ISLAMABAD: The government has called a meeting of the Economic Coordination Committee (ECC) on Monday (today) to consider allowing an intervention price of about Rs5,000 per 40kg for cotton, which has arguably been necessitated by a sharp decline in production, besides clearing a dozen supplementary grants so close to the passage of federal budget by parliament.

To be presided over by Finance Minister Shaukat Tarin, the ECC meeting is expected to approve a notification about minimum indicative prices of tobacco and revision of cess rates on the commodity for the year 2021-22.

The ECC meeting will take up extension of general subsidy on five essential items through the Utility Stores Corporation for another six months (from June 30 to December 31, 2021) because of its poor utilisation during the current fiscal year and also consider a summary of the maritime affairs ministry for recovery of demurrages and other claims of receivables from the Pakistan State Oil.

Sources said the Ministry of National Food Security and Research (MNFSR) led by federal Minister Syed Fakhar Imam is pushing for an intervention price of about Rs5,000 per 40kg of cotton crop for 2021-22 whose production numbers have plunged to a 30-year low.

Ministry officials, however, describe the proposed intervention price as ‘too little, too late’

According to the Pakistan Economic Survey 2020-21, the total production of the cotton crop for 2020-21 declined 23 per cent to 7 million bales from 9.15 million bales a year earlier.

The area under cotton cultivation also fell by 17.4pc to 2.01 million hectares compared to previous year’s 2.5m hectares, mainly due to absence of incentives to farmers to sustain the crop amid challenges from competing crops like sugarcane. This was allowed even though Pakistan has been among the largest cotton producers.

While the growers have been demanding an intervention price of at least Rs5,500 per 40kg this year, senior officials in the MNFSR consider the proposed price of Rs5,000 as “too little, too late” as cotton’s sowing period is already over.

Yet, the government has set the production target for the 2021-22 crop at 10.5m bales, a whopping 50pc higher than that of the current fiscal. The government has also set the target of cultivating cotton over 2.33m hectares, up 16pc when compared to this year’s 2.01m hectares.

Officials pointed out that last year too Mr Imam had urged the ECC to allow an intervention price of Rs4,224 per 40kg that he later reduced to Rs4,000, but the attempt was thwarted due to strong opposition from the textile industry and advocates of free market policies.

In April of last year MNFSR had suggested a minimum intervention price for procurement of cotton through the Trading Corporation of Pakistan (TCP), but the proposal was turned down on the basis of merits rather than the amount involved.

Foreign Minister Shah Mahmood Qureshi and Industries Minister Khusro Bakhtiar had pushed for the intervention price while pleading on behalf of 1.5m to 2m cotton farmers to improve their cash flows and encourage them to grow more cotton.

Over the last few years 50-60pc of ginning units have closed down as cotton production declined.

However, Adviser to the Prime Minister on Commerce Abdul Razak Dawood, Adviser on Institutional Reforms Dr Ishrat Hussain, Minister Hammad Azhar and then SAPM Nadeem Babar countered the move on the grounds that Pakistan’s textile industry was already at a disadvantage when compared to regional competitors like India because of availability of cheaper and better quality cotton.

They contended that if the government stopped local textile mills from making use of cheaper avenues, including local purchases and through imports, it would mean hurting export of textile products.

Then ECC chairman Dr Hafeez Shaikh turned down the summary, saying it was necessary for the government to support cotton farmers but there should be some targeted mechanism to directly benefit the deserving ones, instead of approving an intervention price.

It was argued that cotton was a commercial crop and it could not be compared with wheat or sugarcane crops for which support price or intervention price could be justified on the grounds of food security. The users should be free to obtain their raw material from wherever they find feasible.

This apparently sent a wrong message to the cotton farmers, most of whom are reported to have shifted to maize, sugarcane or rice crops.

Some officials also argue that cotton crop is not a federal subject and hence the federal government could support cotton seed improvement and research and development and might bring the provincial governments on board to provide subsidy and ensure minimum intervention price through the TCP.

Again, it’s not binding upon the textile industry to purchase cotton from TCP when it can procure the commodity at lower rates from other sources, including through cheaper imports. However, as part of his focus on agriculture, Prime Minister Imran Khan is reported to have supported Mr Imam in his efforts to provide maximum incentives to the farmers as the textile industry already has a series of supporting policies and subsidies.

Published in Dawn, June 28th, 2021