Need for a comprehensive cotton policy

Pakistan should make the best use of each gram of cotton produced in the country

Nov 15 - 21, 1999

With the arrival of cotton from new crop various pressure groups have become active. Like every year, it is being said that there would be a bumper crop of over 11 million cotton bales. Phutti (raw cotton) prices have already come down to around Rs 500 per maund and it is apprehended that if government did not intervene it would further go down. Nawaz Sharif, in his last days, had ordered procurement of cotton by the Trading Corporation of Pakistan (TCP) and banks were also ordered to provide funds to the TCP. There was also pressure on the government that involvement of TCP would not yield any substantial results and it should not be allowed to play any role in the cotton trade.

Traditionally there are two pressure groups involved in cotton trade, these are growers and spinners. While the growers want the highest possible price, the spinners wants the lowest possible prices of cotton to prevail throughout the year. At the time of release of estimate of cotton crop size they have a common motive — an exaggerated output figure.

It may look strange but it serves their basic motives. Both of them want to create an impression that there is a surplus of cotton. The growers want to give this impression so that there should be no restriction on export of cotton. The spinners also join their bogey to keep the cotton prices low during peak procurement season. As the time passes by their objectives become opposite. Once the government announces cotton policy and exports orders start coming the spinners suddenly change their stance and try to give an impression that there is a shortage of cotton and there should be ban on its export.

This has been a regular feature every year. Even during the last cotton season the initial estimate was about 10 million bales which was subsequently reduced to around 8 million bales. The spinners also succeeded in convincing the government that at least one million cotton bales should be imported urgently and around the same quantity was imported. The result was that with the commencement of arrival of cotton from current crop its prices plunged. Even when spinners were shouting about shortfall, many cotton experts were saying that at least one million bales were not accounted for. Spinners did not agree with this but the time proved that the apprehensions were right.

It is true that cotton crop is exposed to natural calamities but pest and virus attacks are manageable problems. According to cotton experts the poor crop estimation is result of following unscientific methods. While the US is able to estimate Pakistan's cotton output, we in the country fall pray to the tactics of various pressure groups. That is the reason that despite being among the top five cotton producing countries Pakistan has no corresponding share in the global trade of textiles and clothing.

To the utmost disappointment, Pakistan which should be producing about 20 million bales from the area currently under cotton cultivation, is whenever able to produce over 10 million bales it becomes a crisis. According to textile sector experts, the real demand of cotton in the country is around 8 million bales, at the best. Therefore, there is a need for a clear cut cotton export policy. It is suggested that Pakistan should also follow the policy being implemented in India. India announces the exportable quantity of cotton for each quarter and then sells it through international bidding.

The level of poor documentation is the reason for this confusion. Growers, ginners, spinners, weavers and processors indulge in of the book transactions, whenever possible. It is said to be due to the tax structure but more due to the lust for higher profit margin. While such transactions cause loss of millions of rupees to national exchequer, it also distorts data about production and consumption of cotton in the country.

According to textile sector experts more than 500 spinning mills are in operation in the country. However, production data is available about only half of the mills. Many of the mills were reportedly closed years ago but are still in full operation. Similarly weaving is almost entirely done in the unorganized sector. This is substantiated by the data available from the All Pakistan Textile Mills Association (APTMA). According to the data textile mills consume less than 3 per cent of the total yarn produced in the country.

Therefore, there is an urgent need to introduce satellite based cotton estimation and collect data about consumption of cotton by the spinners. At present two government functionaries, Office of the Textile Commissioner and Central Excise and Taxation department gets regular yarn production reports and calculation of cotton consumption by the mills should not be a problem.

Pakistan needs to make its government offices and trade associations real functional to facilitate formulation of market-based policies. It will also help in countering the impact of pressure groups. The country needs proactive policies and implementing them in letter and spirit.