It was not long ago when Cotton was called white gold. British after occupying India used cotton as raw material to develop its textile industry in Manchester and other areas in North England. Cotton remained the main export of India for centuries.
Cotton was the main export of Pakistan after the independence. After establishing the textile industry in 1960s-both the raw cotton and yarn was the main export. South Punjab and Sindh were and still are the main areas of cotton. It’s also called cotton belt.
Once the white gold now faces serious crisis. Its production is on the decline. The exporter of cotton and yarn now becomes net importer of cotton in last few years. Pakistan is spending nearly $1.5 billion annually on cotton import. When Pakistan is looking for dollars-it is spending precious foreign reserves on the import of cotton.
Why we are spending so dollars on the import of our prime crop? Simple- we are not producing enough cotton to meet our local demand. Our cotton production continues to fall and per acre yield is also not improving. Both the PML-N and PTI governments failed to take concrete action and to take measures to increase the production of cotton.
Government needs to encourage the farmers to cultivate the cotton instead of sugarcane and other crops. New high yield seeds need to be developed and provided to the farmers on subsidised rates. The farmers in cotton belt needs special package and incentives to grow cotton. If the government failed to take action immediately than the production will continue to fall in coming years.
The climate change and global warming is also playing its role in the decline of cotton production. The heavy rains and insects attacks are the other reasons of this decline. The new seeds that coop well with insect attacks and changing weather patterns needs to be developed immediately to increase the cotton production. The twin problems are responsible for the drop in cotton production – the decreasing area under cultivation and the falling yield.
The government must take action to stop the production of low quality of seeds and pesticides. Both make negative contribution in cotton production. Low quality seeds and pesticides played important role in the lower yield and production. The government must address these issues on priority basis.
A greater investment in research and development in the cotton sector is needed to improve both the yield and quality of the commodity. At the same time, the policy of support prices for sugarcane, which results in surplus sugar and contributes to lower cotton output, needs to be reviewed. Merely playing on customs duty and taxes on the import of cotton doesn’t provide a long-term solution to the problem of shrinking cotton output.
In 2015, the country produced 13.96 million bales of cotton. In 2016, however, cotton output dropped sharply to 9.91 million bales. The following two years saw an increase in output to 10.7 million bales and 11.9 million bales respectively.
In 2019, however, cotton production slipped to 9.9 million bales. Cotton output for the current financial year is projected at 10.20 million bales against the target of 15 million bales. Thus, between 2015 and 2019, cotton output dropped 29%. On average, during 2015-19, annual cotton output of 11.27 million bales was recorded compared with average annual consumption of 14 million bales.
Cotton output is a function of two variables – the area under cultivation and the yield. In 2015, cotton was grown over an area of 2.96 million hectares, which in 2019 decreased nearly 20% to 2.37 million hectares. Cotton’s share in total crop area came down from 12.72% in 2015 to 10.47% in 2019.
Likewise, 2015 saw cotton yield of 802 kg per hectare, which by 2019 had fallen 11.8% to 707 kg per hectare. Thus, the two key variables combined to push down cotton output. In terms of area under cultivation, cotton is Pakistan’s third largest crop behind wheat and rice. The decrease in the area under cultivation of cotton, inter alia, signifies that farmers are using their land to grow another crop.
Cotton competes with two other major crops- rice and sugarcane. Rice is mainly cultivated in Central Punjab and some districts of Sindh. Central Punjab is not a cotton sewing area. But sugarcane is a major crop in Central Punjab and parts of KPK. The annual production of rice, which is another export crop, has been around 7 million tons over the past five years.
On the other hand, the output of sugarcane went up from 62.82 million tons in 201515 to 83.3 million tons in 2018 before falling to 67.17 million tons in 2019.
Sugarcane has registered an increase in terms of both the area under cultivation and yield. In 2015, sugarcane was grown over an area of 1.14 million hectares, which increased to 1.34 million hectares by 2018 before falling to 1.10 million hectares in 2019. The commodity’s yield increased from 55,062 kg per hectare in 2015 to 59,587 kg per hectare in 2019.
Why is sugarcane being grown over an increasing area at the expense of cotton? Simply because most influential politicians of mainstream political parties owned sugar mills and have high stakes in sugar industry. The leaders of PML-Q-PML-N-PTI and PPP own sugar mills. There is close connection between the politicians and sugar industry.
Sugar industry is highly protected industry and enjoys many perks. Every government consists of politicians who have direct interests and stakes in sugar industry. So the governments and sugar industry give incentives to farmers to grow more sugarcane every year.
Every year, the government fixes the support price for sugarcane, which is higher than the price growers would get under competitive market conditions. The greater the sugarcane output, the more benefit the growers derive. This means the subsidy is calculated to benefit big growers, who are politically very influential. The support price induces farmers to grow sugarcane over a larger area at the expense of cotton.
In 2018, the total sugar production was 6.6 million tons, while its consumption was 5.1 million tons. Therefore, the surplus sugar was exported.
Owing to distortions in the sugar supply chain, the domestic price of sugar tends to be much higher than its international price. First the government has given subsidy to export the extra sugar. Then the government allowed the sugar mills cartel to increase the prices in domestic market.
For instance, in 2018, the average price of cotton that was exported was $1,651.3 per ton, while that of imported cotton was $1,806.3 per ton. Likewise, in 2019, the price of exported and imported cotton was $1,609.9 and $1,850 per ton respectively. Thus, not only are we net importers of cotton, we have negative terms of trade for the commodity as well.
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28 March, 2020