Cotton production falls by 33 percent amid bad weather, unfair policies

Cotton farmers grow worried as the forces of nature and governance all stack up against them. The Pakistan Cotton Ginners Association (PCGA) reveals cotton production fell by 33 percent compared to the same period last year.

The culprits responsible for the major drop in cotton yields are substandard seed varieties, bad weather and, arguably, an unfair taxation policy. These factors reduced cotton production by 2.719 million bales compared to the previous year.

Cotton production has declined sharply in recent years, but not entirely because of seed quality or suboptimal weather conditions. In fact, cotton production levels are declining as the cotton ginners rely on imported cotton instead of procuring it locally.

The reason millers and ginners purchase imported cotton is that it is cheaper because local cotton sales are subjected to an 18 percent tax, while no additional charges are levied on imported cotton.

This poses an immediate risk to cotton farmers in Pakistan as discriminatory taxation policies are effectively pushing them out of business. According to the International Cotton Advisory Committee, a staggering 1.3 million Pakistani cotton farmers may lose their livelihoods soon.

The current policy of not taxing cotton imports is likely to hurt Islamabad as well because, according to Dawn News, the shortfall of cotton may result in Pakistan needing to import cotton worth well over two billion dollars to fulfil the needs of the domestic textile sector.

Islamabad is also losing out as tax revenues on imported cotton remain uncollected. The only sector seemingly befitting the entire situation is the textiles and apparel sector. However, their gains from purchasing cheaper imported cotton may also be short-term.

The textiles and apparel sector, which makes up 60 percent of Pakistan’s total exports, could soon find itself at the mercy of foreign cotton producers. Large producers often utilise a tactic known as ‘dumping’ to damage infant industries. The same phenomenon, however, is being achieved in Pakistan as a result of the taxation policy.

Pakistan’s centuries-old and well-established cotton-growing industry is at risk. If cotton production levels continue to plummet, the textile industry will become overly reliant on imported cotton.

Islamabad can equalise prices between imported and local cotton by imposing taxes on imports. If this does not happen, foreign cotton sellers will then be able to dictate the price of cotton and sell it to Pakistan at exorbitant rates once domestic cotton growers are out of business.