Low cottonseed procurement price spawns child labour

Business Standard

November 9, 2005

Employment of adult labour to cost an additional Rs 7,970 per acre

Ch Prashanth Reddy / Hyderabad November 09, 2005

An inalienable link has been established between the procurement price by seed companies including multinational enterprises and use of child labour in hybrid cottonseed production in Andhra Pradesh.

A study commissioned by the India Committee of the Netherlands, International Labor Rights Fund of USA and Eine Welt Netz NRW of Germany also holds that the low procurement price paid by the seed companies is responsible for farmers “evading India’s minimum wage laws”.

“Procurement price is an important contributing factor for large-scale employment of child labour in the cottonseed sector. Unless this issue is addressed, other interventions to address the problem of child labour in this sector will not be very effective,”director of Hyderabad-based Glocal Research and Consultancy Services Davuluri Venkateswarlu, and an agricultural economist of Oxford University’s St Antony’s College Lucia da Corta, who conducted the study, stated, adding that the contract farmers of the seed companies employ children, particularly girls, basically to minimise costs.

The study is based on the analysis of primary data collected through field visits and surveys in 38 sample villages spread over 10 mandals in the districts of Kurnool and Mahabubnagar in Andhra Pradesh. Incidentally, Andhra and Gujarat account for nearly 75 per cent of the total cottonseed production in the country.

As per the study, the cost of replacing children with adult labour in hybrid cottonseed production will be Rs 7,970 per acre. This additional amount raises the total cost of production by 12 per cent, that is Rs 37 per kilogram. And, if the official minimum wage of at least Rs 52 a day has to be paid to all the workers, the additional cost of production will be Rs 25,061 per acre and the cost of production per kg of cottonseed will increase by Rs 115.50.

The question now is who should shoulder the burden of this additional cost? Venkateswarlu and Lucia da Corta stated that with the current procurement prices of companies, “seed farmers cannot afford to pay the higher wages necessary to attract adult labour and still make reasonable profits.”

On the other hand, they pointed out that there was a vast difference in the procurement price and the market price of cottonseed.

As against the procurement price of Rs 293 per kg being paid for farmers, the seed companies were selling non-Bt cotton hybrids at Rs 1,055 per kg and Bt cotton hybrids at Rs 3,555 per kg. Hence, the seed companies would be able to make good profits even if they bear the cost for replacing child labour with adult labour.

Even if the entire additional burden is shifted to the seed companies, according to the study, their current profit margins will decline only by 1.3 per cent to
6.8 per cent depending on the type of hybrids.
However, if the total additional cost is shifted on to the seed farmers, the decline in their profit margin will be as much as 64.9 per cent resulting in a net loss.

Given this scenario, the study points out that farmers would not be able to pay the official minimum wage, “which makes the seed companies responsible for evading India’s minimum wage laws”.