The Economic Coordination Committee (ECC) of the Cabinet has deferred the Price for Cotton 2021-2022 for the third time.
The Minister for Finance and Revenue, Shaukat Tarin, chaired the meeting on Monday, in which the Ministry of National Food Security and Research (MoNFS&R) presented the summary of the Intervention Price for Cotton 2021-2022.
The Ministry of NFS&R stated that cotton is the lifeline of Pakistan’s economy and that the production of 14.1 million bales had been achieved in 2004-05, but that over the last four years, its production had declined to 9.18 million bales in 2019-20 and 8.98 million bales in 2020-21 mainly due to area decline in Punjab and a thin profit margin as opposed to other crops like sugarcane, maize, and rice.
Pakistan can potentially produce 20 million bales in three to five years if farmers are supported with appropriate technology and are ensured a fair price.
The ECC was informed that lower cotton production is hampering the growth of the industry and textile exports, and is elevating the import bills of edible oil, raw cotton, and livestock meal, besides causing economic insecurity in the rural areas.
In the past, Pakistan has procured cotton through the Trading Corporation of Pakistan (TCP) five times between 1998-2010. A comparison of the intervention period with that of the non-intervention period revealed that the cotton area end yield had increased during the TCP intervention period and had decreased during it without intervention (2011-2020).
The Ministry of NFS&R had moved similar summaries (the intervention price of cotton) twice in 2020 but the ECC had disagreed with it on them. Resultantly, the Cabinet had constituted a committee comprised of the Ministers of Foreign Affairs, NFS&R, Economic Affairs Division (EAD), and the Advisor to the Prime Minister on Climate Change to deliberate on the issue.
Subsequently, regarding the summary by the Ministry of NFS&R, on 21 May 2020, the ECC had called for the “Minister for NFS&R to hold a structural discussion with provinces to elevate various options of promoting cotton cultivation and extending support to cotton growers”.
As a result of the consideration, the Punjab Agriculture committee headed by the Governor of Punjab had recommended an incentive package of Rs. 5000 as the support price, and a grant subsidy of Rs. 15,000 per acre for cotton growers to enhance cotton production.
As cotton sowing has already started, it is high time that the cotton growers are encouraged by the announcement of an intervention price to procure two million bales of cotton.
The Agriculture Policy Institute (API) has calculated the cost of production as Rs. 4,406 for the Punjab and Rs. 3,960 for Sindh. The stakeholders have recommended an intervention price of Rs. 4,500-5,000 per 40 kg of seed cotton for the year 2021-22.
A Cotton Price Review Committee (CPRC) will monitor the prices of cotton in the local and international markets at weekly intervals. Public intervention through the TCP will come into effect on the recommendations of the CPRC when the market prices of seed cotton drop 10 percent below Rs. 5,000 per 40 kg, and will continue until the market recovers.
In order to promote cotton production in Pakistan, stabilize the domestic market, and ensure a fair return to the farmers, the Ministry of NFS&R has proposed that a total of two million bales may be procured by the TCP while involving the Pakistan Cotton Standard Institute (PCSI) for quality and standards checks; the constitution of a Cotton Price Review Committee (CPRC) to review market prices and propose interventions on a fortnightly basis; the provision of a cash credit limit (CCL) as required by the TCP to procure initially for one million bales of cotton at the intervention price, in addition to incidental charges of about Rs. 8.15 billion as the financial and administrative costs of the TCP.
According to the Ministry of Finance, the ECC has constituted a committee to submit within 15 days a report on the proposal for the Intervention Price for Cotton 2021-2022 Crop by the National Food and Research Division.