Jammu and Kashmir Board Solutions for Exercise 1: Exercise 1

Did Swapna get a fair price for the cotton?

Swapna, a small farmer in Kurnool (Andhra Pradesh) grows cotton on her small piece of land. The bolls of the cotton plant are ripe and some have already burst, so Swapna is busy picking cotton. The bolls, which carry the cotton in them, do not burst open all at once so it takes several days to harvest the cotton. Once the cotton is collected, instead of selling it at Kurnool cotton market, Swapna and her husband take the harvest to the local trader. At the beginning of the cropping season, Swapna had borrowed Rs 2,500 from the trader at a very high interest rate to buy seeds, fertilisers, pesticides for cultivation. At that time, the local trader made Swapna agree to another condition. He made her promise to sell all her cotton to him. Cultivation of cotton requires high levels of inputs such as fertilisers and pesticides and the farmers have to incur heavy expenses on account of these. Most often, the small farmers need to borrow money to meet these expenses. At the trader’s yard, two of his men weigh the bags of cotton. At a price of Rs 1,500 per quintal, the cotton fetches Rs 6,000. The trader deducts Rs 3,000 for repayment of loan and interest and pays Swapna Rs 3,000. 

Why did the trader pay Swapna a low price?

"Swapna, a small farmer in Kurnool (Andhra Pradesh) grows cotton on her small piece of land. The bolls of the cotton plant are ripe and some have already burst, so Swapna is busy picking cotton. The bolls, which carry the cotton in them, do not burst open all at once so it takes several days to harvest the cotton. Once the cotton is collected, instead of selling it at Kurnool cotton market, Swapna and her husband take the harvest to the local trader. At the beginning of the cropping season, Swapna had borrowed Rs 2,500 from the trader at a very high interest rate to buy seeds, fertilisers, pesticides for cultivation. At that time, the local trader made Swapna agree to another condition. He made her promise to sell all her cotton to him. Cultivation of cotton requires high levels of inputs such as fertilisers and pesticides and the farmers have to incur heavy expenses on account of these. Most often, the small farmers need to borrow money to meet these expenses. At the trader’s yard, two of his men weigh the bags of cotton. At a price of Rs 1,500 per quintal, the cotton fetches Rs 6,000. The trader deducts Rs 3,000 for repayment of loan and interest and pays Swapna Rs 3,000."

Where do you think large farmers would sell their cotton? How is their situation different from Swapna's?