More cotton, less sugarcane

Pakistan is experiencing chronic water stress. Apart from the threat posed by India to upend the Indus Waters Treaty, we should recognise that the proper allocation and use of water within the country in agricultural production is a potential water saving measure that could relieve our water scarcity to some extent.

One of the ways to mitigate water stress is to reduce the cultivation of sugarcane, a crop that consumes disproportionate amounts of water for increasingly marginal economic returns (not to mention the diabetes epidemic it has helped to promote in the country).

Sugarcane currently occupies around three million acres of farmland in Pakistan, mostly in Punjab and Sindh. Estimates from Wapda and the International Water Management Institute (IWMI) suggest that sugarcane consumes between eight million and 12 million acre-feet (MAF) of water per year. While accounting for only about 5.0 per cent of the country’s total cropped area, sugarcane cultivation accounts for 15-20 percent of total water usage in agriculture. According to research conducted by the Pakistan Institute of Development Economics (PIDE), sugarcane uses approximately three and a half times more water per acre than cotton.

Cotton now covers around five million acres ¬¬– down from 7.3 million a decade ago – but supports 0.7 per centof GDP and underpins 58.5 per cent of the country's exports through the textile industry. Cotton's role in foreign exchange earnings and employment far outweighs that of sugarcane. That said, the reasons for cotton’s decline are not solely policy-related. Pest outbreaks (notably pink bollworm), poor seed quality, and increasing climate volatility have also undermined yields and shaken farmer confidence.

What sustains sugarcane's dominance is not its superior productivity, but a series of implicit and explicit subsidies. Chief among these is the underpricing of irrigation water. Provincial irrigation departments charge sugarcane farmers as little as Rs100 to Rs300 per acre-foot, depending on the province. In contrast, the economic value of water – based on international benchmarks and commercial rates like those charged by tankers in urban areas – is closer to Rs2,800 per acre-foot. Even using the conservative estimate of 10 MAF, the effective water subsidy to sugarcane growers is around $1.25 billion per year. A more accurate estimate likely falls in the $1.2–1.8 billion range.

PIDE's research shows that cotton delivers more than four times the income per liter of water at the farm level compared to sugarcane. When value-added is included, such as textile exports, a liter of water used for cotton produces 171 times more value than the same liter used for sugarcane.

Empirical data from research published in the Pakistan Development Review (2023) (authors: Irfan Ahmed Baig, Sami ullah, Shoaib Nasir) confirms that Pakistan enjoys a comparative advantage in cotton production, particularly in Sindh and Balochistan. The Domestic Resource Cost (DRC) measure the study uses shows how many rupees of domestic resources are used to generate one rupee of the crop’s value at international prices. A DRC less than one implies comparative advantage whereas a DRC greater than one indicates inefficiency or comparative disadvantage.

Cotton emerges as Pakistan’s most efficient major crop, especially in Sindh and Balochistan. Its DRC of 0.44 nationwide means the country uses only Rs0.44 of domestic resources to earn one rupee’s worth of international value. Sugarcane, with a DRC above 1.0, actually destroys value from a foreign exchange perspective particularly in Punjab where it uses Rs1.33 of domestic resources to produce Re1 of export-equivalent output. (Sindh is the only province where sugarcane shows mild comparative advantage (DRC = 0.80), though still less efficient than cotton with a DRC of 0.28).

The same study reveals that cotton farmers, especially in Punjab, are implicitly taxed under current policies, with an Effective Protection Coefficient (EPC) of 0.90 in Punjab and 0.97 in Sindh, while sugarcane growers are heavily protected, with an EPC as high as 1.60 in Punjab and even higher 1.66 in Sindh. (The EPC measures the crop’s private value added as a proportion of its value added at international prices with a ratio less than one indicating that the crop is being implicitly taxed whereas a ratio greater than 1 indicates that the crop is receiving protection.)

Meanwhile, our textile sector can't get enough locally grown cotton, which hurts exports and job creation. If we shifted some land use, we could cut cotton imports by up to $1.5 billion annually. Process even part of that additional cotton into yarn, cloth, or garments, and we're looking at $700 million to $1 billion in added export value.

As for farmers, while sugarcane currently appears more profitable per acre, it is also more capital- and water-intensive. With improved cotton seed technology, pest control, and extension services, the profitability gap can be narrowed. Transition support should include subsidised inputs, insurance, and buyback guarantees to reduce farmer risk.

Acknowledging sugar mills’ political influence is important. Many were established through patronage and have historically benefited from price supports and subsidies. At the same time, they have been slow to innovate and often delay payments to farmers. (At least 10

sugar mills have been fined recently for tax evasion).

Continuing to subsidise inefficient mills while the textile sector struggles to secure raw material is neither fair nor fiscally responsible. The implicit tax that 240 million Pakistanis pay on inefficient sugarcane production is a waste of the country’s resources and implies that the interests of a handful of sugar mill owners have greater priority than the welfare of the country’s citizens.

Here's what we should be doing in a phased manner: In the first two years, target Punjab's water-stressed sugarcane areas (that's 64 percent of national production) for gradual conversion to cotton-wheat rotation. Keep sugarcane in high-rainfall areas like Sindh to avoid economic shocks.

Fix the policies: Replace the flat-rate abiana water pricing (around Rs200 per acre per year) with pricing that reflects what water actually costs. Introduce metered electricity for tube wells to stop the groundwater pumping frenzy.

Let the market work: Phase out sugarcane support prices and sugar export subsidies. Let global market signals guide what farmers grow instead of taxpayer-funded distortions.

Support the transition: Invest in drought-tolerant, pest-resistant Bt cotton through public-private partnerships. Expand drip irrigation subsidies for cotton farmers to cut water use by 30-50 per cent. Help displaced sugarcane workers and convert sugar mills to ethanol production.

But there's something nobody talks about enough - the health of agricultural workers. Sugarcane harvesting happens in brutal heat, often over 40 C. Workers suffer heatstroke, chronic kidney disease, and severe dehydration. Cotton farming relies heavily on pesticides like pyrethroids and organophosphates, causing nausea, nerve damage, and sometimes death. Too many cotton workers are children from poor families, facing stunted growth and toxic exposure.

We need to act here too. A few commonsense steps could help: bring basic healthcare to fields via mobile clinics; train workers on how to safely handle fertilizers and pesticides; provide protective gear like gloves and boots; ban hazardous practices like sugarcane field burning; offer school stipends so children can attend class instead of working in fields; ensure that shaded rest areas and hydration stations are available.

A healthier rural workforce is more productive but more importantly, it’s the right thing to do. These are our fellow citizens and basic health care provision is the constitutional right of every Pakistani.

A final word of caution to policymakers: because we fail to follow up on research findings, our economy lurches from one crisis to another.

The writer is a group director at the Jang Group. He can be reached at:

iqbal.hussain@janggroup.com.pk