Cotton is the backbone of Pakistan’s agricultural economy; yet the textile industry’s refusal to pay the cotton cess has severely undermined both cotton production and research.
Due to the non-payment of this cess, the Pakistan Central Cotton Committee (PCCC) has faced significant financial constraints, leading to delays in critical initiatives such as developing climate-smart cotton varieties to combat pests like Whitefly, Pink Bollworm, and the cotton leaf curl virus. This situation is directly harming Pakistan’s cotton production capacity, which profoundly impacts the country’s textile exports and overall economy.
The textile industry, particularly APTMA, has long played a pivotal role in Pakistan’s economy. However, in recent years, the industry’s “irresponsible” behaviour has stifled the research and development of cotton, the nation’s most vital agricultural crop.
Since the ECC decision in 2012, a nominal cotton cess of Rs. 50 per bale, valued at approximately Rs. 75,000, has been imposed. This cess is intended to fund cotton research and development, and under current conditions, it should be raised to Rs. 300 per bale. Despite this, mill owners hesitate to pay even the minimal Rs. 50 cess, which accounts for only 0.067% of the bale’s value.
What is even more surprising is that the textile industry passes the cess cost onto consumers by incorporating it into their production costs, yet still refuses to transfer this amount to the PCCC. While the responsibility to pay the cess lies with the mill owners, in reality, they are collecting it from consumers while withholding the payment from PCCC for their own financial gain. To avoid paying this trivial amount, the industry has resorted to various legal maneuvers, harming a key national institution—the PCCC.
Regarding the Rs. 3.5 billion in outstanding cess claimed by the PCCC, APTMA disputes the accuracy of these figures and often points to alleged irregularities in cess recovery.
However, APTMA neither provides its own figures for the outstanding amounts nor presents documented evidence of any irregularities. Over the past eight years (since 2016), the textile industry has filed 65 legal cases against the PCCC, of which the PCCC won 63. Despite this, APTMA has continued to delay cess payments.
APTMA has disregarded rulings by the Supreme Court, ignored directives from the ECC, and neglected the mandates of the Cotton Cess Act. Additionally, the 2021 commitment made by former APTMA Chairman Rahim Nasir to pay Rs. 3 billion in outstanding cess remains unfulfilled.
This conduct by the textile industry also undermines the very model of public-private partnership. If APTMA, a private entity, cannot manage to pay Rs. 50 per bale, how can it effectively support or contribute to the running of national institutions? This situation is not just a violation of the law; it is a deliberate effort to harm cotton research.
Should the textile industry fail to pay the cess, the Land Revenue Department has the legal authority to take action. Non-payment of the cotton cess constitutes a legal violation, enabling the department to issue recovery notices, freeze bank accounts, and initiate other legal means to recover the funds. The objective is to secure resources for the national treasury and provide necessary funding for cotton research and development.
APTMA’s strategy appears to be aimed at prolonging the issue deliberately, reflecting its bad faith. It has even gone so far as to label the Pakistan Central Cotton Committee a “white elephant” that serves no purpose. However, the reality of the textile industry itself is equally concerning: even if cotton production reached 20 million bales, exports would still not see significant growth.
Pakistan’s value-added contribution to textiles is a mere 3%, while Bangladesh, using just 8 million bales, exports $42 billion worth of goods, compared to Pakistan’s $16-17 billion from 10 million bales.
Our industry remains focused primarily on yarn production.
On one hand, the textile sector seeks billions from the government in subsidies and incentives under the guise of promoting exports; on the other hand, it has failed to introduce any international brands or establish a significant presence in European markets. Most of the foreign exchange earnings come from a limited range of products exported to the US and UK, while the textile industries in India, Vietnam, and Bangladesh have far outpaced us in terms of modernization and development.
Unfortunately, Pakistan’s textile industry has failed to invest in technological advancement, leaving it lagging behind in value addition. Reliance on outdated practices and failure to adopt modern production methods has rendered the industry uncompetitive on the global stage.
Consequently, we remain confined to producing raw materials and semi-finished goods, with minimal contribution to value-added products—one of the major barriers to growth in the economy and exports. For decades, the textile industry has received substantial government subsidies and financial incentives, yet has failed to make significant progress.
Its shortcomings contributed to the collapse of key financing institutions like the Pakistan Industrial Credit and Investment Corporation (PICIC) and Bankers Equity, which were designed to provide capital to industries, particularly the textile sector, for growth and modernization.
However, the sector’s failure to effectively utilise this capital led to financial crises, causing these institutions to fold.
The industry’s lack of value addition, failure to establish global brands, and inability to make a mark in international markets despite continuous subsidies are significant contributors to its struggles.
As a result, the sector has not been able to contribute to the economy as it should. Now is the time for the textile industry to shift its approach and ensure the timely payment of the cotton cess so that the PCCC can resume its research activities and prevent the cotton sector from slipping further into crisis.
Copyright Business Recorder, 2024
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