Grim cotton decline

EDITORIAL: There’s nothing really new or unexpected about the cotton crisis; just the fact that things have been allowed to come to such a pass. And now, the government must resolve this crisis very urgently as well, just like all the other crises that it finds itself surrounded by, because at stake are not just the lives and livelihoods of a lot of farmers but also the fortunes of the country’s prime export earning industry, that too at a time when the ruling party is bending over backwards to give national reserves a shot in the arm. Yet with the 34.18 percent year-on-year decline making this year’s cotton production the lowest in three decades, while pushing prices up to an 11-year high, something must be done to import enough of the commodity in time to pull prices down before the export industry starts feeling the pinch as well. Unfortunately, the drop in the domestic crop has more or less coincided with a sharp bull run in international cotton prices, putting yet more unforeseen premium on the price of imports that have now become crucial.

One of the biggest problems, as the prime minister himself was forced to note just the other day, is the sudden jump in the prices of yarn, which must be procured before being transformed into value-added finished products that fetch the kind of prices on the international market that local producers need to keep their factories running. But since Pakistani cotton is of the short to medium staple length, and the staple needed to make yarn of finer count has to be long or extra-long, the demand-supply gap must obviously be filled through prompt imports. Such a problem would not have given the government too many sleepless nights till only three years ago because exporters could just import cotton from India. But the Pulwama incident and the resulting political deadlock brought bilateral trade to a quick, grinding halt. So with the eastern neighbour not an option for the time being, unless of course a special deal can be arranged to build on the goodwill generated by the recent ceasefire at the Line of Control (LoC), the government is forced to look in the opposite direction for the next best source; across Afghanistan into the Central Asian Republics (CARs).

The commerce ministry is, in fact, pushing the government to green-light imports from CARs through Afghanistan. The only problem is that cotton import is governed by the Plant Quarantine Act of 1976, which mandates quarantine to check the commodity for pests before being allowed into the country. And since the country’s only quarantine facility exists at the Karachi port, the rules only allow for importing cotton through the sea-route. That, needless to say, makes trucking cotton home through Torkham impossible unless the government does something about it. The commerce ministry seems unnerved enough by the production shortfall to call for bypassing Pest and Risk Analysis (PRA) at the border, but the ministry of national food security and research is having none of it. It argues that cotton is a high-risk commodity and importing it without conducting proper PRA could lead to an influx of diseases into Pakistan.

The government must realise that it just does not have the luxury of time in addressing this problem. And even as it decides about what to do it is being bombarded with all sorts of suggestions including resuming import from India, making yarn import duty-free and taxing its export as long as there is a severe crisis in the home market. Yet while an export duty on yarn would clearly be going too far, even though the government can allow all the import of duty-free yarn it likes, this is a far bigger problem than restoring the demand-supply equilibrium for the outgoing year. It has to do with a long-term decline in the cotton production area, ad hoc policymaking, and no clear idea of what to do in an uncertain environment just like the one that the government’s lack of foresight has brought about.

Cotton is after all the life and blood of the export economy. And unless the crisis that has developed is met head on and resolved on high priority, the country risks losing chunks of its trade market and a vital supply of its foreign exchange inflow. It is pretty clear, as things stand, that the production shortfall has necessitated immediate import, even though the global market trend suggests that Pakistan would have to pay top dollar for it. Failure to act quickly could well mean that some of our commercial clients are lost forever, because it is not easy to regain a market that has gone to another exporter. The best bet then is to sign deals with landlocked CARs and do what is necessary to get the cotton here through the land route.

Last but not least, the decline of cotton was expected in the absence of policy initiatives, it is highly disappointing nevertheless.

Copyright Business Recorder, 2021