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At the time of Pakistan’s independence, the country had only two textile mills and a handful of ginning factories, producing a modest 1.5 million bales of cotton with an average yield of 370 kilograms per hectare.

The landscape of the cotton industry began to change in 1948 with the establishment of the Pakistan Central Cotton Committee (PCCC) under the Cotton Cess Act of 1923, marking a pivotal moment for cotton research, development, and promotion.

This strategic initiative ignited remarkable growth in the cotton industry. Today, Pakistan is home to over 450 textile mills and more than a thousand ginning factories, with the average yield soaring to 750 kilograms per hectare.

By 2004-05, cotton production surged to an impressive 15 million bales, with notable milestones of 12.8 million bales in 1991-92 and 14 million bales in 2014-15. The significant advancements in cotton production technology can be attributed largely to the persistent efforts of the Cotton Committee.

Under the auspices of the PCCC, a synergistic collaboration between private and public institutions has historically resulted in three bumper crops.

The PCCC, established under the Cotton Cess Act, operates exclusively on the income generated from the cotton cess, receiving no financial aid from the government of Pakistan. This cess funds the salaries, pensions, and research and development activities of agricultural scientists and employees. Notably, the cotton cess is a mandatory levy fixed by an Act of Parliament, tied solely to the consumption of cotton in mills, irrespective of production levels or performance.

Data reveals that the consistent payment of the cotton cess by the industry has significantly boosted cotton production, driven by the continuous advancements in research. This demonstrates the crucial role of the PCCC in fostering the growth and sustainability of Pakistan’s cotton industry.

From 1948 to 2015, the cotton industry diligently paid the PCCC cess, fostering a steady growth and development. However, a significant disruption occurred in 2016 when some textile mills, guided by All Pakistan Textile Mills Association (APTMA), secured a stay order from the Peshawar High Court, halting cess payments.

These mills challenged a 2012 Economic Coordination Committee (ECC) decision that raised the cotton cess from 20 rupees to 50 rupees per bale and extended it to imported cotton. Although the Peshawar High Court invalidated the cess on imported cotton, it upheld the 50 rupees per bale cess. The Ministry of National Food Security and Research/PCCC moved the Supreme Court, which overturned the High Court’s ruling, reaffirming the cotton cess on imported cotton.

Over the past eight years, APTMA has entangled the PCCC in continuous legal battles. Currently, Pakistan has about 500 textile mills. Of the 65 cases filed by the mills, the PCCC has won 63, with two still pending. The mills appear determined to prolong the issue. This ongoing dispute has severely impacted PCCC research institutions and cotton research stations across the country.

Employing 224 agricultural scientists and employees and supporting over 650 pensioners, these institutions have been forced to operate on just 30 to 35 percent of their salaries and pensions for the past 25 months. The PCCC’s total annual budget for salaries, pensions, and research is approximately 700 million rupees, with monthly expenses around 60 million rupees. Currently, only 20% of small and medium-sized mills are paying the cotton cess, severely affecting employees, the institution, and national cotton production.

Since 2016, cotton production in Pakistan has steadily declined due to insufficient investment in research. Achieving optimal cotton production necessitates the collaborative efforts of all private and public institutions under a major research entity like the PCCC, which requires both financial and administrative strengthening.

Significant funds are essential to tackle challenges such as climate change, whitefly, pink bollworm, and to develop new genetically modified cotton varieties. Research is crucial for producing high-quality cotton seeds. Since 2016, textile mills owe a staggering 3.4 billion rupees in arrears, with 17 major operational groups owing more than 1.5 billion rupees.

According to the Cotton Cess Act, any mill that fails to submit its monthly consumption report, progressive report, and cotton purchase receipts to the PCCC’s cess department in Lahore for six consecutive months is considered a defaulter. In such cases, the cess department uses the following formula to assess the owed cotton cess: “average consumption of the last six months + 30% × rate (50) × default months.” Every mill is required to submit its consumption report, monthly progress report, and purchase receipts to the PCCC’s cess department by the 7th of each month. However, under the direction of APTMA, 80% of mills do not comply. This non-compliance exacerbates the financial strain on the PCCC, further hindering essential research and development efforts needed to boost cotton production and improve seed quality.

In the 89th meeting of the PCCC General Body in 2021, the then APTMA Chairman Rahim Nasir promised to settle the 3 billion rupees in cotton cess arrears in 12 to 24 installments. However, this promise remains unfulfilled.

The Federal Audit Report 2023 also acknowledges the arrears amounting to 3.2 billion rupees. Despite a stagnant cotton cess for 12 years, inflation necessitates its revision to 250 rupees per bale. The 2012 ECC meeting had outlined a roadmap to increase the cotton cess by 30% every three years to provide financial support, but APTMA has not implemented this decision.

As a result, over the past eight years, the national institution for cotton research has teetered on the brink of collapse. Hundreds of PCCC agricultural scientists and employees are struggling amidst extreme inflation, and research and development work has come to a halt, negatively impacting national cotton production.

The textile industry’s violation of cotton cess payment promises, the Cotton Cess Act, ECC decisions, Supreme Court rulings, and directives from district collectors have plunged the PCCC into a severe financial and administrative crisis.

Copyright Business Recorder, 2024

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