Pakistan is the fifth-largest producer of cotton in the world. It also has the third-largest cotton spinning capacity in Asia (after China and India) making cotton Pakistan’s largest industrial sector. However, this year, cotton production is predicted to be a mere 4.78 million bales against the target of 9 million bales.
This is primarily due to the damage caused by the floods and decline in the area of cultivation, because of the slim profit margins in cotton production. Cotton plays an important role in the economic development of Pakistan and has remained a key livelihood source for thousands of farmers, however, the industry is losing around 10–15 per cent of its value (around US$350million a year) through poor production, transport and storage practices.
Pakistan’s Economic Coordination Committee (ECC) has sought to fix the Cotton Intervention Price (CIP) for the next crop at Rs.8,500 per 40kg with the objective of increasing cotton production by 10 to 15 per cent. The Federal Cabinet had since ratified the ECC’s decision. Cotton is a key crop for Pakistan’s economy and has been on a decline after achieving the highest production of 14.1 million bales in 2004-2005. The floods in Pakistan last year had badly damaged the standing cotton crop and consequently, cotton production is expected to be a mere 4.78 million bales (arrivals till 3rd March 2023). Lower cotton production has hampered the textile industry’s growth and increased the import bill of raw cotton, edible oil, and livestock meal. This information was given in a summary of the Ministry of National Food Security and Research (MNFSR) which was presented to Pakistan’s Economic Coordination Committee (ECC) of the Cabinet.
Pakistan economy is largely dependent on the agriculture sector which has contributed 19.2 per cent of the country’s Gross Domestic Product (GDP). It also provides 38 per cent employment. Remarkably, 50 per cent of the total industrial labour along with more than 60 per cent of Pakistan’s total exports comes from the cotton crop product chain. Cotton is widely cultivated in several regions of Pakistan, in which Punjab and Sindh provinces are the main growing belts, and Punjab is the leading province in terms of the total production of cotton bales. How does the announcement of CIP ahead of the main sowing season, March to May, benefit the Pakistani farmer? The MNFSR claims it will help growers decide about the area and investment on crop management. The current CIP is expected to enhance yield and area by 10-15 per cent. The MNFSR has proposed to fix cotton (Phutti) intervention price at PKR Rs. 8,500/40kg to revive cotton production, bring about stability in the domestic cotton market, and assure a fair return to the farmers; constitute a Cotton Price Review Committee (CPRC) with mandate to review market prices and propose intervention at fortnightly basis.
Over the years, there has been a decline in the number of farmers engaged in cotton production. Some farmers have already switched to other crops such as rice, maize, and sugarcane as they do not find cotton production profitable anymore. Significantly, the total area under cotton cultivation along with the total production has also significantly decreased in Pakistan. The total area of cotton cultivation was 2,700 thousand hectares in 2017–2018 and reduced to 2,200 thousand hectares in 2020–2021. In the same period, the total production was 11,946 million bales and decreased to 4,500 million bales. The decline of cultivated area is a serious concern especially in Punjab province. Additionally, non-availability of incentives to farmers remains one of the main reasons for decline in cotton cultivation.
The MNFSR states that Pakistan has the potential to increase cotton production to 15 million bales in a short period of time if the old cotton area is re-gained, farmers are supported with appropriate technology, and they receive a fair and stable price. In theory, these are good proposals, but the challenge is that in the last five years, the import bill of raw cotton has exceeded Pak Rupee Rs.56 billion. Most analysts agree that cotton is the most valuable crop in Pakistan with the highest multiplier effect, both on the rural economy as well as the industrial sector. The MNFSR claimed that cotton price intervention policy (2021-2022) resulted in price stability in the domestic market and higher investment in crop management producing 2.0 million additional bales despite a seven per cent decline in the area. Similarly, it also states that this policy in 2022-2023 provided price stability to the domestic market but the unprecedented floods of 2022 significantly damaged the standing crop.
MNFSR held three rounds of consultations with all stakeholders including provincial governments, growers, and cotton-related associations to prepare this year’s CIP proposal. The growers had proposed CIP of Rs7,000-8,000/40kg. Since the last consultation (10-02-2023), cost of inputs had further increased and the revised estimated average cost of production was around PKR Rs. 7,000/40kg. Stakeholders, including the All Pakistan Textile Mills Association, supported the CIP pegged with import parity price in line with the policy of the last two years. In a meeting convened in the Prime Minister’s Office (13 March 2023), it was decided to submit a summary to the ECC for CIP at PKR Rs. 8,500/40kg. Cotton is a vital source of foreign exchange in Pakistan. However, seed cotton yield along with total cultivated area has been continuously decreasing in the last few years. The latest figures provided by the MNFSR indicate that all is not well with Pakistan’s cotton industry and while efforts will be made, it seems difficult to reverse the trend of a decline in this sector of Pakistan’s economy.
Source: https://www.dawn.com/news/1604607
Source: https://profit.pakistantoday.com.pk/2022/08/21/the-cotton-tale/
Source: https://profit.pakistantoday.com.pk/2022/08/21/the-cotton-tale/