The issue of child labour in hybrid cottonseed production in the state of Andhra Pradesh, India has recently received attention from national and international media, government, Non Governmental Organisations (NGOs), social investor groups, international agencies like ILO/IPEC, UNICEF and UNDP and the seed industry. The uniqueness of the child labour problem in hybrid cottonseed production is that the majority of workers in this sector are children, particularly girls. No other industry in India has such a high proportion of child labour in its workforce. The exploitation of child labour in this industry is linked to larger market forces. Children are employed on a long-term contract basis through advances and loans extended to their parents by local seed farmers. These farmers, in turn, have agreements with seed companies (local, national and trans-national) who produce and market hybrid cotton seeds.

Farmers employ children, particularly girls, primarily in order to minimize costs. Earlier studies by these authors¹ which examined reasons for child labour in this industry found that labour costs account for about 50% of total cultivation costs. Farmers endeavour to cut these labour costs by hiring children because the wages paid to children are far below both the market wages for adults in other agricultural field work and even further below official minimum wages. Farmers also hire children in preference to adults because farmers can squeeze out higher productivity from children per day: children will work longer hours, will work much more intensively and they are generally much easier to control than adult workers – whether through verbal or physical abuse or through inexpensive treats like chocolate or hair ribbons. Moreover, children cannot complain as effectively as adults do when they are exposed to poisonous pesticides, which are used in very high quantities in cottonseed cultivation. Moreover, children work in the context of partial adult unemployment – children work whilst their parents cannot².

Hybrid cottonseed production in India is largely concentrated in two states, namely, Andhra Pradesh in South India and Gujarat, a state in the central part of India. These two states account for nearly 75% of total cottonseed production in the country. Until recently AP used to be the largest producer of cottonseed but now Gujarat has overtaken this position. Yet all the important companies involved in cottonseed business in India have their production and marketing base in Andhra Pradesh. Cottonseed production is carried out through contract farming. Companies depend upon local farmers for seed production. They arrange seed buy back arrangements with local farmers through middlemen called 'seed organizers'. Seed organizers thus mediate between companies and farmers. Although seed companies are not directly involved in the production process, they exert substantial control over farmers and the production process by supplying foundation seed, advancing production capital, fixing the procurement prices and through stipulating quality controls.

Currently there are about 100 seed companies including MNCs involved in the cottonseed business in Andhra Pradesh. Whilst nearly 77% of the cottonseed production area in Andhra Pradesh is controlled by the organized sector, the remaining 23% production area is controlled by what is labeled the unorganized sector - those individuals and small firms who do not have legal registration and recognition³. During last three years the area covered by the unorganized sector has grown because of the increasing area under illegal production of BT cottonseed in A.P. Since 2002, with the introduction of Monsanto BT cotton, several unorganized sector players have been encouraged to enter into the illegal production of BT cottonseeds because of the huge profits made through the illegal production of BT seeds.

Thanks to the efforts of local and international NGOs, the government, international bodies like ILO, UNICEF, UNDP, media and social investors, a great deal of awareness has been created about the problem of child labour in this industry. This raised awareness has put the seed industry under pressure to pay serious attention to this problem. As a result, several national and multi-national companies have begun to initiate steps to address this issue. In September 2003, the Association of Seed Industry (National Association of the Planting Seed Industry in India) decided to take concerted action to eliminate child labour in the cottonseed industry in India through collaboration with the MV Foundation, a leading child rights organisation in India. Since then, the ASI tried to motivate seed organizers and farmers to stop the employment of children through meetings, posters, pamphlets, print and electronic media. In a separate move, with the support from ILO/IPEC, the Seedsman Association of Andhra Pradesh (a state level association of seed companies) initiated some awareness programmes to its members to address the problem.

Barring the recent initiatives of few member companies of ASI (Proagro, Syngenta and Emergent Genetics) the efforts of seed companies to reduce the employment of children in cottonseed production thus far have been largely confined to farmers’ awareness and motivation activities⁴. And none of them have addressed the crucial issue of 'procurement price'. Yet the two reports published by the India Committee of the Netherlands (ICN) in 2003 and 2004⁵ reveal a clear link between procurement pricing and employment of child labour in cottonseed production. Based an analysis of data from small sample survey on cost of cultivation, procurement prices and wages structure in cottonseed production, these studies concluded that low procurement prices paid by the companies is one of the contributing factors to the extensive use of child labour in cottonseed production. To quote from the 2004 ICN report:

Even though companies obtain a huge profit margin, they do not seem to be making a rational calculation of the cost of cultivation when fixing the procurement price to be paid to their seed farmers. With the current procurement prices of companies, seed farmers cannot afford to pay better wages to the labourers and still make reasonable profits. Unless better wages are paid, farmers would not be in a position to attract adult labourers to work in their fields in sufficient numbers.... This is not to suggest that once procurement price is increased the problem will be automatically resolved and farmers will shift to adult labour and pay better wages to the labourers. The price issue at least can address a part of the whole problem and other interventions will be more effective once it is resolved.

Seed Industry Counter–Argument

The findings of these reports have been criticised by the seed industry stating that the sample size used in these studies is very small and they lack an in-depth economic analysis of trends in cost of cultivation, yields and profits. The Association of Seed Industry holds the view that the employment of child labour in cottonseed production is in no way linked to procurement price policy adopted by the companies. It argues that cottonseed farmers have relatively better profit margins compared to other farmers and the procurement rates offered invariably exceed the cost of production sufficiently to enable the employment of adult labour at adult wage rates. It puts the blame for the high incidence of child labour squarely on the shoulders of the seed farmers⁶.

In this context there is a need for a detailed economic study of costs of cultivation, wage rates, yields, prices and profits in cottonseed production. The present study is an attempt to fill this gap. In this study we ask what the price is of replacing child labour in cottonseed, or in other words, what is the price of child freedom from labour and who is going to bear it?

Objectives of the study

• To conduct an in-depth analysis of the economics of cottonseed production: the costs of production (including labour and non-labour costs), output and income, and profit over a three year period (2002-2004).
• To assess to what extent the procurement price policy of the seed companies contributes to the widespread use of child labour in hybrid cottonseed production.
• To calculate how far procurement prices would need to rise in order to enable the full scale replacement of child labour by adult labour at both local market wage rates and at official minimum wage rates.

Methodology and Sampling

The present study is mainly based on the analysis of primary data collected through field visits and surveys in 38 sample villages spread over ten mandals, six in Kurnool district and four in Mahaboobnagar district of Andhra Pradesh. The field survey for the present study was conducted during February to May 2005. Details of sample villages and mandals selected for this study are given in the appendix. Kurnool and Mahaboobnagar districts account for nearly 90% of the cottonseed production area in the state. Compared to Kurnool, Mahaboobnagar is a relatively more agriculturally backward region. Large scale seasonal out-migration of agricultural labour to urban areas in search of work is more prevalent in this district.

For the analysis of farm economics data, a sample of 100 farmers who had continuously engaged in cottonseed cultivation during 2002-03 and 2004-05 has been selected from the 38 sample villages through a stratified random sampling method. While selecting the sample, variations in farm size (small and big), ownership pattern (owner or tenant) and geographical variations were considered. For an analysis of trends in cost of cultivation, we collected data on workforce composition, wage structure, output, prices and income which covered a three year period (2002-2004). Data was disaggregated by farm size and region. For the purpose of this study, a small farmer was defined as one cultivating less than two acres of cottonseed and a big farmer defined as cultivating two or more acres.

In estimating labour costs, family labour time is costed at market wages, following a common method found in cultivation studies. Regarding interest payments we recorded interest on capital borrowed from moneylenders, banks and seed companies. For own capital, we impute 12% interest cost which represents the opportunity cost of not having own capital invested it in the bank.

TITLE PAGE

SECTION-II: Economics of cottonseed cultivation