Hanging by a thread

The 25 per cent cut in the import duty on raw silk has had a detrimental effect on the lives of sericulturists in Karnataka.

in Ramanagara

FEBRUARY 26 is a day that silk farmers across southern Karnataka are unlikely to forget soon. On that day, traders and reelers of silk in Karnataka and the adjoining States of Tamil Nadu and Andhra Pradesh restricted their purchases as rumours spread that there would be a 25 per cent cut in the customs duty on imported raw silk.

Srinivas, a silk farmer from Acchalu village of Ramanagara taluk in Ramanagara district, near Bangalore, said: The price of one kilogram of silk cocoon had touched Rs.380, but it nosedived to Rs.150 in one single day. Many of us farmers did not know what to do with the cocoons we had come to sell in the market.

Two days later, the Union Budget announced that the import duty on silk was to come down from 30 per cent to 5 per cent. On March 5, the media reported that a farmer couple in a village in Mandya district committed suicide, apparently because their harvested cocoons would not fetch the high prices that had prevailed earlier. Swami Gowda and his wife Vasantha left behind three children, aged between three and six, in the care of Swami's infirm 65-year-old father. If, as media reports point out, the only reason for the suicide was the steep crash in the price of silk cocoons, this would be the first reported incident of a silk farmer committing suicide in Karnataka.

According to figures available from the Government Cocoon Market in Ramanagara, over the past two years the price of silk cocoons in the Indian market has increased correspondingly with the price of Chinese silk in the international market. (China produces more than 80 per cent of the world's silk and has a decisive influence on global silk prices.) In April 2009, the average rate of the cross-breed variety of silk cocoons was Rs.156.50; in April 2010, this increased to Rs.195. Thereafter, it grew at a dizzying 10-15 per cent every month to reach an average of Rs.311 in February 2011. The crash reduced the average price to Rs.184 in May.

Other factors could also have contributed to the fall in prices now. Every year the price comes down a little during the monsoons because the quality of the cocoons falls. Moreover, there had been a marginal increase in their quantity this year as farmers stepped up production between December 2010 and February 2011 (and harvested the cocoons between March and May).

Cocoon Markets

The Government Cocoon Market in Ramanagara is one of the two biggest markets for trade in silk cocoons in Karnataka. There are between 25 and 35 small markets in the State. The Ramanagara market, along with the Sidlaghatta market in Chikkaballapur district adjoining Bangalore, set the price of silk for the rest of the State. In the Ramanagara market, for instance, more than 1,000 tonnes of silk cocoons were traded in April 2011.

When Frontline visited the Ramanagara market in early June, 31,000 kg of cocoons were traded there on a single day. The price was in the range of Rs.140 to Rs.180 a kg for cross-breed silk cocoons.

A few thousand people throng the market in the early part of the day. Heaps of light yellow cocoons, which look like little wads of coloured cotton, fill the space around. Farmers bring in their cocoons from as near as the next village or as far away as Bellary, a journey of several hours. Each farmer brings in 50-150 kg of cocoons and stacks them up in and around the market according to their quality.

Around 700 silk reelers, who buy the cocoons for processing, participate in the auction every day. Auction agents belonging to the Department of Sericulture of the Karnataka government rush from pile to pile and yell out the price of each. The mood is frenzied and the pace is quick not more than two minutes is spent on a pile. Once the pile is sold and weighed, reelers take possession of the cocoons.

Farmers told Frontline that the production cost of 50-80 kg of cocoons (one single harvest) ranged between Rs.6,000 and Rs.8,000, excluding the cost of land and water. If a farmer has his own plot and source of water, there are no additional costs. But the majority of farmers, like Swami Gowda, have taken farmlands on lease (The rates for leasing a hectare of land vary between Rs.25,000 and Rs.38,000 per annum).

Mallesh, a farmer from D. Hosur village in Maddur taluk of Ramanagara district, said he spent Rs.6,500 on fertilizers, labour, transport, silk larvae, and so on. There are, on an average, six harvests (one harvest takes between 25 and 35 days) in a year. Two of these usually fail as silk larvae are vulnerable to infections.

G.K. Karanth, professor of sociology at the Institute for Social and Economic Change in Bangalore, has studied sericulture for the past few decades. He said: If you look at the production cycle, the farmers are gambling more on the market than on the weather. The cocoons cannot be hoarded for more than a couple of days and so they have to be sold at the prevailing market rate once they are ripe.

Interestingly, silk farming is a highly suitable occupation for small farmers since it can be done on plots as small as five guntas (2,500 square metres). All members of the family participate in the work and additional labour is hired only for five to seven days during the harvest period.

The second link in the production chain is the silk reeler, whose life is equally affected by the vagaries of the market. Once the reeler purchases the silk cocoons (spending anywhere between Rs.10,000 and Rs.50,000 for 70 to 300 kg), he takes it to his reeling unit. In Ramanagara, there are around 500 such small units with several small and large reels. The reeling unit is usually an extension of the reeler's house, so the entire family takes part in the work. The price paid for the cocoons, labourers' wages and the money spent for the sale of the raw silk yarn make up the reeler's expenses.

Syed Feroze is a reeler who employs in his unit 20 labourers on a daily wage ranging between Rs.120 and Rs.150 per head. Skilled labourers can make 1 kg of raw silk yarn from seven to 9 kg of cocoons. When this correspondent visited Ramanagara, the selling price of 1 kg of raw silk hovered between Rs.1,700 and Rs.2,000. In Feroze's unit, 30 to 40 kg of raw silk yarn is produced every day apart from the shedding waste, which is also traded. This raw silk is sold at the Silk Exchange in Bangalore.

After the crash in silk prices, the profit margins for both reelers and farmers are barely above the production cost. The volumes traded by individual farmers and reelers may be small and insignificant in macro-economical terms, but this is life for them.

It is estimated that more than eight lakh people are directly or indirectly dependent on sericulture in Karnataka. According to the figures for 2009 provided by the State Department of Sericulture, 1,40,959 mulberry silk farmers and 7,195 silk reelers were active in the State (mainly in the southern part, around Bangalore) and produced 7,238 tonnes of raw mulberry silk out of a total of 15,610 tonnes produced in India. Karnataka produces close to 50 per cent of India's mulberry-based silk. The State's tryst with silk farming dates back to the 18th century when Tipu Sultan introduced sericulture in the region.

India's total silk production (mulberry-based as well as non-mulberry-based) stands at 19,600 tonnes, while the demand stands at 28,000 tonnes. India meets most of the shortfall by importing nearly 5,000 tonnes of silk from China.

Chinese raw silk, which was available at Rs.1,750 a kg in August 2010, rose to an unbelievable Rs.3,300 a kg in December 2010. This increased the price of domestic raw silk as well, a development that affected the large weaving community and textile manufacturers. The import duty on silk fabric was much lower, at 10 per cent. This meant that raw silk was being imported at a higher cost than finished silk fabric. This anomaly in the import rates made the lobby' of weavers and textile manufacturers pressure the government to do away with the import duty on raw silk. It is interesting to note that the price of imported Chinese silk even after the cut in import duty remains higher than the price of locally produced silk, partly because its quality is better. The average price of imported Chinese silk in April 2011 after the cut in import duty was Rs. 2,450 a kg.

When this demand of the textile manufacturing lobby' was satisfied, it immediately led to a crisis for the many thousands of silk farmers and reelers in Karnataka. It is tempting to see this crisis in clear class' terms as local activists of the Karnataka Prantha Raitha Sangha, an organisation affiliated to the All India Kisan Sabha, do farmers and reelers, who use labour-intensive methods of production, versus the big textile manufacturers, who have an industrialised set-up. But the picture is more nuanced than this because the livelihoods of thousands of handloom and powerloom weavers across the country, many of whom are daily wage labourers, have also to be taken into account. More than two lakh handloom and powerloom weavers in Varanasi shut shop for a day on November 28, 2010, to bolster the weavers' lobby's demand for a reduction in import duty.

Sericulture, which was once touted as a rural activity that could actually draw those who had migrated to big cities such as Bangalore back to agriculture, is losing its sheen. Academic studies exist to show how young men returned to rural areas to practise sericulture. When this correspondent visited Ramanagara, farmers did not demonstrate acute despondency, but they had serious grievances. Several of them told this correspondent that the State government had not heeded their demand to fix a minimum support price (MSP) for their produce.

The farmers do not want to shift to an alternative crop. First, as C. Yeshwanth, a silk farmer from Thorashetthally village of Maddur taluk, says, the topography of the region is favourable for mulberry cultivation. Secondly, the landholding pattern (small and fragmented) is suitable only for silk farming. Thirdly, alternative crops such as sugarcane and paddy require several times more water, which is not available in the area.

Ironically, the government not only refuses to fix an MSP but also disallows farmers from trading in cocoons privately as they did before the passage of the Karnataka Silkworm, Seed, Cocoon Distribution and Control Amendment Act in 1979. A government-regulated market seems redundant when it does not protect the farmers from the vagaries of the international market. A second irony, according to Karanth, is that the import duty was reduced at a time when the State was ready to harness the rich dividends from its own moves, such as Seri-2000, a World Bank-funded project aimed at improving efficiency in sericulture.

A few thousand silk farmers participated in a protest rally held in Bangalore on June 14 to demand an MSP. But the government's response has been tardy. The Karnataka Silk Marketing Board (KSMB), which liaisons with the market on behalf of the State's sericulturists, is on the verge of being wound up. Its Managing Director, Paramesh Pandey, did not respond to the phone calls from this correspondent.

The KSMB has released Rs.17 crore for the purchase of silk cocoons from the market which, according to silk farmers, is a pittance. The many organisations the Karnataka Silk Industries Corporation, the Karnataka Department of Sericulture as well as the Central Silk Board also raise the question whether there needs to be a single apex body to countervail market fluctuations through price support.

The Bharatiya Janata Party (BJP) government in Karnataka is, predictably, trying to milk the crisis for all its political worth. It is blaming the Centre for ignoring the State's interests. Chief Minister B.S. Yeddyurappa and Minister for Labour and Sericulture B.N. Bache Gowda have promised to lead a delegation to New Delhi to demand the withdrawal of the cut in customs duty.

While all this has been going on, the price of silk cocoons has stabilised, though it remains low. On June 14, the average price was Rs.158 for a kg of cross-breed cocoons. One possible way of insulating farmers from sudden fluctuations is to offer an MSP if prices fall below a fixed level. Until then, farmers like Mallesh will remain vulnerable and the silk route they chose as a livelihood option will not ensure a smooth ride.