ISLAMABAD: Amid conflicting views of the proponents of rural agriculturists and urban industrialists, the Economic Coordination Committee (ECC) of the cabinet pended a decision on intervention price for Cotton 2021-22 Crop for at least a fortnight when the sowing would be completely over.

A meeting of the ECC presided over by Minister for Finance & Revenue Shaukat Tarin also approved 11 supplementary grants worth Rs20 billion a day ahead of budget approval and extended subsidy on five major kitchen items through the Utility Stores Corporation for 15 days instead of until Dec 31 demanded by the ministry of industries.

The committee debated at length the merits and timing of a repeatedly delayed summary of the ministry of national food security & research seeking Rs5,000 per 40-kg intervention price for a limited cotton produce. Based on data and charts, the ministry reported that while “comparing intervention period with that of non-intervention period, it reveals that cotton area and yield has increased during TCP intervention period — 1998-2010 — and decreased during the period without intervention — 2011-2020”.

Approves 11 supplementary grants worth Rs20bn a day ahead of budget approval

The house was clearly divided between two groups — Minister for National Food Security Syed Fakhar Imam and Minister for Industries and Production Khusro Bakhtiar on the one side pushing for incentivising cotton farmers and the other group led by prime minister’s adviser on commerce Abdul Razak Dawood, Interior Minister Sheikh Rashid Ahmad, Energy Minister Hammad Azhar and Mr Tarin who jointly knocked down the summary on technical grounds. Privatisation Minister Mohammadmian Soomro was neutral.

The meeting deliberated if offering an intervention price could be a prudent step while sowing was almost over. The opponents were of the view that announcement of an intervention price before sowing could have incentivised farmers to enhance cultivation but no more. Mr Dawood said his workings suggest the Rs5,000 per 40-kg intervention price would make Pakistani cotton expensive when compared with the international market.

Mr Imam said the historic trend suggested that intervention price even after the sowing encouraged farmers to use fertilisers and chemicals and received better results and vice versa. It was reported that cotton output peaked 14.1 million bales in 2004-05 and the hovered around 12m bales since then except for last four years when it declined to 9.2m bales in 2019-20 and just 6.98m bales in 2020-21.

This was mainly because of decline in area in Punjab and thin profit margins in cotton than competition crops like sugarcane, maize and rice. The ministry of national food security & research said the country’s cotton production would reach 20m bales in 3-5 years if farmers were supported with appropriate technology and ensured a fair price.

“Lower cotton production is (also) hampering the industry’s growth, textile exports and elevating import bill of edible oil, raw cotton, livestock meal and causing economic insecurity in rural areas,” the summary pleaded. The summary sought procurement of 1-2m lint cotton at pre-determined rate based on Rs5,000 per 40-kg of seed cotton by the Trading Corporation of Pakistan through the Pakistan Cotton Standard Institute.

Fakhar Imam put on record that the delay in bringing up the summary was not a fault of his ministry which has been trying for almost two months to place it on the ECC agenda and had also taken up the issue both at the level of federal cabinet and twice at ECC. Even two weeks ago, the summary was not taken up by the ECC on the objection of Mr Dawood for being ‘an additional agenda item’. It was agreed then that a special ECC meeting would be called next week to deliberate in detail the cotton crop. Strangely though, even this meeting had about 14 agenda items and four non-agenda items.

Finance Minister Tarin finally ordered that a committee should submit a report within 15 days on the issue to take a decision on future policy direction for the cotton crop and the strategy for its revival or otherwise.

The ECC, on a summary of the Power Division about payment of outstanding amount of net hydel profits, directed power and finance divisions to come up with possible solutions and option for raising funds required financing by the Water and Power Development Authority (Wapda) within two weeks. The power division said the ECC had constituted a committee under Finance Minister Tarin on May 26 to work out a mechanism for settlement of net hydel profit to the provinces.

The committee never met but the finance division reported to the prime minister office that to mitigate liquidity issue of the Central Power Purchase Agency, the power division would move a case for bank financing of Rs20-25bn with the government and the finance ministry would support this.

However, the power division “clarified that the loans for payment of NHP” was to be arranged by Wapda being its liability towards the provinces and NHP was “included in the tariff determination of Wapda by Nepra” which recently allowed Rs11bn mark-up on previous Wapda payments to the provinces. Therefore, the ECC should “direct Wapda to raise bank financing of around Rs25bn with GoP guarantee for payment of NHP” the way it was previously done.

The ECC approved 11 supplementary grants worth Rs20bn. These included Rs10m for the Aviation Division, Rs73.870m for the National School of Public Policy, Lahore, Rs20.70m for the Pakistan Academy for Rural Development, Peshawar, and Rs16.706m for the Inter-Provincial Coordination Division.

Published in Dawn, June 29th, 2021