Pakistan is losing at least $ 5 billion directly on account of the low production of cotton. An increase in cotton production will have a direct impact of $ 1 billion per 1 million bales and a 7 times multiplier impact on the fiscal flows in the economy. Cotton provides livelihood and employment to millions of poor families and it distributes money to the poor rural population especially women and reduction in the area and productivity has an extremely negative impact on poverty.
Overall cotton area in this decade has declined by 33 percent from 2.9 million hectares to 1.9 million hectares. Almost 1.5 million farmers grow cotton out of which 75 percent is grown in Punjab while rest is grown in Sindh, while cotton area in Punjab has decreased by 50 percent from 2.53 million hectares (2012) to 1.28 million hectares (2022).
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In Pakistan, Cotton yields have fallen by 26 percent from 880 kgs/hectare to 652 kgs/ hectare over the last 10 years, while in Punjab the decline has been more pronounced and productivity has fallen by 36 percent from 814 kgs per hectares (2012) to 520 kgs per hectares (2022).
Cotton has lost 1 million hectares during the last decade and if this area is reverted to cotton than the country will produce an extra 5 million bales of cotton which will add 1.523 percent to GDP and will save the country $ 5 billion directly while generating incomes in the rural economy of Pakistan and playing a vital role in poverty alleviation.
Minimum support price to benefit farmers
Given the above analysis, APTMA urges the government to immediately announce a cotton support price of Rs 8,000 per maund of phutti for the upcoming season. At present, wheat is being harvested in Punjab and the cotton sowing will commence within the next few days and this window for capturing the maximum area for cotton should not be lost or delayed.
The support price of Rs 8,000 per maund is based on an international New York future cotton price of Grade-III of $ 1.25 per lb. in line with the international price of December 2022 and is well below the currently prevailing market price of $ 1.45 / lb. (Rs 9,280 per maund of phutti).
The Minimum Support Price will increase the profit and confidence of farmers who have shifted to other crops like Sugarcane, Rice, and Corn. Last year, MSP was also announced, but the government was late in announcing the price when the sowing season had nearly ended. During the cropping season 2021/22 cotton yield per acres increased by 33.5 % from 433 kg/hectare to 652 kg/hectare because farmers took extra care due to the anticipated higher price of cotton.
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This year, a timely announcement of the MSP will not only increase the yields but also the area sown and is likely to yield the expected increase of 5 million bales of cotton equivalent to a savings of $ 5 billion for the economy.