Pakistan cotton sector collapse
Decreasing cotton acreage, yield per hectare, and reckless government policies have taken a heavy toll on cotton production. According to the report of the Pakistan Central Cotton Committee (PCCC), the cotton production target has been missed by 15 percent for the year 2018. The following table shows the cotton area and the production targets and achievements for the 2017-18 year.
In the last five years, cotton production has decreased from 13.86 million bales to 11.98 million bales, which is a decrease of 14% which has caused a loss of Rs 535 billion (almost 2 percent of total GDP) in the economy.
Furthermore, as planting of the 2018-19 cotton crop progresses, only 48% of the crop was planted in Sindh against the target of 0.62 million hectares, while Punjab achieved 95% of the target (2 .31 million hectares) until June. The country’s total planting stands at 2,494 million hectares, registering a decrease of 8.8% in the last five years.
The main reason for the decline in the cotton crop appears to be the low yield per hectare (decreased further by 6.2% in the last five years), which has left Pakistan with the only option of importing cotton for satisfy domestic demand. Under these conditions, when importing cotton is the last resort to satisfy excess demand, the 11% tax on cotton will worsen the situation and leave Pakistan uncompetitive globally. Along with high customs duties, the government is hunting down the textile industry with non-tariff barriers (NTBs). Under NTB restrictions, cotton importers cannot import cotton in more than one shipment with one permit, which inflates entry costs. It will also have a direct impact on textile and clothing exports, 75% of which are cotton-based.
In addition to poor yields, many other mutually reinforcing factors have also affected cotton production. For example, better sugar cane yields due to special policy incentives offered by the government to the sugar industry have ultimately frustrated cotton farmers. They then switched from cotton to sugarcane, resulting in a 15% increase in acreage under sugarcane and a significant decrease in acreage under cotton.
Aside from the technical and administrative challenges, climate change and erratic rainfall are also adding fuel to the fire. Farmers also blame the widespread use of genetically modified Bt. seeds, the seed mafia, and water scarcity for low cotton production. Farmers claim that seed mafias pose a substantial threat to cotton crops by selling fake Bt. seeds, resulting in a loss of 2-3 million bales of cotton each year. The low level of toxin (0.2-0.6 per gram) in these fake seeds and outdated Bt technology has lost its effectiveness against serious cotton diseases such as fall armyworm and other insects.
Water scarcity has also played a major role in the contraction of cotton production. Currently, farmers fear that due to severe water shortages, cotton production may decline by a further 35 to 40 percent compared to last year. Along with the water and energy crisis, the huge increase in the prices of water, gas, fuel and electricity has also affected the yield per hectare.
In addition to the drop in production, the quality of cotton is also deteriorating. Fake Bt. seeds with low level of toxins and contamination are affecting both cotton production and quality. Against the international standard of 2.5g/bale, Pakistan produces highly contaminated cotton with an average contamination of 18g/bale causing a monetary loss of nearly $1.4 billion each year.
In addition to these problems, the low investment in cotton research is also a major concern. Pakistan’s investment in cotton research and development is lower than that of other countries. It is financed by the cotton tax collected by PCCC, which has already decreased by 53% from the previous year, causing a further decrease in cotton R&D. This decline in cotton R&D needs to be reviewed to ensure the survival of the cotton industry in Pakistan.
To protect the cotton industry from further declines, prudent policies are needed. The cost of cotton inputs must be reduced and the new version of Bt. technology seeds must be provided to farmers. In addition to new and updated technology, farmers must also be provided with better quality seeds. Efforts should also be made to explore the feasibility of cotton production in newly available arable areas, for example in Baluchistan and KPK. In addition, a proper system of agrarian reform can be introduced to promote crops that are more important for the growth of the economy.
In the meantime, to protect the textile industry, the mainstay of our economy, all tariff and non-tariff barriers on cotton must be removed until such time as cotton production can meet demand.
To improve quality, awareness campaigns and programs should be initiated to train farmers on proper cotton picking, storage and supply. The ginning must be modernized and upgraded to meet international standards.
In the absence of the government taking any serious notice, the imposition of an 11% tariff on cotton will be the final nail in the coffin for Pakistan’s textile sector, as well as any hope of sustaining export growth.