ISLAMABAD: In a recent development, the federal ministries of commerce and national food security and research have locked horns over the proposed intervention price of seed cotton (phutti) at Rs4,224 per 40kg, as commerce ministry has opposed the proposed price for the upcoming season, revealed by the official documents available with The News.
And to this effect, the debate between top officials of the two ministries may be witnessed in the Economic Coordination Committee (ECC) meeting to be held today (Wednesday) over the intervention price of Rs4,224 per 40kg suggested by the National Food Security and Research (MNFSR) with a view to encourage the farmers to increase the cultivation of cotton crops.
Meanwhile, the commerce ministry has opposed the proposed intervention price of seed cotton, saying that if the domestic intervention price gets higher as compared to the international price, then the textile value chain could not be competitive, knowing the fact that due to Covid-19 situation, cut-throat competition is expected among textile producing countries to retain share in the international market.
According to the documents, the MNFSR has also suggested that the Trading Corporation of Pakistan (TCP) should also be asked to purchase 2 million cotton bales with the involvement of Pakistan Cotton Standards Institute (PCSI) to maintain quality and standards checks.
The food ministry also asked for allocation of Rs83 billion for the TCP to procure cotton at intervention price, recommended to constitute a cotton price review committee (CPCR) to review the market price and propose intervention. As per the documents, the food ministry has already approached the Finance Division for allocation of Rs2 billion in the financial year budget 2020-21, out of endowment fund of Rs6 billion committed by the prime minister on February 25, 2020, also citing allocation of Rs8.3 billion for whitefly pesticides for cotton seed under PM’s Covid-19 package.
However, the commerce ministry has built its case against the intervention price, saying cotton is a commercial crop and has competitiveness to textile value added products, especially garments and made-ups in the international market, depending on availability of cotton on international prices. It is pertinent to mention that the textile sector contributes 60 per cent in export and 40 per cent in industrial employment. The commerce ministry has also come up with a comparison of the current international cotton prices and domestic prices after the intervention is implemented, and managed to build forceful argument that the local cotton price would be much higher leaving the textile industry in the lurch.
According to the working of commerce ministry, the proposed intervention price of Ministry of Food Security for the seed cotton (phutti) is Rs4,224 per 40kg bale, which converts to lint cotton price of approximately Rs10,272 per 40kg. The working says that on the basis of international lint cotton prices as on April 22, 2020, Cotlook price would be Rs8,848 per 40 kg and moreover on NY Future Cotton for the month of July 2020, October 2020 and December 2020, would be Rs7,891 per 40kg, Rs7,872 and Rs8,073 per 40kg, respectively. In terms of US Cents, the domestic cotton would be available on US72.9 cents per pound (lbs), while international cotton on Cotlook would be US63.1 cents per lb, US56.14 cents per lb, US57.58 cents per lb, and US57.68 cents per lb. The Pakistani manufacturers would be purchasing cotton at US10 cents per lb higher price than the competitor countries would purchase.
It may be noted that the Cotlook is the price of supreme quality cotton giving high yield of 90-91 per cent of yarn while Pakistani cotton yarn yield is 84-85 per cent.
And converting international lint cotton import parity prices into seed cotton prices, this would approximately work out to be Rs3,847 per 40kg, Rs3,512 per 40kg, Rs3,505 per 40kg and Rs3,581 per 40kg for Cotlook, NY Future May 2020, July 2020, October 2020 and December 2020 respectively. Whereas, as per the MNFSR summary, the estimated cost of production for seed cotton for season 2020-21 is Rs3,475 per 40kg for Punjab and Rs3,284 per 40kg for Sindh. These prices are close to import/export parity price of international cotton, however, the MNFSR proposed intervention price is Rs4,224 per 40kg, which is higher by Rs749 per 40kg for Punjab cost of cultivation and Rs940 per 40kg for Sindh cost of cotton cultivation.