In public policy, unlike religion, there are no marks for trying. A policy is as good as the outcome it achieves, because economies cannot be run on good intentions alone.
The current government has identified poor domestic cotton production as the last bottleneck in its dream to kick start textile export growth. From improved and subsidized power and energy availability to devalued PKR, it appears all other pieces of the puzzle have fallen into place. The solution to conquering the last frontier, according to PTI’s commerce czars, is to introduce an indicative price for cotton.
The problem with this line of thinking is that it fixates on a singular symptom: the declining area under cotton cultivation, viz. other kharif crops. More specifically, the decline in cotton cultivation and output is blamed on high support price for sugarcane. It is argued that the perverse incentives structure has led to sugarcane production in excess of domestic consumption; whereas the milling sector is unable to offload its inventory build-up without government subsidy for export.
Going by that logic, should the solution then not to remove the support price on sugarcane? While support price has acted as an added incentive, it is by no mean the only factor in driving high sugarcane cultivation. Moreover, if FY19 numbers are any guide, areas under cultivation for both cotton and cane have shown a slump of 11 and 17 percent respectively over previous year.
The Achille’s heel of Pakistan’s agriculture is poor yield and not cultivation; and poor yield has many causes. Cotton’s yield saw stunted but progressive trend circa FY05 – FY15, when GMO cotton seeds were first introduced in the country, first through illegal, and then under governmental stewardship.
Except, when it comes to innovation in biotechnology, there are no easy answers. In a race to catch up to competition, the country cut corners and bypassed Monsanto, the patent owner for Bt cotton. Hybrids seeds were introducing by cross-breeding Bt cotton with local varieties. This, at first brought improvement in yield and production, as early generation of crop produced effective against pest attacks, reducing application of pesticides.
Soon after, the pests, specifically bollworm, soon developed resistance against the first-generation seed variety, leading to wide scale crop destruction in F16. While the other countries such as China and India moved on to second, even third-generation seed varieties, under the stewardship of patent company; when push comes to shove, Pakistan had no support system for its cotton farmers.
If farmers shifted to other crops such as sugarcane in subsequent years, they were only responding to natural forces; sugarcane after all, is a more resilient crop that can better withstand the unpredictability in weather patterns compared to cotton.
Moreover, claiming that indicative pricing alone is responsible for higher sugarcane sowing is blissful ignorance. For one, it cannot explain persistent complains by farming community that millers across the country paid less than indicative price, which was on record acknowledged by sugar miller’s association in the Supreme Court hearing in January 2018.
While growers and millers may not see eye to eye, both groups agree that support price mechanism has been an abject failure as farmers received delayed payments and lower rates; whereas millers incurred losses for procuring crops at what they perceive above-market rates.
For one, in absence of an enforcement mechanism, support price is no more than a notional rate whose impact on growers’ decision-making is subjective. If the government plans to remain fixated on increasing cotton output, it needs to go above and beyond the fantastical notion of setting an indicative rate that no one follows in practice.
In order to get growers’ incentive structure right, the government needs to take tangible policy action on introducing latest pest-resistant seed variety, adapted to local climatic conditions. This requires taking bio-innovation companies on board. But most importantly, it needs to introduce policy measures that guarantee farmers a price at the time of sowing, whether on market-set or indicative rates.
For as long as farmers are left exposed to market rates at the time of harvest, they will place their bets on the safer crops. If that is too hard for the policymakers to swallow, there is always synthetic fibre!
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