Cotton growers and ginners: Ministry accuses government of giving preference to 'mighty' textile sector

Ministry of National Food Security and Research (MNFS&R) on Thursday accused top government decision makers of giving preference to the mighty textile sector over cotton growers and ginners due to which growers have reduced their inputs.

This observation came from the Secretary (MNFS&R) Dr Hashim Populzai at a meeting of National Assembly Standing Committee on National Food Security and Research presided over by the committee's Chairman Rao Muhammad Ajmal.

Secretary National Food Security and Research informed the committee that when the issue of five percent tax on cotton oil seed oilcake came up, the Ministry moved a summary to the ECC a couple of weeks ago to withdraw the five percent customs duty.

Comments were also sought from the concerned ministries but only the Ministry of Commerce supported the proposal however Federal Board of Revenue (FBR) clearly stated that it could not support to the proposal and went on to state that it would propose in the next federal budget 2020-2021 that tax also be imposed on other cakes aimed at eliminating discrimination.

Dr Populzai further stated that his Ministry presented the case before the ECC with substantial documentary evidence and justification of problems being faced by the economy, growers and ginners due to five percent tax.

According to the Secretary National Food Security and Research, he briefed the ECC that the price of cotton oil seed (Banaoula) had decreased compared to oilcake which was alarming as the oil was supposed to be extracted from cotton oil which was being used in animal feed. The country has to import more edible oil due to this situation.

He further stated that cotton was not being purchased from growers, disclosing that some deals were being done "underhand/ informal" due to which that share of cotton was not accounted for in the actual figures.

Secretary National Food Security and Research informed the committee that the ECC took the decision that Secretary Finance would hold a meeting on the issue of duty on cotton seed oilcake. Subsequently, on December 31, 2019, Secretary Finance held a meeting which was also attended by Secretary National Food Security and Research and Cotton Commissioner.

Secretary Finance, he said, took the stance that it was done as a consequence of pressure of International Monetary Fund (IMF) which would not agree to withdrawal of 5 percent duty as its financial impact is Rs 5 billion or Rs 6 billion.

"Secretary Finance took the stance that withdrawal of 5 per cent duty is not possible for the government. Since IMF delegation is due in February 2020, Secretary Finance suggested to me as Secretary National Food Security and Research to meet the IMF delegation and try to convince them on withdrawal of this duty," he continued.

Secretary National Food Security and Research claimed that during the ECC meeting it was also decided that Finance Division would facilitate interaction of Ministry of National Food Security and Research with IMF on video link but during the meeting with Secretary Finance, it was pleaded that interaction on video link did not give good impression as one on one meeting would be better.

Dr Populzai further stated that in the last ECC meeting duty on import of cotton was removed and in addition import of cotton through Torkham border was also allowed. He said MNFS&R in its comments on the summary of Commerce Ministry strongly opposed the proposal.

He said All Pakistan Textile Mills Association (APTMA) in one of its recent meetings claimed that if cotton was imported at the current duty rate, it would be Rs 200-300 cheaper than local cotton. "This is a very important point that if cotton is imported at current duty, it is cheaper by Rs 200-300 per bale as compared to local cotton," Dr Populzai said, adding that duty draw facility was also available to textile sector on re-export of that commodity.

"APTMA is being extended double benefit. We are unable to understand that when the issue of removal of duty on imported cotton comes under consideration IMF's restrictions do not halt such a proposal but when the issue of removal of duty on cotton seed oilcake then IMF interferes. This is strange and one wonders how this is happening. None of the ECC members mentioned IMF's restrictions when the removal of duty on imported cotton came under consideration. We will raise this point in the Federal Cabinet meeting when ECC minutes will be presented for ratification," said a visibly angered Dr Populzai.

Commenting on cotton's position, he said that MNFS&R took the stance that indicative price of cotton should be fixed in addition to its official price, aimed at extending support to cotton crop. He said a committee was constituted and nothing was done and the issue is in the same position as in the past.

He said this should have been the first year when the government announced am indicative price of a crop other than sugarcane or wheat.

He said due to that situation growers had stopped investing in cotton crop. He further maintained that even when there was a shortage of cotton in the country its prices were declining reflecting the manipulation by APTMA as a single buyer.

"When there is a need to support cotton, its prices drop and the price gap is widens between Pakistani market and international market as APTMA is a single buyer influencing the market," he further stated.

Talking about research in cotton, he said Pakistan had only one such organisation i.e. Pakistan Central Cotton Committee which was redundant. A committee has also been constituted to restructure it. Ministry has won case against APTMA on the issue of cess collection.

Chairman Standing Committee stated that cotton in Pakistan was not being taken seriously and conspiracies were hatched against it.

Former Chairman Pakistan Ginners Association Haji Hafeez Anwar argued that if five percent duty on import of cotton was removed, prices of local cotton would further decline. He argued that there was no need to import cotton as 1.5 million bales are still in stock. He claimed that cotton would not be more than 5 million to 6 million tons if current mess continues in this sector.

Haji Hafeez Anwar who attended the meeting along with a delegation also claimed that due to fake (ineffective) medicines, cotton yield has dropped.

Cotton Commissioner said that 3.5 million bales of domestic cotton were still in stock even then duty free import of cotton had been allowed.

He suggested that duty free import of cotton should not be allowed as long as domestic cotton is available in the market.

Member Standing Committee, Ibrahim Khan said that cotton yield had dropped to 240 kg (6 maund) from 600 kg (15 maund) per acre.

He said cotton seed was very important for improving the crop. Ministry has welcomed private sector companies which supply good quality cotton seed. He further stated that talks have been held with the American company M/s Monsanto for provision of BT cotton IV. The company has promised to meet the Ministry in February 2020.

Secretary, MNFS&R briefed the committee that the demand for pulses was increasing day by day with per capita consumption of about 6.0 kg per capita per annum and annual consumption had exceeded 1,095 thousand tons. Currently Pakistan is producing only about 501.9 thousand tons of major pulses. Retailer's price of major pulses in the country is more than double farmer's market gate cost, which clearly indicates that middle men are fetching more than the producer. The suggested indicative prices per 40 kg of chickpea, lentil, mung bean and mash bean are Rs 3600, 4800, 4000 and 5800 respectively, which includes investment incentives. The Committee recommended that the PPRA Rule 36 (a) adopted for procurement of pulses may be amended to pave the way for direct procurement of pulses from the farmer and to minimize the role of middlemen.

The representatives of the Engineering Development Board (EDB) apprised the committee that presently three tractor manufacturing companies are operating in the country. The EDB is in process of adoption of WP-29 vehicle regulation which would internationally standardize the Pakistani tractor manufacturing units but at present WP-29 is only for cars. The Committee was informed that the file for adoption of WP-29 is pending with the M/o Foreign Affairs. The Committee recommended that the M/o Foreign Affairs should expedite the process of adoption of WP-29 vehicle regulation. The Committee also constituted a Sub-Committee under the convener-ship of Chaudry Muhammad Ashraf, MNA to examine the Chamber of Agriculture Bill, 2019.

The meeting was attended by Rao Muhammad Murtaza Iqbal, Mian Muhammad Shafiq Kamal Uddin, Mr. Muhammad Ibrahim Khan, Syed Mobeen Ahmed, Chaudry Muhammad Ashraf, Choudhary Faqir Ahmed, Syed Javed Ali Shah Jillani MNA's, beside senior officers from the MNFS&R, Chairman, PARC, MD Utility Stores, M D PASSCO and representatives of Pakistan Cotton Ginners Association also attended the meeting.