The production and distribution of cotton plays a key role in the economy of Pakistan. It is not only an essential segment of economic strategy but has social dimensions as even the farmers' schedules of social activities which are dependent on expected cash flows from value chain. Cotton as the basic raw material for the Pakistan textile industry accounts for almost 70% of the basic cost of production in the textile industry and any movements in price or quantity have significant impacts.
Pakistan is the 3rd largest consumer and 4th largest producer of cotton crop in the world. For the last five years, the country is facing a huge cotton shortage close to 40 percent of demand. This year Pakistan has missed the cotton sowing targets, largely in Sindh, due to acute water shortage, leaf curl disease and climate change. The overall sowing area in Pakistan is 2.71 million hectares against the target of 2.95 million hectares which signposts an 8% decrease in yield. The production estimates showed an estimate of 10.82 million bales, indicating a shortfall of almost 4 to 5 million bales.
Over the last five years, decrease in production of cotton crop has caused almost Rs 1 trillion loss to the economy. In the past several years, the quantity and especially quality of the cotton declined drastically. In 2012, country had produced more than the targeted level - 14.8 million bales against the target of 14.1 million. Since then, cotton crop suffered from encroachment of land (sugarcane encroached best cotton growing area), viruses and water shortage issues. Currently, shortfall is expected around 25% majorly due to farm inputs, including poor quality seed, cotton leaf curl virus (CLCV), pest management issue, lack of plant resistant seeds, depleted technology, late sowing and severe shortage of water. According to reports, the occurrences of CLCV were told about 29.28 percent this year against 21 percent recorded last year which affected the yield.
On water paradox, Pakistan has the world's fourth highest rate of water usage per unit of output as it is bigger threat than the terrorism in Pakistan. This decrease in our water resources over last year, was recorded at2.3%, forecast for the current year is even worse. This issue has curtailed estimates of the production of cotton crop especially in Sindh where there is lack of reservoirs and a poor water management system.
There are 1300 ginning industries working in Pakistan. In the same way, the share of intermediaries (ginners) is also worsening the production as in New York the share of intermediaries is almost 12% and in Pakistan, it's currently about 45%.
Environmental hazards and high cost of production challenge sustainability and farmer's income in Pakistan. The average farm gate price of phutti is Rs 3700 per 40 kg and ginning cost is roughly Rs 700 per bale plus 7% wastage. Whereas the sale price of cotton is almost Rs 8300 per 40 kg. This difference in marketing and risk margin is kept by ginners. Ginning units have to go for better technology to eliminate inefficiencies and the material in the ginned cotton. This higher gap between the farm gate and the market price generates inefficiency and inadequate return to the farmers. Ginning quality in Pakistan leave much to be desired as Pakistani ginned bales contains up to 10% trash and are usually underweight and contains high levels of moisture, sand, dust, threads of nylon bags and leaves of cotton plant. These impurities make the cotton expensive for textile mills.
To increase yield and ginning quality efforts are being made to resolve the problem in Punjab, which accounts for almost 80 percent of the yield. Punjab may suffer from a decline of 19% in output despite increase in the area of production. Similarly, Sindh is going to suffer from almost 38 percent decline in the production. This deficiency will again create panic for entire value chain as government has already imposed duties on import of cotton. This duty will further increase the cost of raw cotton. This severe shortage and duties will adversely affect the export sector. The production shortfall will force the entire value chain to rely on imported cotton this year as well, to meet the shortfall and to get export-quality cotton.
Increase in cotton production is not possible without introducing new cotton seeds as Pakistan Central Cotton Committee (PCCC) has totally failed to launch new seeds qualities due to lack of research. Our average cotton yield is 17 maunds whereas progressive farmers are getting 40 maunds yield in Pakistan. Government needs to take measures on emergency basis in cotton research areas, i.e., variety besides high productivity and desirable fibre traits.
Promotion of cotton means promotion of exports while failure of cotton crop translates into heavy damage to country's economy. It is said that one million bales of cotton has 0.5 percent impact on GDP. It would be difficult for textile industry to compete with textile giants like China, India, Bangladesh, Vietnam and Sri Lanka when we have to import a larger amount of expensive cotton to meet the shortfall of our cotton requirements.
PCCC is required to ensure availability of cotton to the industry at reasonable prices through-out the year and develop such varieties of cotton seeds that are resistant to diseases and enhance per acre cotton yield. The industry requirement is increasing with each passing year but indigenous production of cotton is further decreasing. Most importantly, the government is required to revisit its decision of duties on import of raw cotton immediately.
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