Insufficient supply of cotton affecting
the textile industry adversely
There has been noticeable hue and cry over
this season’s cotton output. The official word is that
Pakistan’s actual cotton production can realistically be
expected at 10.2 million bales. But it is a matter of
perspective as to how bad this production figure really is. On
one hand, the output is slightly better than 9.86 million bales
produced last season. On the other, the produce is a third shy
of the official target of 15 million bales. To begin with, the
lofty target for this year’s output defied reason. Amid a
secular decline in acreage and yield, how could there be a 50%
jump in the white harvest? The surprise, then, is not missing
the unrealistic target that assumed a record growth in yield.
The only unexpected thing is the fact that the output this year
is somewhat better, despite higher than usual rainfalls, gusty
winds in certain regions, and pest attacks on standing crops.
Besides, changes in cotton output may not
directly correlate with activities in the processing industries.
As a crop, cotton holds 4.5% stake in agriculture GDP and
consequently a 0.8% share in overall GDP. In the secondary
sector, the cotton-based textile industries have a 21% share in
large-scale manufacturing and consequently a 2% share in
national GDP. For instance, in FY19, cotton output declined 17%
year-on-year, but textile LSM showed a slight decline of 0.19%.
Therefore, the portrayal in certain
quarters of this cotton output as some kind of a “disaster” can
be treated as a hyperbole. With similar cotton output as last
year, there is a likelihood of this cotton output having a
somewhat benign impact on agro and manufacturing GDP growth, due
to low base effect, as well as the trade balance. Having said
that, there is still a need to address the causes of long-term
decline in cotton economy.
There is a gradual reduction in the
cultivation area for cotton. Acreage declined from 2.97 million
hectares in FY15 to 2.37 million hectares in FY19. But acreage
alone is not the big picture. The real indicator is the yield,
which is down from 802 kg per hectare in FY15 to 707 kg per
hectare in FY19. This season, the yield will further decline, as
a 17% growth in cultivated area has yielded only 3% increase in
A lot has been written about the need for
better farming techniques, but the issue of yield enhancement
boils down to a lack of proper seed markets in Punjab and Sindh.
As previous varieties of cotton, often seeded from the grey
market, are now unable to withstand pest attacks, the
new-generation, pest-resistant varieties need to be introduced
through officially-sanctioned market mechanisms.
Resilient seed varieties alone, however,
will not be enough to keep farmers’ faith. The rising cost of
agricultural inputs, especially in the last two years, cannot be
denied. Cotton is a sensitive crop compared to the alternatives.
As long as sugarcane and maize offer better returns at lower
risk compared to cotton, the farmers will probably not pay
attention to the availability and affordability of better cotton
seed varieties. However, it would be a costly mistake to de-link
the cotton economy from international markets by announcing
support prices. It isn’t clear by how much, but the indicative
price can incentivize the cultivation of cotton and investment
in yield enhancement techniques. However, the flip side is that
a price-floor above the international market rate will raise the
cost of production for processors and create other market
The significant PKR devaluation in the
last year and a half is expected to address the pricing
imbalances and give better signals for the next plantation
cycle. Instead of a purely fiscal response to jack up cotton
output temporarily, the policy focus needs to be on the
sustainable production of cotton, keeping in mind the challenges
of climate change as well as the low competitiveness of the
export-oriented textile sectors.