Ministry of Textile Industry has moved a summary to Prime Minister Nawaz Sharif, who is also the Minister In-Charge of the Ministry, seeking his approval for cotton intervention price to stabilize prices, officials sources revealed to Business Recorder.
The Ministry moved a summary containing three proposals for cotton intervention price including procurement of (i) seed-cotton at the price of Rs3, 000/40 kg, (ii) procurement of lint cotton, and (iii) direct subsidy @ of Rs5,000 per acre.
According to sources if Prime Minister opts for direct subsidy, it would require Rs 35 billion to be disbursed to growers @ of Rs 5000 per acre (up to 100 acres per grower).
In the other two proposals Trade Corporation of Pakistan (TCP) would require Rs 40 billion to purchase 13 million maunds of seed cotton (equivalent to one million bales), and an additional Rs 8 billion subsidy to be provided by the federal government.
After the Prime Minister's approval the summary would be sent to the ECC of the Cabinet for further consideration.
Finance and Commerce ministries have already rejected the proposal of Textile Ministry for procurement of seed cotton through TCP, terming it impracticable due to operational reasons and an estimated cost of up to Rs 13 billion to the public exchequer.
However the Ministry of National Food Security and Research has supported the Textile Ministry's proposal arguing that TCP has the expertise, infrastructure and capacity for the gigantic task of procuring phutti from the farmers directly.
During 2014-15, due to fluctuating international lint prices, cotton growers suffered badly; average seed-cotton price during cotton picking season last year remained below the average cost of production calculated by Punjab Cost of Production Committee. It is expected that the cotton price trend during this year (2015-16) will not be much different from the previous year, which means that farmers cannot expect a fair return for their cotton crop.
The Ministry of Textile had sought proposals from all stakeholders for procurement of 13 million maunds of seed cotton at the price of Rs 3,000/40 kg to stabilize cotton market. The Commerce Ministry argued that, "the ministry is of the view that the proposal for procurement of seed cotton (phutti) by government through TCP is impracticable due to operational reasons and open to visible estimated financial loss of Rs 8-13 billion to the public exchequer. Besides, having no expertise and trained human resources, this may result in further losses and will also be prone to corruption. Commerce ministry does not support the proposal of purchasing seed cotton (phutti) through TCP".
Finance Ministry also responded negatively while saying that last year TCP procured 96,000 bales of lint against the target of one million bales and that procured quantity is still with TCP and has not been disposed-off due to market conditions. Financial losses are estimated to be one billion rupees. TCP does not have the required technical and financial resources nor extended procurement network to support the procurement of 13 million maunds of phutti.
Finance Ministry further maintained that the proposed procurement of 13 million maunds of phutti at the proposed intervention price of Rs, 3000/40 kg against market price of Rs2400 per 40kg will involve subsidy impact of Rs7-8 billion while financial impact on account of incidentals of TCP and subsequent losses on account of disposal of this quantity will be in addition. Budgetary provision does not exist for this purpose.
Finance Ministry has further stated that in the post 18th Constitutional Amendment period, agriculture is a devolved subject. Provinces may take more responsibility while federal intervention is curtailed. It is also important to note that as a result of significant reduction in fuel prices and subsidy on agricultural tube wells, the input cost has been somewhat reduced.
Finance division argued that the proposed TCP intervention in the procurement of cotton should be at a minimum, and major share of the proposed subsidy may be picked by provinces.
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