The move is aimed at luring farmers back to their once favourite cash crop after a crash in domestic production over the last few years, necessitating costly imports.
By Muhammad Ali
ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has approved a minimum intervention price (CIP) of PKR 8,500 per 40 kg for raw cotton for the sowing season getting underway.
The somewhat generous CIP has been set for the March to May 2023 cotton sowing season on the recommendation of the Ministry of National Food Security & Research (MNFSR) in view of the downturn in cotton production.
Cotton is the most valuable crop with the highest multiplier effect both on the rural economy as well as the industrial sector. Officials say cotton, one of Pakistan’s key crops, achieved the highest production of 14.1 million bales in 2004-05. However, in subsequent years, its production averaged around 12 million bales.
But for the last 4 years, it has declined to 7 million bales in 2020-21 and about 9.45 million bales in 2021-22. But unprecedented floods in 2022 significantly damaged the standing cotton crop reducing the production to a mere 4.76 million bales (arrivals till 3rd March, 2023) against the target of 9 million bales,
The production of cotton in the current financial year touched lowest ebb it stood at just 4.76 million bales.
Cotton production has mainly decreased because of decline in crop area. Due to thin profit margin in cotton, farmers have switched some of area to other crops like rice, maize, and sugarcane.
To meet the demand of textile industry, Pakistan has the potential to increase cotton production to 15 million bales in a short period of time if historical cotton area is regained, farmers are supported with appropriate technology, fair and stable price is ensured.
Low cotton production in recent years has hampered textile industry’s growth and increased import bill of raw cotton, edible oil, and livestock meal. Over the last five years, import bill of raw cotton has exceeded USD 6 billion.
Cotton price intervention policy during 2021-22 resulted in price stability in the domestic market and higher investment in crop management producing 2 million additional bales despite 7 percent decline in area.
Similarly, this policy adopted in 2022-23 also provided price stability in the domestic market. However, the unprecedented floods of 2022 significantly damaged the standing crop.
The growers proposed CIP of PKR 7,000-8,000/40kg. The revised estimated average cost of production is now approximately PKR 7,000/40kg. The stakeholders, including All Pakistan Textile Mills Association (APTMA), supported CIP pegged with import parity price in line with the policy of the last two years.
Announcement of CIP at this time – ahead of the main sowing season, March to May – will encourage growers to look favourably upon cotton when deciding about the area and investment on crop management. The proposed CIP is expected to enhance yield and area by 10-15 percent.
Official sources say the MNFSR arrived at the figure of PKR 8,500/40kg for raw cotton or phutty to revive cotton production in the country, bring stability in the domestic cotton market, and assure fair return to the farmers.
The Ministry has also constituted a Cotton Price Review Committee (CPRC) with a mandate to review market prices and propose intervention at fortnightly basis.
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