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ISLAMABAD: The Federal Cabinet has referred back a decision of the Economic Coordination Committee (ECC) on fixation of cotton intervention price of Rs5,000 per 40kg on the request of Prime Minister’s Advisor on Commerce and Investment Abdul Razak Dawood.

Well informed sources told Business Recorder that Dawood was on a foreign visit on July 16, 2021 when the ECC headed by Finance Minister took a decision on a summary of the Ministry of National Food Security and Research.

On July, 16, 2021, Ministry of National Food Security and Research submitted the following proposals: (i) procure lint cotton at pre-determined rate, (base grade 3 with staple length 1-1-/32”) based on Rs 5,000 per 40kg of seed cotton; (ii) constitute a Cotton Price Review Committee (CPRC) with mandate to review market price and propose intervention at fortnightly basis; (iii) 0.2 million cotton bales may be procured by TCP, initially involving Pakistan Cotton Standard Institute (PCSI) for quality and standards checks, CPRC will direct TCP for additional procurement if needed; and (iv) provide a Cash Credit Limit (CCL) as required by the TCP to procure initially for one million bales of cotton at intervention price, and additional incidental charges of about Rs7.71 percent as financial and administrative cost etc. of TCP.

ECC takes decisions on sugar, cotton

After detailed discussion, sans the representative of Commerce Ministry who left the meeting early to reportedly gossip with friends, the ECC decided that the CPRC shall be entitled to trigger procurement of lint cotton whenever the price falls below Rs5000 per 40kg in local market, provided that the intervention price is fixed at 90 percent of the Import Parity Price (IPP) of Cotlook-A Index, but in no case, higher than Rs5000 per 40kg for a fortnight; provided further that CPRC shall invariably meet three days before the end of such period to review market situation and decide upon continuation of the intervention or otherwise.

The sources said the ECC, which is scheduled to meet with Finance Minister Shaukat Tarin on Wednesday (today), will reconsider its decision of July 16, 2021.

Ministry of National Food Security and Research, in its summary stated that cotton, being the life-line of Pakistan’s economy, achieved the highest production of 14.1 million bales in 2004-05. Since then, the cotton production hovered around 12 million bales, but for the last 4 years, it has declined to as low as 9.18 million bales in 2019-20 and 6.98 million bales in 2020-21, mainly due to area decline in Punjab and a thin profit margin in cotton than its competing crops like sugarcane, maize and rice.

Pakistan can potentially produce 20 million bales in 3-5 years, if farmers are supported with appropriate technology and ensured a fair price. Lower cotton production is hampering the industry’s growth, textile exports and elevating imports bill of edible oil, raw cotton, livestock meal and causing economic insecurity in rural areas, etc.

In the past, Pakistan has procured cotton through Trading Corporation of Pakistan (TCP) five times during 1998-2010. While comparing intervention period with that of non-intervention period, it reveals that cotton area and yield has increased during TCP intervention period and decreased during the period without intervention (2011-2020).

Cotton market remains stable amid increased trading

Earlier, Ministry of NFS&R has moved similar summaries twice in 2020, however, ECC did not agree with the proposals of the Ministry. Resultantly, Cabinet constituted a committee consisting Ministers of Foreign Affairs, NFS&R and EAD and Advisor, Climate Change Division to deliberate and re-submit a summary to ECC. Subsequent, ECC on the summary of the MNFS&R directed on May 21, 2020 to “Minister NFS&R to hold a structural discussion with provinces to evaluate various options of promoting cotton cultivation and extending support to cotton growers”. As a result of consultation, Punjab Agriculture Committee headed by the Governor (Punjab) recommended an incentive package of Rs. 5,000 as support price and a grant subsidy of Rs. 15,000 per acre, for cotton grower to enhance cotton production. In June 2021, M/o NFS&R again moved a summary to ECC of the Cabinet. The ECC decided to constitute a committee under the chairmanship of Minister NFS&R. The Committee met on July 07, 2021and reached to the following conclusion ;(i) Cotton Price Review Committee will monitor local market prices. If market prices fall below Rs. 5000/40kg intervention will be initiated @ 90% of the import parity price of Cotlook- A Index (the reference international price) ;(ii) there would be an initial intervention for 200,000 bales, further buying would be decided by the CPRC based on market trends and ;(iii) the procurement operation will be terminated by December 31, 2021.

Ministry of National Food Security and Research stated that the intervention at this point of time is essential and will ensure investment on crop management, which can enhance production by 10% or one million bales. Agriculture Policy Institute (API) has calculated the cost of production and recommended the intervention price as Rs. 4,500-5,000/40kg of seed cotton for the year 2021-22.

Copyright Business Recorder, 2021

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