermediaries.

Way Forward

• Integrated Pest Management: There is a need to advocate for integrated pest management (IPM) strategies that combine natural controls, trap crops, and beneficial insects to reduce pesticide dependency while effectively managing pests.
• Community-Based Seed Banks: Establishing seed banks at the community level to conserve and share traditional cotton seed varieties, preserving genetic diversity and promoting higher-yielding strains.
• Market Linkage Platforms: Establishing digital platforms that directly connect cotton farmers with buyers and textile manufacturers, reducing middlemen involvement and ensuring fair pricing.
• Value Addition Through Local Processing: Promoting value addition by establishing local cotton processing units that can gin, clean, and process cotton fiber, creating employment opportunities and adding value to the cotton supply chain.

India set to become 3rd largest economy by 2030

Context

S&P Global anticipates that by 2030, India is poised to emerge as the world's third-largest economy, projecting a substantial increase in nominal GDP from $3.5 trillion in 2022 to $7.3 trillion.

About

• India is presently positioned as the fifth-largest global economy, with the United States, China, Germany, and Japan occupying higher ranks.
• S&P Global emphasizes the critical role of India transforming into a major global manufacturing hub.
• A robust logistics framework is deemed essential for India's economic growth, according to S&P Global.
• Workforce upskilling is identified as a crucial factor for India's economic advancement by S&P Global.
• S&P Global underscores the importance of increased female workforce participation for the development of India's economy.
• Anticipating growth in India's high-growth startup ecosystem, particularly in financial and consumer technology sectors.
• S&P Global foresees expansion in the automotive sector contributing to India's economic development.

Sugar’s Pressmud for Green Energy Production

Context

• India sees Pressmud, a residual byproduct of sugar production, as a valuable resource for generating green energy through the production of Compressed Biogas (CBG).
• India has become a significant player in the global sugar economy, taking the lead as the primary sugar producer since the 2021-22 period, surpassing Brazil. Furthermore, the country holds the position of the second-largest sugar exporter on a global scale.

What is Compressed Bio-Gas (CBG)?

• CBG is a Renewable, environmentally friendly gaseous fuel derived from the anaerobic decomposition of organic materials. It is produced through a process called Biomethanation or anaerobic digestion, where various organic sources such as agricultural waste, animal manure, food waste, sewage sludge, and other biomass materials are broken down by bacteria in the absence of oxygen.
• The resulting biogas primarily consists of methane (usually over 90%), carbon dioxide, traces of hydrogen sulfide, and moisture.
• To convert biogas into CBG, purification steps are employed to remove impurities such as carbon dioxide, hydrogen sulfide, and moisture.
• The purified methane gas is then compressed to a high pressure, typically around 250 bar or higher, hence the term "Compressed Biogas."

What is Pressmud?

• Pressmud, also known as filter cake or press cake, is a residual byproduct in the sugar industry that has gained recognition as a valuable resource for green energy production.
• This byproduct offers Indian sugar mills an opportunity to generate additional revenue by utilizing it as a feedstock for biogas production through anaerobic digestion, leading to the creation of Compressed Biogas (CBG).
• Anaerobic digestion is a process through which bacteria break down organic matter—such as animal manure, wastewater biosolids, and food wastes—in the absence of oxygen.
• Typically, the yield of pressmud ranges from 3-4 % by weight with the input sugarcane processed in a unit.
• Advantages of Pressmud Utilization for CBG Production:
  • Fewer Complexities: Its advantageous qualities include consistent quality, simplicity in sourcing, and fewer complexities compared to other feedstocks.
  • Simplified Supply Chain: It eliminates the complexities associated with the feedstock supply chain, as found in the case of agricultural residue, where biomass harvesting machinery is required for harvesting and aggregation.
  • Single Sourcing: The feedstock is sourced from one or two producers or sugar mills, as opposed to agricultural residue, which involves multiple producers / farmers within a narrow window of 45 days per year.
  • Quality and Efficiency: Quality consistency and higher conversion efficiency, requiring less feedstock quantity compared to alternatives like cattle dung. Approximately 25 tonnes of pressmud are needed to produce a tonne of CBG. In comparison, cattle dung requires 50 tonnes for the same gas output.
  • Cost-effectiveness: Lower cost (Rs 0.4-0.6 per kilogramme) compared to other feedstocks like agricultural residue and cattle dung. It eliminates pretreatment costs as it lacks the organic polymer lignin, unlike agriresidue.
• Challenges Faced by Pressmud Utilization:
  • Pressmud faces challenges such as escalating prices, competition for usage in other industries, and storage complexities due to gradual decomposition, necessitating innovative storage solutions.
  • As an organic residue, it is sought after in sectors like animal feed, bioenergy production (for biogas or biofuels), and agricultural soil amendments. This competition can sometimes limit its availability or increase its cost for specific applications.

What is India's Pressmud Production landscape?

• Production Statistics: In the fiscal year 2022-23, India's sugar production reached 32.74 million tonnes, generating about 11.4 million tonnes of pressmud.
• Sugarcane Growing States: The primary sugarcane-growing states, notably Uttar Pradesh and Maharashtra, contribute significantly, covering approximately 65 % of India's total sugarcane cultivation area.
  • Key sugarcane-producing states include Uttar Pradesh, Maharashtra, Karnataka, Tamil Nadu, and Bihar, accounting for a substantial portion of India's overall sugarcane production.

Way Forward

To harness the full potential of pressmud for CBG production, various interventions are crucial:

• State-level Policies: Implementation of supportive bioenergy policies by states, streamlining approval processes and offering incentives.
• Price Control Mechanisms: Establishing mechanisms to control pressmud prices and encouraging long-term agreements between sugar mills and CBG plants.
• Technological Advancements: Research and development for efficient pressmud storage technologies to prevent methane emissions and minimize gas loss.
• Training Initiatives: Conducting training sessions for CBG plant operators on plant operations, scientific equipment handling, and feedstock characterization.

SEBI Board Approves Regulatory Framework

Context

The board of the Securities & Exchange Board of India (SEBI) has approved a framework for Index Providers. This move is aimed at boosting transparency and accountability in the governance and administration of financial benchmarks within the securities market.

What are the New Regulations Framed by SEBI?

• Framework for Registration of Index Providers:
  • SEBI announced the approval of regulations establishing a framework for the registration of Index Providers. This framework will be applicable specifically to 'Significant Indices,' which SEBI will identify based on objective criteria.
    • The regulatory structure aligns with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks.
• Dematerialization Requirement for AIF Investments:
  • SEBI introduced a requirement for Alternative Investment Funds (AIFs) to hold fresh investments made after September 2024 in dematerialized form.
    • However, existing investments are exempt, except in cases mandated by applicable law or when the AIF, alone or with other SEBI-registered entities, has control in the investee company.
  • The mandate for the appointment of custodians, previously applicable to specific AIF categories, will now extend to all AIFs.
• Amendments to SEBI (Real Estate Investment Trusts) Regulations:
  • The SEBI board approved amendments to the Real Estate Investment Trusts (REITs) Regulations, creating a regulatory framework for Small & Medium REITs (SM REITs) with an asset value of at least ₹50 crore.
  • SM REITs will be able to establish separate schemes for owning real estate assets through special purpose vehicles (SPVs).
• Flexibility in Social Stock Exchange (SSE) Framework:
  • SEBI provided flexibility in the framework for the Social Stock Exchange (SSE) to boost fundraising by Not-for-Profit Organizations (NPOs).
  • This includes a reduction in the minimum issue size and application size for public issuance of Zero Coupon Zero Principal Instruments (ZCZP) by NPOs on SSE, encouraging wider participation, including retail investors.
• Nomenclature Change and Comfort Measures for NPOs:
  • SEBI approved a change in the nomenclature from "Social Auditor" to "Social Impact Assessor" to convey a positive approach toward the social sector.
  • This measure is intended to provide comfort to NPOs involved in the SSE and reinforce SEBI's support for social impact initiatives.

What is SEBI?

• About:
  • The Securities and Exchange Board of India (SEBI) is a statutory body established in 1992 under the Securities and Exchange Board of India Act, 1992. 
  • It operates as a regulatory authority with the primary objectives of protecting the interests of investors in securities and promoting and regulating the securities market. 
  • SEBI's headquarters is located in Mumbai, and it has regional offices in Ahmedabad, Kolkata, Chennai, and Delhi.
• Background:
  • Before the establishment of SEBI, the regulatory authority was the Controller of Capital Issues, operating under the Capital Issues (Control) Act, 1947.
  • In 1988, SEBI was formed as the regulatory body for capital markets through a government resolution.
  • Initially, SEBI was a non-statutory body without legal powers, but it gained autonomy and statutory powers with the SEBI Act of 1992.
• Structure:
  • The SEBI Board is composed of a Chairman and several whole-time and part-time members.
  • SEBI can appoint committees as needed to address current issues in the securities market.
  • A Securities Appellate Tribunal (SAT) has been established to safeguard the interests of entities dissatisfied with SEBI's decisions. SAT has a Presiding Officer and two other Members, wielding powers similar to a civil court.
  • Individuals who disagree with SAT's decisions can appeal to the Supreme Court.

What is IOSCO?

• About:
  • Founded: April 1983
  • Headquarters: Madrid, Spain
    • IOSCO Asia Pacific Hub is located in Kuala Lumpur, Malaysia.
  • It is the international organization that brings together the world's securities regulators, covering more than 95% of the world’s securities markets, and is the global standard setter for the securities sector.
  • It works closely with the G20 (Group of Twenty) and the Financial Stability Board (FSB) in setting up the standards for strengthening the securities markets.
    • The FSB is an international body that monitors and makes recommendations about the global financial system.
  • The IOSCO Objectives and Principles of Securities Regulation have been endorsed by FSB as one of the key standards for sound financial systems.
  • IOSCO's enforcement role extends to matters of interpretation of International Financial Reporting Standards (IFRS), where IOSCO maintains a (confidential) database of enforcement actions taken by member agencies.
    • IFRS is an accounting standard that has been issued by the International Accounting Standards Board (IASB) with the objective of providing a common accounting language to increase transparency in the presentation of financial information.
• Objectives:
  • To cooperate in developing, implementing and promoting adherence to internationally recognized and consistent standards of regulation, oversight and enforcement in order to protect investors, maintain fair, efficient and transparent markets, and seek to address systemic risks;
  • To enhance investor protection and promote investor confidence in the integrity of securities markets, through strengthened information exchange and cooperation in enforcement against misconduct and in supervision of markets and market intermediaries; and
  • To exchange information at both global and regional levels on their respective experiences in order to assist the development of markets, strengthen market infrastructure and implement appropriate regulation.
• Membership:
  • IOSCO provides members the platform to exchange information at the global level and regional level on areas of common interests.
  • SEBI is an ordinary member of IOSCO.

India Imposes Onion Export Ban

Context

The significant increase in onion prices in India has prompted the central government to take action. In response to this issue, the Ministry of Finance has implemented a substantial measure by imposing a 40% export duty on onions. Consequently, onion auctions in Nashik district, Maharashtra, a key onion-producing area in the country, have been suspended.

Details

• The imposition of an export duty on onions is a strategic move aimed at stabilizing domestic onion prices by restricting exports. This measure is intended to secure a sufficient supply of onions within the country, thereby ensuring reasonable prices and preventing further escalations in the market.
• The fluctuation in onion prices is a significant concern in India, given the vegetable's staple status and its essential role in numerous Indian dishes. Sharp increases in prices directly affect household budgets and contribute to consumer inflation. Therefore, the central government's decision to implement an export duty underscores its dedication to managing the onion market and maintaining stable prices for consumers.
• This decision holds broader implications, including the preservation of food security, prevention of market manipulation, and protection of the interests of both consumers and onion growers. However, it is crucial to recognize that while export duties can help regulate domestic prices, they may also impact the income of farmers who depend on export markets for their produce.

Causes of Rising Onion Prices

The recent surge in onion prices is primarily a result of a shortage in stored onion produce, driven by adverse weather conditions and reduced cultivation.

• Harvesting Seasons: Onions are typically harvested in two seasons, Kharif and Rabi. The Rabi crop, harvested in March-April, accounts for about 60% of total onion production and is crucial for year-round storage. However, this year, unfavorable weather conditions and crop damage led to a lower-than-expected Rabi crop, creating a shortage of stored onions.
• Seasonal Nature of Onion Cultivation: Onions follow a seasonal cultivation pattern with three main crops: Rabi, Kharif, and late Kharif. Among these, the Rabi crop, sown between December and January, is conducive to storage due to its lower moisture content.
• Unseasonal Weather Events: Unpredictable weather events, such as unseasonal rain and hailstorms during the Rabi crop season, have significantly affected onion crops, particularly in key producing states like Maharashtra. Hailstorms in March damaged around 40% of onion crops in certain areas, rendering about 20% unfit for sale due to quality issues.
• Reduced Cultivation: Lower cultivation area is another contributing factor. Some farmers have opted to grow alternative crops due to various reasons, including weather challenges, crop damage, low returns, and high input costs. This reduced cultivation has led to a decline in onion production, exacerbating the gap between demand and supply.

Impact of Rising Onion Prices

The surge in onion prices has multifaceted impacts on consumers, the economy, and politics in India:

• Consumer Burden: The increase in onion prices places a significant burden on households, particularly lower-income families, impacting their budgets and influencing consumption patterns and dietary choices.
• Food Inflation: Onions being a staple food item, their price fluctuations can contribute to overall food inflation. Rising onion prices can trigger a broader increase in the cost of other food items, affecting the purchasing power of consumers.
• Political Sensitivity: Historically, spikes in onion prices have led to public outrage and protests. The affordability and availability of onions often symbolize a government's ability to manage essential commodities, making it a politically sensitive issue that can affect the government's popularity and credibility.
• Economic Disruption: High onion prices can disrupt supply chains and impact industries reliant on onions. Businesses in food processing, restaurants, and catering may face increased production costs, potentially affecting profitability and necessitating adjustments in pricing.
• Social Equity: Lower-income households, allocating a larger portion of their income to food, are disproportionately affected by rising onion prices. This exacerbates inequalities and widens the socioeconomic gap, highlighting the social equity implications of commodity price fluctuations.

These impacts underscore the interconnected nature of the economy and society, where changes in the price of a single commodity like onions can have far-reaching effects. Addressing these challenges requires a comprehensive approach encompassing short-term measures to stabilize prices and long-term strategies to enhance agricultural resilience and supply chain efficiency.

Challenges associated with the onion market

Several factors contribute to the vulnerability and fluctuations in onion prices in India:

• Weather Vulnerability: Onion cultivation is highly sensitive to weather conditions. Adverse events like unseasonal rain, hailstorms, and droughts can damage crops, reducing supply and causing price fluctuations. Climate change further amplifies these challenges, making onion cultivation more susceptible to unpredictable weather patterns.
• Storage Infrastructure: Effective storage is essential for price stabilization. Inadequate storage facilities result in post-harvest wastage and supply instability. Investing in modern storage infrastructure, including cold storage facilities, can help mitigate price volatility caused by seasonal supply fluctuations.
• Supply-Demand Dynamics: The misalignment between onion cultivation and consumer demand creates supply-demand imbalances. Sudden changes in cultivation practices or unexpected increases in demand can lead to price spikes. Implementing mechanisms to predict demand more accurately and incentivizing farmers to adjust cultivation practices can help manage these dynamics.
• Export Dynamics: While onion exports can be economically beneficial, careful management is required to ensure domestic stability. High international demand may lead to shortages and price increases domestically. Balancing the needs of both domestic and international markets requires effective supply chain management.
• Subsidy Distribution: Subsidies are introduced to support farmers and stabilize prices. However, challenges in subsidy distribution, including administrative delays and corruption, can limit their effectiveness. Streamlining subsidy distribution mechanisms and ensuring transparency are crucial for ensuring that intended benefits reach the farmers efficiently.

Addressing these challenges necessitates a combination of short-term measures and long-term strategies. Short-term measures may involve managing stockpiles, implementing price stabilization mechanisms, and ensuring timely subsidy disbursement. Long-term strategies include investments in storage infrastructure, promoting climate-resilient agricultural practices, and improving supply chain coordination to minimize the impact of these challenges on onion prices and availability.

Way Forward

• Storage Enhancement: Investing in modern storage facilities, such as cold storage, can extend the shelf life of onions and prevent spoilage. This will help stabilize prices by ensuring a steady supply even during periods of low cultivation.
• Crop Diversification: Encouraging farmers to diversify their crops can reduce dependence on onions and buffer against price shocks. Promoting the cultivation of other vegetables can provide alternatives for consumers and stabilize the market.
• Resilient Varieties: Developing and promoting onion varieties that are resilient to adverse weather conditions can minimize the impact of weather-related disruptions on onion supply and prices.
• Efficient Subsidy Delivery: Implementing efficient and transparent subsidy distribution mechanisms ensures that financial support reaches farmers in a timely manner. This can help stabilize their income and incentivize onion cultivation.
• Market Intelligence: Establishing real-time market information systems allows policymakers to monitor onion prices, supply, and demand trends. This information can aid in making informed decisions to manage price fluctuations effectively.
• Balanced Trade: Carefully managing onion exports to balance international demand and domestic supply is crucial. Export restrictions during times of domestic scarcity can help maintain price stability at home.
• Climate Resilience: Promoting climate-smart agricultural practices, such as water-efficient irrigation and soil management techniques, can enhance the resilience of onion crops to changing weather patterns and minimize crop losses.

Conclusion
The recent increase in onion prices in India is primarily linked to a scarcity in stored produce and reduced cultivation, which can be attributed to adverse weather conditions and damage to the Rabi crop. To tackle the challenges associated with the rising prices of onions, a comprehensive approach is needed. This should include enhancements in storage infrastructure, diversification of crops, promotion of resilient farming practices, efficient distribution of subsidies, and effective trade management. Collaborative efforts involving the government, farmers, and other stakeholders are crucial to ensure stability in prices, uphold food security, and safeguard the well-being of consumers.