The Effect Of Cotton On Punjab And Haryana Essay

The Effect Of Cotton On Punjab And Haryana Essay

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The first article it states how cotton in Punjab and Haryana has declined 27 percent to 7.56 lakh hectares in the 2016 and 20117 crop years. As a result farmers shifted to other crops after incurring huge losses due to whitefly pest attack last year. As per the latest data, area planted to cotton in Punjab is lower by 43 percent at 2.56 hundred thousand hectares in the 2016 and 2017 crop years, from 4.5 hundred thousand hectare in the previous year. Similarly, the cotton area coverage in neighboring Haryana fell 14 percent to 5 hundred thousand hectares this year as against 5.8 hundred thousand hectares in the 2015 and 2016 crop year. More than 90 percent of farmers sow BT cotton seeds and the maximum retail price are currently being fixed by the central government from this year onwards. The country 's total area sown to cotton remained lower by 45 per cent at 19.07 lakh hectares so far in the 2016 2017 crop year compared with 34.87 lakh hectares in the year earlier period.

The issues presented in the first article (PTI, June 27, 2016) are a shift in supply based on whitefly pest attacking cotton farmer’s crops. Cotton like most farm products are typically similar and are produced my many farmers and each producing a small amount compared to the collective supply in the market. Each farmer is price taker, therefore cannot affect the market singularly (Perfect Competition, n.d.). Consequently, the cotton farmers are operating in a perfect competitive market. Cotton, similarly to most farm goods is classified as a necessity; their demands therefore are less elastic as well as its supply (Perfect Competition, n.d.).

Figure 1 displays the quantity of cotton supplied decreased from Q to Q1, because of the whitefly pest problem. ...

... middle of paper ...

... If the prices suddenly fall, and people only want to pay $2 per bag or rice, the government might put in a minimum price (a floor) of $5, ensuring producers get enough money. If they put a price floor below equilibrium (e.g. $1) then it would be ineffective in protecting producers.
Price ceilings will change supply and demand; it will create a shortage in the market. If the price ceiling is set lower than the market equilibrium then there will be far more farmers trying to buy cotton seeds and there won’t be enough seeds to go around. While the price ceiling is set to protect the farmers from the inconsistencies in the cotton seed price, it’s important to realize it may have consequences in the market. My recommendation would be to enact price ceiling for a short time because the longer the ceiling continues worse shortage and the effects on the market will become.

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