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Issues Faced in Cotton Marketing
Issues Faced in Cotton Marketing
Issues Faced in Cotton Marketing
PROBLEMS OF COTTON IN PAKISTAN – A CASE
STUDY OF MULTAN AND BAHAWALPUR
REGIONS
By
MUHAMMAD BASHIR KHAN
A thesis submitted in fulfillment of the requirement for the degree of
DOCTOR OF PHILOSOPHY
IN
ECONOMICS
DEPARTMENT OF ECONOMICS
BAHAUDDIN ZAKARIA UNIVERSITY
MULTAN
ACKNOWLEDGEMENT
I have worked with a greater number of people whose contribution in assorted way to
the research and the making of thesis deserved special mention. It is a pleasure to
convey my gratitude to them all in my humble acknowledgement. In the first place, I
would like to record my gratitude to Dr. Imran Sharif Chaudhry for his supervision in
an excellent and most professional manner, injunction and guidance throughout the
work. Above all and the most needed, he provided me unflinching encouragement and
support in all the ways. I am indebted to him more than he knows.
I gratefully acknowledge Dr Shah Nawaz Malik for his advice, supervision, crucial
contribution and his involvement with his originality which has triggered and
nourished my intellectual maturity that I will benefit from, for a long time to come. I
really feel extremely proud to have worked under his dynamic guidance. His brotherly
behaviour, constructive criticism, sympathetic attitude and keen interest at every step
of research and write up of the manuscript made this thesis, a dream came true.
My thanks go in particular to Dr. Hanif Akhtar for his valuable advice, supervision
and for using his precious time to read this thesis and gave his critical comments
about it. I express my sincere gratitude to him for his skillful suggestions,
philanthropic behavior, dexterous guidance, edifying cooperation, encouragement and
special prayers in Makkah Sharif and Madina Sharif.
Sincere friends are the gift of Heaven and of course have no substitute. I fervently
extend my special thanks from unfathomable depths of my heart to Mr. Muhammad
Aslam, and Mr. Zahid Khan for their support in all odd times. I was extra ordinary
fortunate to have them on my side. I have no words to express my humble obligation
to them for their contribution and unfaltering moral support. I am grateful to them in
every possible way and hope to keep up our collaboration in future.
Finally, I would like to thank every body who was important to the successful
realization of thesis, as well as expressing my apology that I could not mention
personally one by one.
CA Commission Agents
CAMI
FOB Free-on-Board
FY Financial Year
VB Village Beopari
I solemnly declare that this research work is written by me for the purpose of
submitting it to fulfill the requirements for the degree of “DOCTOR OF
PHILOSOPHY IN ECONOMICS”. All sources of information have been
acknowledged in this thesis.
Table Page
No.
Table 3.9 Seed Cotton Market Price Vs Support Price (Rs. per 40kgs) 96
Table 6.2: Cultivation Cost of Multan and Bahawalpur Region Under 162
Different Farmers Categories
Table-6.3: Cost of Production of Seed Cotton in Multan District 163
Table 6.4: Sowing Cost of Multan and Bahawalpur Region Under 164
Different Farmers Categories (Rs.)
Table 6.6: Fertilizer Cost of Multan and Bahawalpur Region Under 165
Different Farmers Categories (Rs.)
Table 6.7: Irrigation Cost of Multan and Bahawalpur Region Under 166
Different Farmers Categories (Rs.)
Table 6.9: Percent Sprays Applied on Different Dates in Study Area 168
Table 6.11: Plant Protection Cost of Multan and Bahawalpur Region 170
Under Different Farmers Categories (Rs.)
Table 6.12: Labor Cost of Multan and Bahawalpur Region Under 170
Different Farmers Categories (Rs.)
Table 6.13: Land Rent of Multan and Bahawalpur Region Under 171
Different Farmers Categories (Rs.)
Table 6.14: Total Cost of Production in Multan and Bahawalpur Region 171
Under Different Farmers Categories (Rs. Per Acre)
Table 6.15: Seed Cotton Yield in Multan and Bahawalpur Region (40 172
Kgs Per Acre).
Table 6.16: Cost-Benefit Ratio of Cotton (Per Acre Basis) in Multan 173
District
Table 6.19: Cob-Douglas Production Function Results for the Farmers 177
In District Multan
Table 6.20: Cob-Douglas Production Function Results for the Farmers 180
In District Bahawalpur.
Table 6.21: Cob-Douglas Production Function Results for the Farmers 182
in Multan and Bahawalpur Region.
Table 6.22: The Economies of Scale in the Multan and Bahawalpur 184
Region.
Table 6.23: Cobb Douglas Production Function Results Showing the 187
Response of Per Acre Cotton Revenue to Different Inputs.
Table 6.24: Economics Efficiency for the Use of Critical Inputs of 188
Cotton in Cotton Belt of Multan Region.
Table 6.25: Economics Efficiency for the Use of Critical Inputs of 189
Cotton in Cotton Belt of Bahawalpur District.
Table 6.26: Economics Efficiency for the Use of Critical Inputs of 189
Cotton in Cotton Belt of Multan and Bahawalpur Region.
Table 6.30: PAM for Cotton in the Multan and Bahawalpur Region 194
Based on Export Parity Prices.
Table 6.31: PAM for Sugarcane in Multan and Bahawalpur Region 195
Based on Export Parity Prices.
Table 6.32: PAM for Rice in Multan and Bahawalpur Region Based on 196
Export Parity Prices
Table 6.33: Summary of PAM for Cotton, Sugarcane and Rice in 196
Multan and Bahawalpur Region
Table 6.42: Most Critical Marketing Problems for all the Category of 204
the Farmers in Multan and Bahawalpur Region
Table 6.49: Factors Attracting the Marketing of Cotton at the Grower 211
Level (Percent).
Table 6.51: Logit Model Results Showing The Effect of Various 219
Factors on the Marketing of Cotton at Grower Level
Table 6.53: Factors Attracting the Marketing of Cotton at the Ginner 230
Level.
Table 6.54: Factors Detracting the Marketing of Cotton at the Ginner 231
Level
Table 6.55 Logit Model Results Showing the Effect of Various Factors 235
on the Marketing of Cotton at Ginners Level.
Table 6.58: Logit Model Results Showing the Effect of Various Factors 244
on The Marketing of Cotton at Spinners Level
Table 7.5: Augmented Dickey-Fuller Test with Trend and Intercept 260
Figure Page
No.
Fig. 6.3 Percentage Share of Different Cost Items in Multan and 162
Bahawalpur. Region.
Fig. 6.7 Overall Cotton Yield Pattern in Multan and Bahawalpur 173
Region
Fig. 7.5 Forecasting of Area and Yield Using Annual Compound 269
Growth Rate Model
TABLE OF CONTENTS
Contents Page
No.
Chapter 1 Introduction 6
2.1 Introduction 15
2.4 Conclusion 55
3.1 Introduction 57
3.2.1 Geography 58
3.2.2 Topography 59
3.5 Competition of Cotton with Other Crops for Labor and Time of 70
Management
6.8 Allocative Efficiency Of Input Use For Cotton In The Multan And 184
Bahawalpur Region
6.18 Logit Model Results Pertaining to Attractive and Detractive Factors 216
in Cotton Marketing
Bibliography 296
SUMMARY
OBJECTIVES
This study focuses on the marketing problems being faced by the stakeholders in the
chain of cotton marketing in Pakistan in general and in the study area in particular.
The major concern of the study is to assess the status of production and marketing
problems in the Pakistan. An attempt is made to probe in to the factors which attract
and detract the marketing of cotton in Multan and Bahawalpur regions based on the
survey data collected from the study area. In addition, the cost of production of all the
inputs was calculated. In order to estimate the cost of production and processing of
cotton crop in Multan and Bahawlpur region, the crop budgeting technique was used.
The cost benefit ratio and economies of scale for all the stakeholder in the chain of
cotton marketing was estimated basing upon the survey conducted in the study area.
In order to measure input use efficiency in production, comparative advantage and the
degree of government intervention, policy analysis matrix is used. To assess the status
of production and its issues, secondary data was analyzed using E-Views (a statistical
package). Basing on the compound growth rate, the forecasting for area, and yield
was carried out.
KEY FINDINGS
Basing upon the cost of production and processing of cotton crop, seed cotton yield
per acre, gross and net income in the study area, cost benefit (CB) ratio was
calculated. The results show that CB ratio for small farmers is 1.18, medium 1.19 and
for large farmers CB ratio is 1.45. When the CB ratio of farmers was compared with
ginners and spinners, the results show that it is 1.47 for ginners and 1.66 for spinners.
The results indicate that spinners are earning more profit than ginners and the farmers.
Growers are the stakeholders getting minimum profit in the channel of cotton
marketing. The analysis indicates that cotton is more economical to the large farmers
when farmers of Multan and Bahawalpur district were compared with each other on
the cost benefit ratio basis, it was observed that the farmers of District Bahawalpur are
earning more (1.40) from cotton than the farmers of Multan district (1.30). The sum
of co-efficient obtained through Cobb Doglous Production function and the cost
benefit ratios obtained through crop budgeting technique was indicative of returns to
the scale. The sum of co-efficient and CB ratio are greater than 1, for all the farmers
1
in the region, indicating that all the farmers of the region are efficient producer but
relatively the farmers of Bahawalpur region are more efficient than Multan having CB
ratio as 1.40. In order to estimate the allocative efficiency of inputs, marginal value
product (MVP) was estimated. It was concluded that there is a dire need to fulfill the
scarcity of the resources for cotton production. Among them the major inputs are the
quality seed, fertilizer (DAP and Urea) and irrigation water. If these inputs are
properly arranged, per acre production of cotton can be enhanced.
Multan and Bahawalpur regions are agriculturally advanced region where wheat,
sugarcane, rice and cotton are the major crops. Comparative advantage for different
crops was calculated by using policy analysis matrix (PAM) model. The domestic
resource cost (DRC) shows that export parity price is 0.57 and the value added per
acre inch of water is Rs. 1383.01 for cotton crop. The PAM and associated co-
efficient shows that cotton crop has comparative advantage in Multan and
Bahawalpur region as compared to rice and sugarcane crops and can very well
compete in the international market on export parity prices.
Basing on the primary data collected from the study area, marketing problems of
farmers (all categories) Village Beopari (VB)/Commission Agents (CA), Ginners and
Spinners were calculated. Rapid price fluctuation, un-due kind deduction by buyers
and no premium for clean cotton were identified as the most critical marketing
problems for the farmers of all categories in the study area. Demand for clean cotton,
mixing up of varieties, contamination of cotton, rapid price fluctuation, undue kind
deduction and lack of storage facility was identified as the most critical problems
faced by VB / CA. Similarly the most critical problems faced by the ginners are
contaminated seed cotton, non-availability of credit, non-availability of technical staff
and high labour cost. The most critical problems being faced by the spinners are no
proper grading/classification of cotton, mixing up of varieties, no standardization and
size of bales, outdated saw-gins and no proper packing of lint.
Logit Regression Model was used to identify the factors which attract and detract the
cotton marketing. Farmgate selling having 0.302 coefficient, cash payment 0.230,
easy post harvesting 0.215, prestigious-ness of cotton crop 0.122 and fulfillment of
emergency needs 0.82 coefficient were found as the attractive factors for cotton
marketing for the farmers of all categories while sugarcane marketing returns -0.124,
kind deduction by Village Beopari/Commission Agent -0.22 and lack of market
intelligence -0.025 as coefficient were found as detractive factors for cotton
2
marketing. When hypothesis were tested at ginners’ level, it was found that easy to
buy at factory gate having 0.283 coefficient, easy to sell the by-products 0.112 and
high demand of by-products 0.046 were found as the attractive factors while late
payments having -0.052 coefficient, mixing up of varieties -0.187, high risk of
burning -0.012 and high moisture content of products having -0.175 as coefficient was
found the detractive factors for cotton marketing for ginners.
The hypothesis was tested at spinners’ level also. The logit model results revealed that
high profit margins with 0.125 coefficient, low variable cost 0.052, high demand of
product 0.091 and factory gate selling 0.102 were attractive factors of cotton
marketing for spinners while low quality of yarn -0.097, high rate of mark up on
investment -0.169, daily changing demand -0.212 and urgent payment to the ginners -
0.022 coefficient was found as detractive factors of cotton marketing for spinners.
Secondary data was analyzed by using EVIEWS. By using same data, forecasting for
cotton area and yield was calculated by the year 2015. The results revealed that the
cotton area will increase to 3572 million hectares and yield to 714 kg/ha by the year
2015. The forecasting was carried out on the basis of compound growth rate.
The key policy implications for all the stakeholders in cotton marketing chain are as
under:-
a) For Growers
For transferring the cotton production and protection technologies as well as
issuing timely warning to the growers on account of weather and insect-pests
situation, the electronic and print media must be used.
Provision of agricultural credit must be ensured to safeguard the interest of small
farmers by extending credit to them on easy terms and to recover the same in time
as well as to protect them in case of any natural hazards and calamity.
The policy of fixing support price for seed cotton may be continued. This
mechanism would be required till the local textile mills and ginners adopt the
buying and selling process based on quality parameters instead of variety and
station.
3
The production of high grade and contamination free cotton is in fact inter linked
and may be achieved by implementing the cotton standardization and grading
system and prohibiting the use of known contaminants.
The growers need to be convinced through education for proper picking practices
and time to ensure the process of cleanliness right from the field and in turn avail
better prices.
Inputs such as fertilizer, pesticide and certified seed availability must be ensured
at the subsidized rates.
c) Ginners
Sub-standard ginning is one of the major causes for the resulting low quality lint.
For its improvement, research in ginning methods etc. is needed and the ginners
have to be trained in these techniques.
Cotton marketing and pricing should be based on its grade and staple instead of
varieties. The ginners should mark the bale as per its grade and staple.
In ginning factories, timely replacement of saws, instead of repair and sharpening
of its teeth is highly desirable to overcome the problem of increasing short fibers.
Cotton of different grades and staple should not be mixed as it deteriorates the
quality and thus adversely affects the market value of lint cotton.
d) Spinners
Local spinning is still in coarser group with a national average yarn count of 20s,
whereas with the available staple cotton it is possible to produce 30-40 counts
yarn. The efforts should be made in this direction with focus on competitive
advantage rather comparative advantage.
4
Export Promotion Bureau should launch campaigns to create awareness among
the exporters of value-added goods regarding stringent standards being imposed
by the importing countries.
In value-added sector, for producing quality products and, therefore, realize better
export prices, it is absolutely necessary for producers of garments, knit-wears and
other value added goods to modernize their production technologies, upgrade their
quality and design and adopt modern marketing strategies.
======================
5
CHAPTER 1
INTRODUCTION
The cotton industry and cotton related services play major role in Pakistan's economy,
contributing as much as 63.9 percent of country's exports (Pakistan Economic Survey
2005-06). It is one of the few sectors that have acted as catalysts to further industrial
growth in terms of its related industries and by products. It has developed forward
linkage in the form of textile industries, knitwear units, dying units, and garments
manufacturing units.
Cotton is a natural vegetable fiber used primarily as a raw material for cloth. Cotton's
strength, absorbency and capacity to be washed and dyed also make it adaptable to a
considerable variety of textile products. It grows best in tropical and warm subtropical
latitudes. Leading producers include USA, China, India, Pakistan, Uzbekistan and
Turkey.
Cotton produced by small trees and shrubs of a genus belonging to the mallow family.
The immature flower bud blossoms and develops into an oval boll that splits open at
maturity, revealing a mass of long white seed hairs, called lint, that covers a large
6
number of seeds. When fully mature and dry, each of these hairs is a thin flattened
tubular cell with a pronounced spiral twist and is attached to a seed. The length of
individual fibers ranges from 1.3 to 6 cm (0.5 to 2.5 inch). Shorter fibers that grow
from the seeds are called linters (SMEDA, 2005).
The earliest evidence of using cotton as a textile fiber comes from India around 3000
BC (Ali, 2007). There were excavations of cotton fabrics of comparable age in
Southern America. Cotton cultivation first spread from India to Egypt, China and the
South Pacific. The global rise in cotton production relates to invention of the saw-
tooth cotton gin by Eli Whitney in 1793 (Brown et al 1958). With this new
technology it was possible to produce more cotton fiber that stimulated new
inventions in the spinning and weaving industry. Today, cotton is grown in more than
80 countries world-wide (SMEDA, 2005).
Pakistan's economic revival is really linked to the revival of its agriculture sector,
which is approximately 25 percent of Pakistan's GDP. Within the agriculture sector
cotton crop is the basic raw material for the textile industry. Textile exports comprise
more than 60 percent of Pakistan's total exports. Thus the success or failure of cotton
crop has a direct bearing on Pakistan's annual GDP growth. There is a need to have a
comprehensive and consistent Cotton Policy, one that ensures an equitable and level
playing field for all the stakeholders across the value chain (SMEDA, 2005).
Cotton production is the inherent comparative advantage of the Textile sector and the
Policy should preserve and enhance this natural asset. The regional countries are all
trying for a bigger market share in textiles and Pakistan must maintain a competitive
edge in terms of raw material production. Amongst the competing countries like
China and India have a big cotton crop while Taiwan, Hong Kong, Korea and
Bangladesh have small cotton crop.
7
over time. The policy should provide a long-term direction for the growers and the
industry.
Pakistan is the ancient home of cultivated cotton. The history of cotton has been
traced back to Moen-Jo-Daro, a 5000 year old civilized city of the Indus Valley in
Sindh, one of the four provinces of Pakistan. The unearthed cotton relies from the city
reveal the proficiency of Indus Civilization in the use of cotton as far back as 3000
BC, (Ali , 2007). According to Afzal (1969), Alexander the Great described the cotton
plant of the Indus Valley ''as a plant from which the natives plucked the Vegetable
Wool which they spun into admirable clothing". These lines reveal that Alexander the
Great was surprised to see the cotton plant and the making of clothing. The
indigenous variety of cotton, known as Desi Cotton' was being grown in the Indus in
this valley. Genetically cotton plant is a perennial and flourished in cotton forests but
with advancement of farming technology it was adapted as a seasonal crop for higher
productivity.
The Desi cotton has rough fiber characteristics with staple length of around 20mm
and micronaire count of over 5.5 (Sattar. , 1960 and, Gulati, 1957). These features
make it suitable for a limited use of denims, tarpaulins, Khaddar cloth and other rough
fabrics spun and weaved locally in the cottage industry. American cotton was
introduced in the subcontinent by the British at the turn of the century. Initially the
genotypes were imported from the North American continent and tried in South
Western Indian regions. Dr. Mohammad Afzal, a prominent breeder of Punjab,
adapted the American genotype to Punjab by a cross breed between the Desi and
American cotton - 3F variety produced in 1917. Since then cotton cultivation in
Punjab and later Sind shifted from desi to 'American' varieties, which are primarily
crosses of new American breeds with 3F progenies.
Since American Cotton fiber characteristics are finer having staple length over 25mm
and micronaire below 4.5, it is capable of being spun at higher counts to produce finer
cloth and ideal for use in fabrics blended with man-made fibers (SMEDA, 2005).
8
Since cotton provides lint for fabrics and seed for oil, it quickly adapted a very
significant role in Pakistan’s agro-economy. During late 50's and 60's there was a
rapid expansion of cotton cultivation, the spreading progressively from central Punjab
to southern Punjab. Short-medium staple varieties like 13/26, B-557 and 4F were
grown extensively during 60's and early 70's (Afzal, 1947).
The main characteristic common to most Pakistani varieties is the fiber strength,
which is the best in the world (Sattar , 1960). If other factors like clean picking, good
ginning and elimination of contamination can be managed, local cotton is perhaps the
best in the world. Unfortunately this quality potential was never achieved largely due
to the marketing anomalies prevalent in the cotton markets that impeded the
incorporation of the desired technological perfections.
Free trade of cotton existed in the country until 1974, when the Cotton Export
Corporation (CEC) was created to control the cotton lint markets through public
sector policies and to eliminate free market forces. Prior to this, the Karachi Cotton
Exchange (KCE) functioned independently as an international marketing organization
along with the Liverpool and New York Cotton Exchanges. Local and international
trade was freely conducted.
9
With the formation of the CEC, forward trading of cotton was banned and private
sector export of lint stopped. The CEC was the only agency allowed to export cotton
at government regulated prices. From the mid-seventies onwards, export duty on
cotton was imposed ranging between 30 percent – 35 percent. This had two distinct
consequences: One, a large subsidy was provided to the local spinning industry and
secondly, the quality of ginned cotton suffered badly because of the inefficiencies of
the state run CEC (SMEDA, 2005).
The local spinning industry reacted by spinning cotton at far lower counts than the
potential of the varieties (at 12- 20 counts in place of 18 - 40 counts), and exporting
large quantities of low quality yarn. At one point in the early eighties, Pakistan held
about 80 percent of Asia's low count yarn market (Textile Vision, 2005).
Unfortunately, a large portion of the unregulated subsidy on cotton was passed on to
Japanese and Korean investors who financed local industry on the basis of 'costs plus
profit' basis. The local spinning industry, epitomized by All Pakistan Textile Mills
Association (APTMA) ignored re- investment into upstream quality production of
cotton. Varietals mixtures, poor quality ginning and contamination of jute and
polyester fibers became the hallmark of Pakistani cotton despite its excellent genetic
potential. The CEC's role in abetting poor picking and processing of cotton was
further exacerbated by APTMA’s short-term profit motives of making windfall profits
from cotton subsidies (SMEDA, 2005).
In 1987, the direct export duties on cotton exports were replaced by a bench mark
system, whereby the price available to the exporter was set by the commerce ministry
regardless of his sale price. The government withheld the amount above the
benchmark prices as export duty. Simultaneously, export of cotton by the private
sector was allowed too. The benchmark system removed any incentive for quality
improvement in cotton that the private sector could have instituted.
In the year 1991-92 cotton production rose to a peak of 12.8 mil1ions bales, up from
the 3 years moving average of around 9.5 mil1ion bales. This happened partial1y due
to the introduction of the new variety S-12 that had a very high ginning outturn
(GOT) of 41percent. The government and the industry set this as the new bench mark
for cotton production for the future and planned for 15 mil1ion bales of cotton by the
year 1995-96. S-12 was badly hit by cotton leaf curl virus (CLCV) and cotton
10
production dipped down to 7.9 mil1ion bales in 1993-94, creating a huge over
capacity in ginning and spinning units (SNEDA, 2005).
In the same year, the Task Force on Agriculture, managed to lobby for a major shift in
government policy through a decision to remove all export duties on cotton for ever.
The industry was struck by a shortfall in production and exposed to international
prices simultaneously.
For the next few years, the spinning industry had to survive on lesser profit margins
largely due to its own inefficiencies and the changing global demand for quality
cotton and yarn. So the industry has to import cotton from Central Asia, Turkey and
Australia. Although imported cotton is at time costlier than local cotton, the quality
factor makes its import viable.
The endemic problem of varietals mixture at the field level, ginning factory floor,
high trash content and contamination still remains the major constraint to the
development of a competitive cotton value chain. The captive farmers were hit by low
yields due to virus or by low prices if the yield rises. In year 1999- 2000 the crisis hit
growers with an enormity that may cripple agrarian economy in the fertile cotton belt
of the country. High international production, falling international prices and bad
quality made Pakistani cotton virtually non-saleable in the international markets,
while the crippled local industry did not had the capacity to pickup the entire crop. In
the absence of the CEC to provide subsidized purchases, the entire cotton chain
choked. The spinning industry had a relief of cheap cotton after many years.
Till the year 2005-06, the marketing of cotton is still being affected badly from
contamination, staple length problem and low yield per acre. Moreover, the decrease
in international price of cotton is also having a direct bearing on the domestic lint
price.
The above observations roughly provide an agenda for the present study. To
be more specific, the present study seeks to accomplish four broad objectives. Main
objectives of the study are;
11
1. To asses the current status of production (in general) and marketing
problems (in particular) of cotton in Pakistan.
2. To probe into the factors which attract and detract the marketing of
cotton in Pakistan.
The cotton and its axially bodies like its production and marketing are very
important issues of the Pakistan economy. As discussed in the aforesaid objectives
that cotton marketing problems and attractive and detractive factors for cotton
marketing will be identified. As it is a fact that every problem has a solution. Thus
after identifying the problems regarding cotton production and its marketing, solution
to these problems will be suggested for the improvement of cotton marketing.
12
4. To recommend some policy implications for the Government and the
policy makers in Pakistan.
Every research study formulates some suggestions and policy measures for the
policy makers. In the current study at the end some recommendations and policy
measures have been formulated so that it can help and guide the policy makers. It will
also direct the future researchers in molding their research proposals.
The thesis consists of eight chapters in all. In the start all the research has been
summarized with the title summary of the research.
Chapter 1 deals with the importance and need of the study. In this chapter
some theoretical concepts of cotton marketing in Pakistan have been described in
detail.
Chapter 4 deals with the profile of cotton growing areas in Pakistan as well as
profile of the study area. Historical cotton production has been discussed. The agro
climatic characteristics of the area are also given in this chapter. Marketing channel of
cotton along with its major players identified in study area has been described in this
chapter as well.
13
Chapter 6 describes the cost of production for producers, ginners and spinners
in the cotton belt of Multan and Bahwalpur region. Comparative advantage for cotton
and allocative efficiency for critical inputs for cotton has been estimated. Attractive
and detractive factors for cotton marketing have been identified for all the marketing
agents involved in the cotton marketing. Comparative advantage of cotton crop in the
study area was calculated by using PAM and in the same chapter some marketing
problems for different categories of the farmers in the study area have been discussed.
In order to conclude these factors some hypothesis has been tested with the help of
logit model.
Chapter 7 deals with the secondary data analysis for cotton acreage and yield
which was analyzed by using time series method. By using the same data, forecasting
for cotton area and yield was done till year 2015 basing on the compound growth rate.
14
CHAPTER 2
REVIEW OF LITERATURE
2.1 INTRODUCTION
15
(c) The parameter restriction implied by long-run market integration executes
slightly better but was still difficult to accept for three of five districts.
(d) Local seasonality was present for four districts.
These results suggested some quite significant departures from the conditions
for both short run and long run market integration. And in the short-run rice markets
in Bangladesh are not well integrated.
Nelson and Panggabean (1991) explained that policy analysis have to present
their research results to policy makers in an easy and comprehend able way. For this
purpose they suggested that two types of summary measures have been developed.
One strand focuses on private and social cost of public sector investment. While
second strand of analysis focuses on price distorting policies and popular measure for
this are NPC, EPC and DRC. According to authors, Indonesian sugar sector is a
complex one and is an ideal candidate for PAM. They used the data for 1987 and
16
separated sugar sector in three representative activities i.e. production, processing and
marketing. Indonesian economy was relatively undistorted and determination of social
prices was straightforward.
Longmire and Debord (1993) measured policy effects for Pakistan’s major
crops and livestock enterprises up to 1991-92. The measures calculated include
nominal protection co-efficient, effective protection co-efficient and producer subsidy
effects. As well domestic resource cost analysis was undertaken to measure the
comparative advantage that lie in production of different crops. The results indicated
overall that strong comparative advantage prevail in all the production of major crops
(cotton, basmati and wheat) and in most livestock enterprises. Production of sugar in
Pakistan involve strong comparative disadvantage. The policy analysis suggests that
although there have been some striking changes to overall economic policies in
Pakistan, the effects of pricing policies for agriculture have remained largely
unaltered in recent years. While pricing policies and indirect policy effects through
industry protection of other sectors provide strong dis-incentives to agriculture the
sector benefits sizably from some domestic inputs being under priced-notably
irrigation water. The net subsidy effects overall are almost neutral, although a more
efficient, productive and environmentally-sound agriculture would have emerged if
prices farmers faced for inputs and outputs were nearer to their true social costs.
17
market competitiveness, market stability, marketing integration and market efficiency.
It also seeks to highlight the determinations of income in the markets, and provide a
comparative picture of the prices and the market charges inside and outside regulated
markets.
Goletti et al. (1994) conducted research on Food grain markets in Egypt and
measured the degree of market integration for wheat, maize and rice using urban price
data for the period 1976 to 1992 and rural price data for the period 1982 to 1992.
Therefore the analysis covered both the pre-reform period before 1986, and the post
reform period after 1986. Their main objective was to document the extent of market
integration for major grains based on time series of monthly prices at the governorate
level. They derived four main conclusions (i) reforms have not destabilized food grain
prices; (ii) the degree of segmentation among food markets has been decreased during
reform period. This was the case for rural wheat and maize markets, but not for rice
markets; (iii) urban markets show a much higher degree of market segmentation. The
most segmented markets were the major centers, Cario, Alexandria, and Port Said;
and (iv) the degree of market integration, both in terms of magnitude of market
interdependence and speed of price transmission was until 1992 very limited. This has
been observed in spite of the relatively high development of infrastructure and
communication networks in Egypt. They suggested that process of market reform
did not produce major structural change in terms of improved market integration.
Silvapulle and Jayasuriya (1994) tested for spatial market integration in five
rice markets of Philippines (Manila, Ilocos Norte, Central Luzon, Central Visayas,
and Central Mindanao) from period 1975 to 1989. The main objective was to present
an approach which overcomes some of the drawback of the Ravallion mode, in order
to overcome these problems they used the Johansen’s system approach. By using this
approach they tested for a number of co integrating relationships and common trends
among the five rice market prices, and for the validity of the relationships between
these prices implied by perfect market integration. They concluded that the regional
markets were integrated, with Manila being the dominant market and Ilocos Norte and
Central Visayas prices were influenced by previous period Ilocos Norte price in the
short run. The high degree of market integration observed with the view that
Philippines rice markets were quite competitive, and provide a little justification for
18
extensive and costly government intervention designed to improve competitiveness to
enhance market efficiency.
Hudson et al. (1996) conducted research on the relationship between the spot
prices and the future prices of cotton in the southwest USA using co integration
technique. They concluded that the cash producer price and the future price were not
consistently related. The futures and cash prices were co-integrated in two years,
while not co-integrated in other two years. The in-consistency indicates that reliability
of the future price of cotton in the Southwest is questionable.
Verhesse et al. (1996) analyzed the traditional market for caraway by using
co-integration and error-correction analysis on OLS regressions, which indicated that
the caraway market provided a good mechanism for an efficient allocation resources.
A test procedure was developed to investigate whether one of these quotations drives
19
the other. It was concluded that Rotterdam was the leading market. It provided futures
markets with the information necessary for determining the optimal futures contract
form the hedger’s perspective.
Sharma and Dhindsa (1996), in their study have estimated the supply response
of cotton crops at regional level in Punjab. The overall analysis shows that area under
American cotton has increased tremendously in south-western region of Punjab, while
in other two regions, the area under it has shown significant decline during the period
under study. Such a fast increase in area under American cotton in south-western
region took place mainly due to the forces of substantial increase in price, yield and in
turn value productivity per hectare of this crop as compared to its competing crops.
The farmers in central region have not responded significantly to various price and
yield factors. It might be due to the fact that cotton American occupies very minor i.e.
0.4 percent of gross cropped area of central region and therefore does not occupy and
important place in the cropping pattern of the region. Keeping in view the relative
gross profitability of this crop, there is a good scope for expanding area under it in
central and sub-mountainous region of the state; yet this crop can replace the rice crop
very negligibly because cotton and rice lands are very much different in nature,
especially with regards to the drainage requirements.
Due to low level of value productivity and relative yield of cotton Desi, the
area under this crop declined substantially in various regions of Punjab. The farmers
in sub-mountainous and central regions have responded significantly negative to
absolute price and irrigation, while the response of the farmers towards other factors
was relatively weak and insignificant. Both these regions occupied very small percent
of total area under cotton (Desi) in the state. South-western region which occupied
almost 87 percent of the total area under cotton Desi in state responded significantly
positive to yield and relative profitability factors and significantly negative to price
and irrigation factors. Almost similar pattern was also observed for Punjab as a whole.
The significant negative impact of relative yield and relative profitability risk
factors on area under both cotton crops in various regions of Punjab showed that
variation in these factors did unfavorably affect to cotton cultivators and the farmers
in the state were risk averters. Despite the availability of fairly high yielding varieties
of cotton (Desi), the farmers in the state have not paid proper attention towards the
20
plant protection measures. As a result of it, yield level of cotton (Desi) remained very
low and crop failures are also very common, especially in sub-mountainous and
central region of the state. If the farmers take proper care at the production level and
the possibilities of export markets are fully explored, this crop has some scope to
replace rice crop at the margin in various regions of the state. Thus, the most
important requirement on the production side is the proper application of spraying
schedules. In order to motivate the farmers to put more area under cotton crops, the
government should make efforts to reduce instability in their yield and profitability
and this in turn can be done by discovering better varieties of disease resistance cotton
crops. Suitable, assured and remunerative support prices and procurement of the
produce brought in the market assured and remunerative support prices and
procurement of the produce brought in the market is very much necessary to stabilize
acreage under both of cotton crops and sustain their production at a high level in
future.
Duncan (1997) has explained his views about world food markets in 21st
century. He describes that as for as the world food outlook is concerned, the recent
upsurge in concern seems poorly base. The rate of growth needed to meet the
expected effective growth in demand is much lower that it has been for the past 40
years. Those people concerned about recent declines in growth of grain yields should
remember that the world does not yields to grow as fast as they have done in the past,
particularly for rice. It is therefore, highly likely that world prices of grains will
continue to fall in real terms, though we have to expect the occasional sharp increase
as seen in the past year. But these will not signal any long term crisis in the world
food situation. A challenge for agricultural policies and for agricultural research is to
adapt to the changing dietary patterns resulting form the rapidly increasing incomes
over much of the developing world.
21
most cases, the most appropriate management of soil, water and germ palms resources
will be achieved by internationalization of the external costs associated with their use.
The management of commodity risk has entered a new era with the global
liberalization of agricultural markets. This liberalization has strong support within
economic research which judges international and domestic efforts to stabilize prime
commodity prices to be difficult, if not impossible, to implement without subsides,
highly likely to be captured by special interests, and of unproven net social benefit.
Research is needed on the question of the social value of reducing price uncertainty
and / or price variability and under what circumstances or for which commodities it is
likely to be of benefit.
22
negotiations over groups of countries, allowing the better use of scarce technical
expertise, and improving their bargaining position. It is clearly in their interest to be
active and informed participants in general trade and financial talks, as well as in
agricultural trade negotiations.
Tariq Banuri (1998) published a paper and purpose of this document was to
explore prospects and mechanism for a transition to sustainable development in
Pakistan and the effect of international trade on such prospects. The context of the
study is a globalization world in which trade is expanding rapidly, production is
increasing for a global market, the autonomy of the state is shrinking at a time when
its obligations are increasing and there continue to be significant differences in the
capacity of different producers to respond to incentives, opportunities and constraints.
The specific case examined by the author is cotton and cotton products, which
together constitute the largest and most important sector in Pakistan with considerable
trade exposure at every stage of production.
Barret (1998) has expressed the main ideas about the measuring integration
and efficiency of international agricultural markets. He describes that the measuring
of integration should relied upon flow-based indicators of tradability and would
hereby correspond more closely with reasonable, popular understanding of the term.
Estimation of efficiency should build on price based tests for market equilibrium. In
this regard, he has pointed out that agricultural economists have an important role to
play in advancing an improved understanding of efficiency in international trading
relationships and in helping to identify where competition, trade or transport policy
can best contribute to improve national welfare and by facilitating competitive
international markets integration that brings gains from specialization. There is a
pressing need to establish whether or not the patterns observed in the sectoral and
macro level work done with in international economics indeed indicate imperfect
competition, as seems the dominant interpretation within that sub discipline today.
Give our collective strength in applied microeconomic analysis, agricultural
economists likely hold comparative advantage within the broader economics
profession in accomplishing this objective. While international economists tend to
work with sectoral or macroeconomic data and unit values, agricultural economists
commonly work at the more desegregated level of particular products and with price
23
rather than unit value data. Although this does not allow for comprehensive coverage
of trading relationships, a reasonable mass of case studies of individual products in
individual industries across various countries can contribute significantly to the
empirical literature on international markets and social efficiency, including the costs
of commerce not endogenous to a given product market. And because tariff and non-
tariff costs of international commerce are relatively high in agriculture, this issue is
perhaps most germane to our sub-discipline, providing further motivation for
agricultural economists to take the lead in this area. But since prices have no
sufficient statistics for understanding either market or social efficiency, government
agencies, industry, and academic researchers must collaborate in the collection of
systematic, comparable data on the costs of international commerce if we want to
make a real progress in this endeavor.
24
Stock-Bridge, Smith and Lohano’s (1998) research was carried out in Sindh
province, Pakistan over a four-month period between October 1996 and January 1997.
The research examined the following: -
The objectives were to investigate and describe in detail the cotton and wheat
marketing systems of the study area and to provide insights into the role of
interlocked transactions and associated institutions, in the performance of developing
country marketing and farm credit systems. In Pakistan the private sector has always
been active in service provision, and private traders have tended to dominate crop
purchase and interlocking of other services, notably input supply and credit,
particularly for resource-poor farmers. Both interlocked transactions and the observed
structure of private trade have been influenced by the effects of state intervention,
against the background of a generally adverse physical, institutional and policy
environment. In the poorer areas of Pakistan, such as rural Sindh, service provision is
also inextricably bound up with the highly unequal social and economic relations.
In Pakistan the private sector has always played a significant role in credit
provision, input distribution and output marketing. Immediately after independence
the private sector was dominant but government intervention through nationalization
of commercial banks, expansion of the formal credit supply and establishment of
state-owned corporation for input supply and output procurement steadily increased
through 1960s and 1970s, ostensibly primarily to protect producers and consumers
from exploitation by middle-men. The interaction occurred at both national and
regional level.
The exact nature of intervention and the corresponding nature of private sector
participation in service provision has varied from service to service and crop to crop,
but even where government agencies were intended to have a monopoly their
performance has tended to be so inefficient and ineffective that much activity has
remained in the hands of the private sector. For example, Kamdar reports that
25
commission agents and traders were engaged by the Sindh Seed Corporation to
procure wheat seed in Sindh because the agency lacked the ability to arrange
deliveries to procurement centers from widely scattered farms. Kamdar describes
government relations with private sector that it set out to regulate as based on
“compromise and barter”. For example, the effectiveness of measures of licensing of
traders, weights and measure, standardization of market charges, hoarding regulations
and dissemination of information were reduced by collusion between private traders
and the bureaucracy.
Fang and Beghin (1999) assessed the comparative advantage and protection of
major agricultural crops using a modified Policy Analysis Matrix. Commodities
26
covered were rice, wheat, maize, soybean, rapeseed, cotton, tobacco, sugarcane and a
subset of fruits and vegetables. They stated that consistent with the institution of the
simple Heckscher-Ohlin model, there was a comparative advantage in labour
intensive crops and a disadvantage in land-intensive crops. Specifically grain (wheat,
maize and sorghum) and oil seed crops (soybean and rapeseed) were less socially
profitable than fruits and vegetables, tobacco, sugarcane, rice and cotton. Agricultural
protection revealed systematic pattern of input subsidy and output taxation through
exchange rate over-valuation effective protection patterns showed the high protection
enjoyed by the rapeseed sector, and the effective taxation burdening tobacco and
apples. The estimates of protection suggested that input policies unnecessarily
induced deadweight loss to achieve self-sufficiency.
These types of the sensitivity analysis were also carried out by varying output
prices, domestic inflation and exchange rate valuation. The results of sensitivity
showed that the three industries strong enough at both the farm and industrial levels to
meet the challenges of likely commodity price and yield variations after devaluation
of local currency. The comparativeness and comparative advantage improved in all
cases as the result of devaluation.
27
developing countries perceptions of the performance of marketing systems and the
potential benefits of liberalization are often clouded by the extent of corruption which
tends to reinforce popular negative stereotypes of private market intermediaries. They
pointed out that available evidence favors further market liberalization, but
investigation of corruption reveals that the sequencing of reform and balance of
residual regulations by the stage must be carefully evaluated.
28
five agro ecological zones. Results revealed that compared to other sectors higher
number of crops are economically viable in each zone in small scale commodity
sector. The most efficient crop in communal sector was groundnut followed by
sunflower and cotton in all zones.
John Baffes (2000) studied the cotton sector in west and central Africa and
argued that currently Africa is undergoing a process of reforms that will have a
significant impact on its long-term growth. The individual countries are designing and
implementing these reforms. The author observes that 30 percent of cotton production
is traded internationally. The US, Uzbekistan, West and Central Africa account for
more than half of the world’s export. The major producer India, Pakistan and Turkey
do not export cotton, although they occasionally import to supply their textile
industries.
Darren Hudson (2000) observes that the Government of Pakistan utilized a tax
on the export of cotton lint from 1988 to 1995. Prior research has shown that this
policy had a significant impact on the cotton and yarn sectors in Pakistan over that
period. Pakistan eliminated the export tax in 1995 and has not reinstated it. The
elimination of this policy has had and will continue to have implications for Pakistan
and the rest of the world as Pakistan adjusts to these changes. Indications are that
cotton production and export could significantly increase, placing downward pressure
on world cotton prices. Cotton yarn production and exports are expected to decrease
as a result of higher internal prices for cotton.
29
Mohanty et al (2002) used a modified Policy Analysis Matrix (PAM)
approach to assess the competitiveness of Indian cotton. They concluded from
analysis that trade liberalization and domestic policy reforms that alter the current
levels of effective protection could significantly effect the constellation of crops
production in different regions of the country. They suggested that Indian policies
directed at maintaining the availability of cheap cotton for the handloom and textile
sectors have induced major inefficiencies in the cotton sector.
Chang and Nguyen (2002), explain that the Australian cotton industry has
become one of the fastest growing sectors of Australian Agriculture. Cotton exports,
in 1997 / 98 were 593.4 kilo tones, generating about $1.4 billion dollars in export
revenues. They have found that Australia and USA are the major suppliers to Japan,
accounting for approximately 80 percent of total cotton imports. Although USA is the
dominant supplier in Japan, but Australia has been steadily gaining market share with
improved products. The primary aims of this study were to estimate the demand for
Australia cotton in the Japanese market, relative to that for cotton from USA, and to
provide policy recommendations for improving Australian cotton’s export
performance in the Japanese market. The analysis was base on the original nonlinear
version of the AIDS model, using data from 1972 to 1998. In the process, theoretical
restrictions were also tested. We found that : (I) import market shares are affected by
total cotton imports; and (II) demand for Australian cotton is more sensitive to price
changes whereas demand for US cotton is more sensitive to income changes.
Australian and US cotton were substitutes but there was a greater tendency to switch
from Australian cotton to US cotton. Based on these results, it appears that product
quality is an important strategic issue in the Japanese market. Therefore, it can be
concluded that the Australian cotton industry may be able to improve its market
position by appropriate management and marketing strategies. These include
increasing production efficiency along the supply chain to lower costs as well as
embarking on research and promotion to improve quality and quality image.
Bukenya and Labys (2002) studied the degree of spatial price convergence in
world commodity markets for coffee, cotton, wheat, copper, tin and lead using time
series and cross-section analysis. To measure this convergence, they utilized
correlation, regression, co-integration and impulse function analysis. Their results
30
indicated that correlation coefficients themselves were not capable of detecting
convergence and that the received co-integration tests were more powerful detecting
any convergence that might have taken place. Commodity price movements were
tested using unit root tests for the levels and first difference series. In the levels series,
lead and wheat commodities were found to be stationary while the first differences
were found to be stationary for all commodities. Impulse response results showed
non-stationary in all cases and co-integration test showed a common trend in tin, lead
and wheat markets. Altogether non-stationary, lack of common trends (no co-
integration), and increasing variance movement implied the lack of convergence.
Carlos E Carpio and Octavio A. Ramirez (2002) analyzed and measure the
causes of cotton production variations in India, Pakistan and Australia. Cotton yield
and acreage models were estimated for each country using 30 to 40 years of data.
Updated estimates of the degree of responsiveness of cotton yield and planted areas to
changes in economic and climatic factors, and of the current yield and acreage trends
in these three countries was provided. An important contribution of this study is that it
empirically demonstrate that the farmer’s decision about how much land to allocate to
cotton production is not only affected by the economic returns that they expect to
obtain from cotton versus those from alternative (i.e. competing) crop, but also by
their perceived degree of uncertainty (i.e. variability) associated with the returns.
Yavapolkul et al. (2004) observed the price linkages and adjustment between
developed and developing countries in two key commodity market, long-grain rice
and medium-hard wheat during the post-Uruguay Round era using multivariate co-
integration analysis. For rice market, prices of the United States, Thailand, Vietnam
and India were chosen. Similarly for wheat market, prices of the United States,
Canada, Australia, Argentina and India were chosen. They suggested that the prices of
developed and developing countries were co-integrated, i.e., they show a stable, long-
run relationship during the post-Uruguay Round period. Results from the multivariate
co-integration analysis suggested partial market integration between developed and
developing countries in rice and wheat markets. They concluded that the developed
countries were price leaders in these two markets, and the changes in their prices have
relatively large impacts on the developing countries. The new entrants into world
markets have faced considerable price adjustment due to changes in the developed
countries’ prices.
31
Don Ethridge, et al (2006) projected the world cotton to 2015/16. The global
fibre model developed at the Cotton Economics Research Institute at Texas
technology University was used to generate 10 year projections of cotton and textile
production, mill use and trade for 24 countries/regions under specified assumptions
for macro-economics variables, weather and policies/programmes, referred to as the
baseline. Global results and results for selected major countries are shown in the
article. Results indicates a continued dominance of China in textile production and
cotton trade, rising global production of cotton and shifting cotton export market
shows with the US losing and Brazil gaining.
Since Pakistan became an independent country in 1947, very few studies were
conducted on agricultural marketing research up to 1980's. The existing literature on
agricultural marketing in Pakistan is an inadequate guide to public policy that includes
Mushtaq (1971); Qureshir (1974); Siddiqui, (1979). After 1980's only few studies
were conducted which include the works of Akhtar (1985), Ali (1985), Khushk (1999)
and Chaudhry (2004), the scope of these studies is limited and in-depth analysis has
not been carried out. Most of them deal with only descriptive accounts of some
aspects of the institutional arrangements, without analyzing such important issues as
the regional and inter-temporal nature of prices or how the development process may
have been influenced by them. Furthermore, the available research base in the
agricultural marketing has focused on major crops and fruits, while the cash crop like
cotton remained un addressed.
32
competition at the village level. This intermediary could, however, be made efficient
by creating effective competition at village level.
He also pointed out that migration of the traditional trading class from the
villages have contributed significantly to improved performance of village markets.
However, Qureshi's work and others (Farooqui(1985); Khan; (1962); Chaudhary,
(1970) and Rashid, (1970) similar to his are not without serious shortcomings. First
Qureshi used one year's cross sectional data, which are certainly not sufficient to get a
full view of the market's performance. Secondly, he limits his study to village
markets, which are only one of the many channels of markets in Pakistan. There are
town and city markets, which influence the function of lower level markets and must
therefore be studied to get a complete picture of marketing systems. Finally, he
provides no information on the size distribution of traders or their conduct-in arriving
at a price and dealing with their competitions. All of these are important factors,
which determine the level of performance of any market.
In fact, these studies have explained that fruits are traded through centralized
marketing systems. In the producing area assembly markets are functioning, these
33
markets are the main source to supply fruits to the terminal markets to fulfill the
demand of the consumption areas. More than 85percent of the fruit products are being
transported from assembly markets to the terminal markets.
None of the studies included above has tried to test hypotheses regarding the
efficiency of fruit markets in Pakistan. Generally they did not consider that the
marketing intermediaries are business firms having a valid profit motive. The gross
producer-consumer price differentiates have been regarded as the profit of marketing
intermediaries without emphasizing the cost of performing the various marketing
services. Estimation of marketing margins as indicated by the above and other similar
studies has led to some of the leading misunderstanding about marketing margins.
First it is generally believed that a small margin denotes a greater marketing
efficiency as compared to large margin. Another misconception is that the large
marketing margin reflects eliminating role of middlemen. It is very simple to see that
the size of marketing margins depends upon the number and costs of marketing
functions performed between producer and consumer rather than the number of
middlemen.
34
Frontier Province he concluded that village and wholesale markets were efficient,
with price increases at the wholesale level passed on to farmers, and performance of
the marketing system primarily dependent upon other sectors, i.e. transport,
communications and credit.
Manwani (1980), has described that cotton is the chief cash crop of Pakistan
and plays an important role in the economy of the country. Cotton provides income to
about five million people and is the main raw material for textile industry which is the
largest industrial activity accounting 48 percent of the value added of large scale
manufacturing and 27 percent of its employment.
Pakistan was the sixth largest exporter in the world but it acquired the position
of being the second largest exporter of cotton in 1979/80. The price of Pakistani
cotton was 81.75 cents per pound in March 1977 which came down to 52 cents in
December 1977. It indicates that any fluctuation in the price not only affects the
foreign exchange earnings, but also affects the cotton based economy of the country.
Cotton goes through a complex marketing system. It passes through landlords,
moneylenders, itinerant dealers and ginners purchasing directly from the growers. In
this regard, the grower has borne all the expenses which are involved in cotton
marketing. Thus the grower faces many problems in cotton marketing such as lacking
of improved transport facilities, multiplicity of the middlemen, lacking of storage and
warehousing facilities, defective weights and measures, delay in payments and
lacking of grading and standardization. These problems bring a bad reputation to the
country’s exports and results in contraction of demand in international market.
35
Akhtar (1985) describes in his research that plant protection measures for a
weather-sensitive crop like cotton can make a difference between its actual and
normal yields. Since in the cotton-growing areas of Pakistan, small variations are
observed in the use of complementary inputs like fertilizer, seeds, irrigation and
cultural practices, the timing of application and the quality and amount of pesticides
assume crucial importance in determining cotton yields. Pest attack destroyed nearly
40 percent of cotton in Pakistan, leading to a negative agriculture growth rate for the
year, import of cotton and loss of foreign- exchange earnings.
36
Ali (1985) studied the systems at the regional and farm levels in Northern
Sudan, focusing on the constraints to agricultural development, including marketing
constraints (inefficient pricing policies, shortage of storage facilities etc.). The
existing on-farm and off-farm agricultural production and marketing facilities were
analyzed, paying special attention to infrastructure, marketing systems, credit
availability, agronomic practices and limitations and labour availability and its use.
The main crops grown in the area were wheat, pulses and date palm.
Hussain and Mahmood (1988) have conducted research on leaf curl disease of
cotton. It was recorded from Multan area in 1967 on a few individual plants. Almost
the same position of the disease persisted till 1986. During 1987, its incidence
increased substantially and it spread in most of the growers fields. This disease had
already been reported from the Sudan, Nigeria, Western and Central Africa as one of
the most important disease of cotton crop.
The disease causes either upward or downward curling of the leaves. The
veins of the leaves become thick which are more pronounced on the lower surface.
These veins may become “enations” (finlike outgrowths). In young leaves, the
thickening first appears on the lower surface of small veins and gradually linking
together. This process makes the leaves curl. From the underside, affected veins
appear abnormally dark green and opaque. New leaves developed, after appearing of
the first symptoms, are usually small and much distorted by curling.
Survey conducted in third week of September and first week of October, 1987,
to record incidence of this disease in grower’s fields at Cotton Research Institute,
Multan, indicated that the incidence of the disease was very high up to 80percent in
some of the grower’s fields. All the varieties / strain were found to be susceptible to
this disease but commercial variety, NIAB-78 was least affected.
The virus is not mechanically transmitted nor carried through soil or seed. It is
transmitted by the feeding of the whitefly Bemisia Tabacci infection of a host plant,
within 6.5 hours. The experiments on the transmission of this virus among different
species of cotton through grafting and whitefly were carried out in caged plants and it
was found that this virus can be transmitted form Gossypium hirsutum to G.
raimoundii and G. arboreum.
37
Baluch (1988), has analyzed the loses of cotton output that occurred by the
attack of whitefly. He has estimated that 30 – 40 percent of the crop is reduced yearly
by insects. Generally, modern agriculture relies heavily on chemicals which are
intensely poisonous. Accidental poisoning and self poisoning have become major
problems over the last few decades. But the commercialization of new products is
vitally necessary in order to fulfill the requirements of ever increasing world
population.
Reliance on chemicals in some countries has lead to the point where the word
“Pesticides” in many instances has been used synonymously with plant protection
with consequences which are well known to all of us. However this has not always
been the case in developing countries like Pakistan where illiteracy, shortage of
trained technicians, lack of basic information and need for motivation and technical
direction frequently mediate the rational use of chemicals have in many cases resulted
in human intoxication, in effective pest control, and other undesirable side effects
including environmental population, destruction of natural enemies, flare-back of
target pests and emergence cost of these chemicals which not only require large
amount of foreign exchange but, if used incorrectly, can greatly reduce farmers net
income. Keeping all these facts in mind, it is timely appropriate for Pakistan to follow
integrated pest management techniques. Integrated pest management utilizes any
combination of techniques to control pests. These techniques are used in an integrated
approach to keep the pest population at levels below those that cause economic injury.
Integrated control depends on an adequate under standing of population dynamics of
the pest, and also of the ecology as well as the economics of the particular cropping
system.
Kushk, Lashari, Chakrani and Sharif (1989) describes that cotton varieties
grown in Pakistan can be classified into two types, upland (American and Egyptian
cross-breed) and desi (indigenous). The upland varieties are mostly long and medium
staple value and are ideal for spinning. Desi varieties have no staple value and are
used entirely for filling mattresses. The upland varieties are cultivated on more than
90 percent of the area, because they give more yield per hectare and also fetch better
prices. They have further pointed out that farmers have rapidly adopted Niab-78. This
is due to the fact that Niab-78 had higher yield potential and matures 2 weeks earlier
38
than other recommended varieties. Farmers growing wheat after cotton as the major
rotation in the cotton zone have quickly adopted this variety, in order to avoid delays
in wheat planting.
The results indicate that a sizeable share of the cotton area was planted to
varieties not recommended, including desi and mistures. Pure seed of recommended
Sindhi varieties was not available prior to sowing time. Thus the shopkeepers
purchased need from Punjab and distributed it among the farmers at sowing time. The
Sindh Seed Corporation should multiply seed of recommended varieties and make it
available in time to the farmers, including seed of Niab –78. On farm trial of Sindh
varieties must be laid out to see the performance of the varieties under farmers
conditions. There should be specific recommendation for small farmers who can not
afford to purchase improved seed and can not apply more sprays. The Extension
Department can assist in the dissemination of new varieties through demonstration on
farmers field.
The results showed that producers of wheat, basmati rice and cotton were
heavily taxed (negative PSEs) during the period under analysis. The input assistance
to farmers, the only positive transfer available to producers, has phased out by
government indicated by declining numbers of PSEs of input assistance policy. The
sectoral transfers (from agricultural producers to non agricultural consumers) in case
of wheat almost balanced each other out leaving, the taxpayers marginally losing only
39
when imports have to be affected. The extent of negative transfers to producers
becomes very small when world prices are translated into export parity rather than
import parity prices. The study concluded that over valuation of exchange rate during
the study period caused an implicit tax to producers and increases the consumer
subsidy indirectly.
They said that DRC criterion requires perfect market and economy conditions.
In the presence of product as well as market distortions, an accurate transformation of
market prices into economic prices is difficult task. The comparative advantage is
criticized due to its “static nature” as it does not take into account the dynamic factors
40
like increased capacity utilization, the economies of scale, technological changes,
changes in further prices of inputs and outputs. Therefore, an assessment of the
further comparative advantage or resource allocation cannot be made only on the
basis of existing patterns of comparative advantage. The “Specialization” suggested
by comparative advantage principle leads to mono cropping that cannot be advised for
the countries due to their need of foreign exchange earnings and risk involved with a
single crop production.
Chaudhry (1995) utilized time series data of main crops (wheat, cotton, rice
and sugarcane) for the period 1984-85 to 1992-93 and worked out the nominal
protection co-efficient for concerned crops at official and shadow exchange rate both.
He concluded that there prevailed no consistent inter-temporal trend and the NPC’s
varied randomly. With the exception of few years in case of coarse rice and sugarcane
the under pricing of agricultural commodities relative to world price level remained a
common policy feature. Further the overvalued exchange rate had been lower than
those at the official exchange rates. Like the NPCs the real prices of most of
agricultural commodities had fluctuated without any inter-temporal trend except in
case of coarse rice and seed cotton, where real prices fell more or less consistently
between 1984-85 and 1992-93. Further agricultural commodity prices as a percentage
of NPK fertilizer price witnessed a fall with the passage of time and due to this
progressive decline agricultural commodity prices in 1992-93 were only 60 percent of
those of fertilizer prices.
Dasti (1995) has analyzed the output of cotton in Pakistan in the light of cotton
production policy that was announced by the Agriculture Department in which special
emphasis was placed on good quality seed, tillage, irrigation, weeding and
fertilization. It was also decided that before large-scale use of pesticides and high
41
dosage of fertilizer is advocated to the farmers, input output ratio and financial
implications should be worked out, particularly the cost and benefit ratio. And
thereafter its use should be recommended to the farmer on a large scale. As a result
there was an increase in cotton production from 1980 –81 onwards, which remained
till 1982-83 cotton season. The per acre yield ascended from 250 Kg hectare in 1978 –
79 to 364 Kg/ hectare in 1982–83. But once again, after five years, the cotton crop
failed to achieve the production target. The total production was 2.23 million bales
during the year 1983-84 against last years’ production of 3.64 million bales. In
Punjab, during the year 1983-84, the average yield dropped from 343 Kg per hectare
to 184 per hectare, while in Sindh from 416 kg per hectare to 314 kg per hectare. Due
to failure of cotton crop, it was predicted a loss of over 30 billion in GDP. Besides, it
would have multiply negative effects on trade, industry, export and foreign exchange
earnings.
42
excess of the threshold level of 4.5-5.0 percent per annum. The authors observed that
the efficiency of resource use, a greater dependence on modern technologies and a
minimization of government intervention in the market mechanism are the essential
pillars of the high growth strategy.
43
rice. So, diversification in favour of non-rice economic activities for both uplands and
extreme lowlands is socially justified. The comparative advantage in the cultivation of
modern varieties is higher for wet season aman-rice, which is relatively low input
intensive, than for dry season boro-rice, although there as been a substantial decline in
the real rice price in the domestic and world market, the comparative advantage has
improve over the last two decades.
Tariq (2001) has examined the cotton crop and found that it has 120 to 130
days life span in many countries rather than 200 days or even more in Pakistan’s case.
He further explains that 60,000 to 80,000 plants are sown per acre but in Pakistan
50,000 plants per acre are maintained. Besides, cotton crop is attacked by various
diseases which reduce the overall production of the country. In this regard, he has
suggested a few main points for increasing the output of cotton production. Firstly,
when this crop is attacked by the insects, chemical means are not the only solution to
control them. But the varieties having multi-adversity resistance (MAR) should be use
for this purpose. Secondly, he has given the example of Egypt and Syria in this
regard.
The Egyptians have planned programme for this purpose. School children are
trained to identify insects that pick all kinds of larvae and destroy them. The Syrian
have banned the use of pesticide against whitefly and have eliminate bollworms by
improving the threshold level. For the control of bollworms, they have given the
authority to train entomologists to verify the situation in the filed and issue a specific
prescription in writing to procure pesticide from the market. In this way, they have
totally eliminated the chemical use on all kind of cotton insects. It is pointed out that
per hectare cotton yield in Syria is 1023 kg as compare to 572 kg in Pakistan. In our
44
country insecticides with new chemistry are introduced each year but with no results.
Pesticide business in Pakistan has gone up to around Rs. 14 million annually. This
huge expenditure can be saved if the Syrian methods are adopted by our growers for
the cotton crop. Thirdly, the soils are deficient in many nutrients as well as in organic
matter which needs replenishment through green maturing. The growers may be
advised and encouraged to apply green manure to their lands after 4 to 5 years. These
suggestions can be implemented with the aid of government for increasing the output
of cotton.
Ahmad Zahoor (2001) explains that Pakistan cotton is rated as the most
contaminated cotton with non-lint contents, which is resulting in price discounts in the
international market. Now government has launched a strategy to obtain clean cotton
in which the focus is to launch awareness campaign on media, organize the training
programmes for farmers, traders and ginners. Pakistan government has also banned
the use of jute and polypropylene cloth for transportation of seed-cotton.
The results showed that DRC coefficients for Pakistan vary between 0.31 and
0.41. It was further revealed that in terms of comparative advantage Sindh has edge
over Punjab due to its natural and geographic comparative advantage the SBC
analysis reinforce the results of DRC analysis about the competitiveness of Pakistan
in seed cotton production. The results showed that value of NPC ranges between 0.45
and 0.65 for both cotton production regions. The farmer of seed cotton is receiving
45
prices less than world reference for both the cotton producing provinces. The
coefficient of effective protection indicates inputs and output (seed cotton) remained
heavily taxed in both provinces throughout the study period. It was suggested that
making policies consistent with the existing pattern of our international
competitiveness could maximize the welfare gain.
Niemi (2003) studied the agricultural commodity trade between ASEAN and
European Union using co-integration and error correction models. The main objective
of their study was to build a set of dynamic, theory-based econometric models which
were able to capture both short-run and long-run effects of income and price change
in ASEAN major agricultural commodity exports to the European Union.
Econometric models were constructed for seven agricultural commodities Cassava,
Cocoa, Coconut oil, Palm oil, Pepper, Rubber and Tea exported from the Association
of Southeast Asian Nations (ASEAN) to the European Union (EU). The import
demand analysis of the study examined the response of EU’s agricultural commodity
imports to income and price changes and the length of time required for this response
to occur. The results of their study suggested that co-integration and error correction
specification were well suited for the study of agricultural trade flows, which were
typically non-stationary time series. The error correction specification was found to
provide a good representation of the data-generating process for agricultural
commodity flows from ASEAN countries to the European Union.
Khuskh and Memon (2003), describe that cotton is known as the silver fiber of
Pakistan second important crop after wheat in terms of area and value added earnings.
It brings cash return to farmers, supplies employment to thousands of workers – both
in rural and urban areas.
Cotton feeds 1035 ginners and about 5000 oil expelling units in the country,
which produce 400, 000 tons of edible oil. Cotton seed is also extensively used in
milk production. The authors have analyzed the cotton marketing system in Sind
province. Although they have not applied formal analytical methods to this analysis,
cotton marketing system in Sindh appears to be relatively competitive and efficient.
Recent liberalization has increased incentives to produce cotton and the benefits of
higher prices have on the whole been transmitted to growers interlocking transactions
46
have played an important role in this by facilitating the provision to growers of farm
input and credit.
47
Hasan (2003), describes that such marketing are synonymous with the
manufactured items, after processing, become value added and are traded at premium.
Such activities include tobacco curing, small scale oil-seed crushing, tanning industry
on cottage scale etc, besides, milk collection, wool shelling, dates curing, other fruits
and vegetables primary processing, raw sugar (Shakkar) and gur-making are some
other activities producing the non-farm products. Such small scale industries in rural
areas have explained an overview of agricultural marketing. Unlike complex and
multispectral operations in urban areas, marketing in rural area is based on the
traditional way of assembly and distribution. Bulk of the function is preformed by
“the middleman” or “the distributor”, such as a wholesaler, retailer or a broker. These
also include a multitude of traders cum peasants in “open markers”.
The author has pointed out that wider benefits can only be achieved through
an efficient marketing system, particularly in the rural markets as these are basic
contact points for small farmers to dispose off their products. The Integrated Rural
Development Programme (IRDP) had some innovative features with people
participation in decision-making, planning and implementation through the
establishment of the branches of various nation building departments at different focal
points. But these too, could not prove effective. The IRDP had the conceptual
shortcoming of ignoring the marketing aspect. Its center remained pre-occupied in the
supply of various input items.
48
marketing sometimes is problematic due to lack of proper storage and transport
facilities.
Khushik and Memon (2003) studied that the agricultural product is sold by
growers in two ways. One to sell directly to consumers round side stands and the
other is indirect marketing where growers and consumers do not meet. Direct
marketing requires a change in the focus by growers. They have to focus on
production around their market rather than producing a commodity. The underlying
concept is that there is a difference between marketing and selling. It is possible to
add value to products by direct marketing when producers assume the marketing
functions traditionally done by others. By doing this, producers become price makers
in their market, not price takers. Direct marketing of fruits and vegetables can be done
through marketing channels that are available to growers. There are many steps in
marketing of fresh fruit and vegetables, including picking, cleaning, packing,
transporting, possible broker services, wholesaling, shipping from wholesale to retail
outlet and retail sales. Typically, the price retailers’ charges for products are at least
two to three times higher than what is paid to the producer. Producers can market
large quantities of product through this alternative, but their profit margin is very
small. Due to fluctuating wholesale prices, at times producers sell their products
below break-even prices.
49
These meals are eaten not only in restaurants but also in prisons and nursing home.
This institutional market is also known as the food service market.
The smaller institutional buyers deal with the wholesalers. As with the
retailers, there is an increasing number of large institutional buyers, some of the
largest are the fast food chains. These large firms are also increasingly buying direct
from shippers rather than from wholesalers.
50
Beside, rules and regulations which are enforced from time to time, there are
two statutory Acts which presently are in operation. One is styled as the Agricultural
Produces (Grading and Marketing) Act 1937, and the other as Agricultural Produce
(Markets) Act 1939. Both these legislations were enacted in pre independence days
and were operative in the undivided India. Pakistan has adapted them. The former is
an Federal Act and relates to the grading and standardization of the agricultural
produce and the latter is a Provincial Act which provides regulation of agricultural
wholesale markets.
The author further analyses the favorable impact points of agricultural markets
as under: -
Rasool (2003) has analyzed the crisis of cotton at global level including
Pakistan. He has pointed out that China is facing one of its worst crop damage and is
expected to have crop harvest of around 27 million bales against the estimated
consumption of about 30 million bales. China would fulfill its demand by the import
51
of cotton from other countries. Similarly, Pakistan is facing the same problem. Wide
spread damage due to pest attack has decrease the output of cotton. In this regard, the
textile industry is facing a severe crisis of price flare-up in raw cotton which has risen
by 38 percent from Rs.2500 to Rs. 3400 per maund. In the face of the severity of the
crisis in the context of Pakistan, collective responsibility lies on government as well
as textile industry for their failure to spot the crisis while in making and moving fast
to hedge themselves by timely coverage from world market when prices were still in
attractive limits. Self-included arrogance on the part of the government and deeply
embedded indifference by the textile industry towards a collective stance to monitor
global situation has trapped the industry in the current crisis. As experience reveals,
most of the price increase would be absorbed once the global prices settle down and
simultaneous price enhancement demands are put forward from all textile producing
countries. Textile products would regain their better price levels prevailing till mid
90’s. This would ultimately provide natural cushion for another round of price decline
(a hallmark of free trade) in subsequent years after a temporary but desperately
needed break. Increased unit price would lead to higher export earning for the country
in terms of Dollar. Margins of trade may be squeezed in the short term, which have
been the case with growers for many years, but ultimately textile trade should recover
the lost ground as normalcy returns to world market in due course.
Khan (2003), has examined that the cotton requirements of textile industry are
growing at a fast pace. There has been large-scale balancing and modernization of the
industry apart from addition of new spindle-age in the recent past which has
considerably raised the consumption of cotton. The mill consumption of cotton has
gone up from 9.4 million bales in 1999-2000 to 11 million bales in 2002-2003. It
indicates that the mill consumption of cotton has grown at the rate of about half a
million bales per year during the last four years. The cotton requirements of the mills
are being placed at 12 million bales in the current season and around 15 million bales
after the year 2005. As against the fast growing cotton requirements, the local
production of cotton has stagnated around 10 million bales (ex-gin) during the last
four year. The growing imbalance between demand and supply of cotton has
necessitated imports which have gone up from 0.5 million bales in the year 1999-00
52
and 1.6 million bales in the year 2001-02 and 1.1 million bales in year 2002-03. The
yield per acre at around 550 lbs of lint is still very low being one-third of what it is in
countries like Australia, China and Egypt. The author has suggested that new varieties
of cotton should be introduced in the country as India has introduced Bt cotton in 37
districts and 60 percent of the average in the USA, China and Australia is said to be
under Bt cotton because it protects cotton from bollworms attacks, economizes in the
use of pesticides and considerably increases the yield per acre.
Tariq (2003) describes that Pakistan, the world’s fourth largest cotton
producer, ranks first in export of cotton and cotton based products by fetching over 60
percent foreign exchange. The cotton scientists, extension workers and growers had
followed a fair weather technology. But they do not think about the rainy season
which created risk for the cotton crop. Due to heavy rains in the country the
bollworms and other insects severely attacked this crop and reduced the output which
created crisis. The yield losses were in Punjab and Sindh. Hence the estimated output
decreased form million 10.5 bales to million 10 bales. This indicates that the adopted
measures failed to control the insects. It is further pointed out by the author that the
pesticides use rose rapidly from 665 tons in 1980 to about 70,000 tons in 2002,
valuing Rs. 10 billions. This situation is worst for the growers because it increases the
cost of production and also cotton would be imported from other countries to feed the
textile industry.
Madeeha G. Qureshi and Sarfraz Khan Qureshi (2004) reviews the farm size,
efficiency and productivity relationship. Their study is organized in four sections
53
which include the literature on past research on land markets in Pakistan and other
countries. Description of land market institutions and changes in the structure of land
markets including the pattern of ownership and the operational distribution of land
and trends in different factors of land markets. The author examines the relationship
between farm size and productivity, land rights, constraints faced by small farm, land
reforms, land fragmentation, transaction costs, the relationship between rent and land
prices.
Siddiqui Ibad (2004) studied the role of support price for various agricultural
commodities including cotton. The author observes that support price help raise the
production and safeguards the interest of the farmers against falling prices in the post-
harvest months particularly when the harvest is a bumper-one. Moreover, it helps to
stabilize inter-year and intra-year prices of the agriculture commodity. The author
further examined custom ginning and hedge trading.
Shah Nisar Ali et al (2005) studied about the area and production of sunflower
in Pakistan. The author observed that the edible oil import bill rising from Rs. 77
million in 1969-70 to Rs. 3.900 billion in 2002-03 have overburdened the economy of
the country. Only 30 percent of the total needs are met through local production while
70 percent are provided by import. Major share of the domestic production of edible
oil comes from cotton seed and canola, 67 and 19.6 percent respectively. The
remaining 13.4 percent contributed mainly by sunflower. More than 70 percent of the
potential in the field of sunflower have not been achieved so far. For this purpose the
R2 value was calculated and keeping in view the fluctuation in the time series data,
second degree equation was measured by the authors. Due to a low value of co-
efficient of determination with linear trend and variation in the data, second degree
polynomial function (parabola) was estimated which gave a higher value of
determination. With the use of second degree polynomial function the value of co-
efficient of determination increased from 50 percent to 60 percent.
54
Mustafa, K (2005) examined the performance of marketing institutions and
delineate the deficiencies inherent in the agricultural marketing system of Pakistan.
The author concludes that successful marketing strategy in Pakistan requires more
than creation of marketing institutions both in Public and Private sector. A far broader
base and positive role is however, required of the public sector than currently
followed. The development of marketing institutions with the subsistence activities of
small farmers has to be gradual and combined with assurance of the various pre-
requisites necessary for their success. Participation of the farmers is required in
establishment and use of standard weights and measures by private traders,
dissemination of information on prices prevailing in other producing and consuming
centers, and construction of storage facilities where farmers may wish to store their
produce for late sale, particularly if such storage facilities are combined with facilities
for advanced credit on a portion of the value of the produce.
Khan Alamgir and Yasin (2006) calculated the cost of cotton ginning in
Pakistan. The author observes that there are 1263 ginning factories in the country with
about 5745 gin stands, out of which 2.5 percent, 63 percent, and 33 percent and 1.5
percent gin stands have 80, 90, 100 and 120 saws respectively. The cost of ginning
was calculated basing on electric cost, depreciation of the machinery, repair and
maintenance cost of the building and machinery, cost of establishing a ginning
factory, cost of mechanical staff including unskilled and skilled labour and cost of
ministerial staff.
Ali, Mahbub (2007) observes that up to the beginning of the 20th century,
Pakistani area used to grow only Desi cotton having short and rough staple. American
Upland and Egyptian cotton was tried in nineteenth century. Since then, the new
introduction has passed through different stages of acclimatization, adaptation and
improvement in the local environment. To meet the requirement of developing
spinning industry, the American cotton with its longer staple and better spinning
quality, replaced old Desi cotton. The quality of cotton has also improved, higher
55
yield varieties were evolved and moreover, better and appropriate agronomic
practices were also introduced.
2.4 CONCLUSION
Summing up, it is concluded that cotton is the main cash crop of Pakistan and
plays an important role in the economy of the country. In our country, there are 80
percent of small growers and they face financial constraints at the time of ploughing
farms. They purchase their input from the local traders on loan at high rate of interest
or pay 10 percent to 25 percent more price. Mostly loan facilities are extended by the
local traders to them with the conditions that they would sell their produce to loonies
only. In this way, they face problems from both sides. While purchasing input from
the market, they pay more prices and when they bring their output for sale, they
receive fewer prices. Keeping in view these problems, they are unable to save from
income for future crop.
56
CHAPTER 3
PERFORMANCE OF AGRICULTURE
SECTOR IN PAKISTAN WITH SPECIAL
REFERENCE TO COTTON
3.1 INTRODUCTION
The main challenge for development efforts in Pakistan lies in the rural sector
which suffers from widespread poverty and a number of allied problems
encompassing social, economic and technological factors. The social problems arise
mainly from a pattern of skewed distribution of land ownership which makes the rural
society both rigid and iniquitous. The technological problems are the result of
traditional cultivation methods perpetuated by pressures of population on land, the
57
small size of cultivation units, and tenancy farming which block incentives for
technological progress. The economic problems stem primarily from the inability of
the agricultural sector to provide adequate opportunities for full employment and its
resulting failure to yield incomes adequate for providing a satisfactory living standard
to the rural population at large. Also, there is not enough saving capacity to enable
capital formation for raising the productivity of both land and labor to optimize their
potentials. A historical perspective of Pakistan and its economy with an overview of
its important sector i.e. agriculture will be discussed in preceding sections.
3.2.1 GEOGRAPHY
Pakistan is located in South East Asia having borders with Iran on the
southwest, Afghanistan to the west and north, China to the northeast, and India to the
east. The Arabian Sea marks Pakistan’s southern boundary. According to the United
Nations and the Pakistan government, the country has a total area of 796,095 square
kilometers. This figure, however, does not include the Pakistan-administered portions
of Jammu and Kashmir know as Azad Kashmir and the Northern Areas, with areas of
11,639 square kilometers and 72,520 square kilometers, respectively. These areas are
claimed by Pakistan, but because their possession is disputed, so these are not
included in official land area statistics. Pakistan shares border with Iran which is 909
kilometer, with Afghanistan which is 2,430 kilometer, China 523 kilometer and India
2,912 kilometer. Length of Pakistan coastline is 1,064 kilometer along the Arabian
sea (Library of Congress) (Fig. 3.1).
58
Fig. 3.1: Pakistan-Geographical Location
3.2.2 TOPOGRAPHY
Pakistan is spread among nine major ecological zones and has a diverse array
of landscapes. Its territory encompasses portions of the Himalaya, Hindu Kush, and
Karakoram mountain ranges, making it home to some of the world’s highest
mountains, including K2, which at 8,611 meters above sea level is the world’s second
highest peak (Library of Congress).
Indus is the main river having 2,749 kilometers within Pakistan and its
tributaries: the Chenab 730.6 kilometers, Ravi 680.6 kilometers, Jhelum 611.3
kilometers, and Sutlej 530.6 kilometers. (Library of Congress)
Pakistan has generally a dry climate and receives less than 250 millimeters of
rain per year, although northern and southern areas have noticeable climatic
differences. The average annual temperature is around 27°C, but temperatures vary
59
with elevation from –30°C to –10°C during the coldest months in mountainous and
northern areas of Azad Kashmir to 50°C in the warmest months in parts of Punjab,
Sindh, and the Balochistan Plateau. Mid-December to March is dry and cool; April to
June is hot, with 25 to 50 percent relative humidity; July to September is the wet
monsoon season; and October-November is the dry post-monsoon season, with hot
temperatures nationwide (Library of Congress).
60
Gross fixed investment by the private sector grew by 9.7 percent in nominal
terms and by marginal 0.9 percent in real terms. The year 2007-08 has been a
turbulent year for the world economy. A rollercoaster ride with record growth in
China and India punctuating the highs, soaring energy prices, unprecedented hikes in
food inflation and a financial markets crisis to match the Great Depression
accentuating the lows. The year saw China and India account for more than half of
world growth, but for many, the most pressing matter of the year has been the sub-
prime meltdown in the US and the ensuing financial crisis and credit crunch around
the world.
Developing and emerging economies have outperformed advanced economies
by growing at brisk pace of 7.9 percent in 2007 and projected moderation at 6.7
percent in 2008. The effects of adverse developments at global level have been felt
unevenly and countries with weaker macroeconomic fundamentals taking a bigger hit.
Commodity Producing Sector (CPS) is comprised of production sectors such
as agriculture and industry. It accounts for 46.8 percent stake in the GDP. Its less-
than-satisfactory performance has been responsible for a relatively slower economic
growth in 2007-08. The CPS registered a growth of 3.2 percent in 2007-08 as against
6.0 percent last year owing mainly to the lackluster performance of its critical
components, namely agriculture and manufacturing. While agriculture grew by 1.5
percent, the manufacturing sector posted a modest growth of 5.4 percent in 2007-08.
The share of agriculture in GDP has been falling persistently. It accounted for
24.1 percent in 2001-02 but subsequently has declined to 20.9 percent in 2007-08.
However, it still remains the single largest sector of Pakistan’s economy and an
overwhelming majority of the population depends directly or indirectly on income
streams generated by the agriculture sector. Apart from being a major source of
foreign exchange earnings, the agriculture sector also provides employment to the 44
percent of the country’s labour force.
Historically, the crops sub-sector has had the largest share of the agriculture
sector, but the lackluster performance of this sub-sector over the years has reduced its
contribution to 45 percent in 2007-08. The crop sector has enormous potential to
influence not only the performance of overall agriculture but can serve as an anchor
for food security of the country, particularly after the emergence of a food crisis on
the global front.
61
The share of livestock in agriculture has increased from 27.2 percent in 1969-
70 to 52.1 percent in the outgoing fiscal year. The contributions of fishing and
forestry have historically been low and insignificant; therefore it remained so with a
contribution of only 0.3 percent and 0.2 percent, respectively.
Agriculture performed poorly this year, growing at a meager 1.5 percent as
compared to 3.7 percent last year and against the target of 4.8 percent for the year.
Such a dismal performance can be attributed to sharp deceleration in the growth of
major crops sub-sector. Having grown at a healthy 8.3 percent last year, this sub-
sector has posted a negative growth of 3.0 percent in 2007-08. Minor crops registered
a growth of 4.9 percent as against the negative growth of 1.3 percent last year.
Major crops accounting for 34 percent of agricultural value added, witnessed a
contraction of 3.0 percent as against a positive growth of 8.3 percent in 2006-07 and a
target of 4.5 percent. Major decreases over last year’s production have been observed
in wheat (from 23.3 to 21.7 million tones), cotton (from 12.9 to 11.7 million bales).
Minor crops, accounting for 11.4 percent of value added in overall agriculture,
grew by 4.9 percent, against the negative growth of 1.3 percent last year and growth
target of 2.3 percent (GOP, Economic Survey 2007-08).
Livestock accounts for 52 percent of agriculture and 10.9 percent of GDP, its
importance can be gauged by the fact that the livelihoods of about 30-35 million
people in the rural areas depend directly or indirectly on livestock and dairy sector.
The livestock sector grew by 3.8 percent during 2007-08 as against 2.8 percent last
year. The higher growth is mostly due to an increase in livestock animals and the
poultry sub sectors.
The fisheries sector account for only 0.3 percent of GDP and witnessed a
growth of 11 percent against 0.4 percent last year. Marine fisheries registered a
growth of 11.0 percent against negative growth of 7.0 percent last year. Inland fish
segment also registered a growth of 11.1 percent as against 2.5 percent last year.
Forestry plays an important role in Pakistan’s economy in spite of its meager
share of 0.2 percent in the GDP.
The value addition in forestry sector witnessed a negative growth of 8.5
percent as against massive decline of 29.5 percent last year and much lower than the
targeted level of 3.5 percent.
The manufacturing sector has witnessed healthy growth since the turn of the
decade, growing at an average of 9.7 percent since 2002-03. The growth performance
62
in 2007-08 has remained subdued. Output from the manufacturing sector grew at a
modest 5.4 percent as compared to 8.2 percent in year 2006-07. The large scale
manufacturing (LSM) witnessed a modest growth of 4.8 percent down from 8.6
percent last year. Growth in the small scale manufacturing sub-sector moderated to
7.5 percent in 2007-08 from 8.1 percent in 2006-07.
Natural reserves of ores and minerals are a vital asset to any economy.
Pakistan has economically exploitable reserves of coal, rock salt, limestone and onyx
marble, china clay, dolomite, fire clay, gypsum, silica sand and granite, as well as
precious and semi-precious stones. The mining and quarrying sector grew by 4.9
percent in 2007-08 as against 3.1 percent in 2006-07and target of 4.5 percent.
However, the contribution of this sector towards GDP has remained low at around 2.5
percent. Within the sector, the output of crude oil and natural gas has increased by 8.5
percent and 2.4 percent, respectively. The production of coal has declined sharply by
5.9 percent.
The services sector has emerged as the main driver of economic growth
around the world and it has remained the economic powerhouse of Pakistan for some
time. The services sector has surpassed the growth target of 7.1 percent and grew by
8.2 percent in 2007-08 as against actual achievement of 7.6 percent in 2006-07. The
services sector has made a contribution of 74 percent to the GDP growth. The services
sector has been an important contributor to Pakistan’s economic growth over the past
five years growing at an average of 7.3 percent annually since 2003-04.
Finance and insurance sector displayed a stellar growth performance by
posting a growth of 17.0 percent during 2007-08 which is higher than 15 percent
growth of 2006-07 and target of 15.0 percent.
Public administration and defense posted a growth of 10.9 percent as
compared to 9.1 percent in 2006-07. Ownership of Dwellings has remained constant
at 3.5 percent for the past 5 years. However, the growth of 3.5 percent this year was
below the targeted level of 4.0 percent.
The contribution of CPS to GDP growth has declined to 26.6 percent from
42.4 percent last year. The decline in contribution was caused primarily by a
comparatively slower growth in manufacturing and major crops-led-agriculture
sectors Agriculture sector contributed only 0.3 percentage points or 5.6 percent to
GDP growth in 2007-08 as against 0.8 percentage points or 12 percent contribution in
2006-07.
63
The manufacturing sector contributed 1.0 percentage point or 17.7 percent to
GDP growth as against 1.5 percentage points or 22.2 percent in 2006-07. Industry
contributed 1.2 percentage points or 20.9 percent to this year’s real GDP growth.
Services sector which contributed 4.2 percentage points or 73.4 percent to
overall growth in 2007-08. It is encouraging to note that the contribution of wholesale
and retail trade is increasing. It has contributed 18.7 percent or 1.1 percentage points
to GDP growth in 2007-08 (GOP, Economic Survey 2007-08).
64
growth is mainly caused by crop sector which is associated with the vagaries of
mother nature, pest attacks, adulterated pesticides etc.
Agriculture performed poorly in 2007-08, growing at 1.5 percent against the
target of 4.8 percent. The poor performance of agriculture can be attributed to an
equally poor performance of major crops and forestry, registering negative growth of
3.0 percent and 8.5 percent, respectively.
Major crops, accounting for 34 percent of agriculture and 7.1 percent of GDP,
suffered on account of poor showing of wheat and cotton and less than satisfactory
performance of rice crop. Sugarcane and maize being other two major crops,
performed impressively in 2007-08.
The wheat crop was adversely affected by the shortage of irrigation water by
23.3 percent over normal supplies during Rabi and inordinate spike in prices of DAP
fertilizer. Accordingly, production of wheat declined to 21.7 million tons - from 23.3
million tons last year, thus registering a decline of 6.6 percent.
Minor crops accounting for 12 percent in agriculture value added posted a
growth of 4.9 percent against the negative growth of 1.3 percent last year. The
performance of livestock accounting for 52.2 percent of agricultural value added, was
satisfactory at 3.8 percent.
Pakistan’s agricultural output is closely linked with the supply of irrigation
water. Against the normal surface water availability at canal heads of 103.5 million-
acre feet (MAF), the overall (both for Kharif and Rabi) water availability has been
less in the range of 5.9 percent (2003-04) to 20.6 percent (2004-05). However, it
remained less by 2.5 percent in 2005-06 against the normal availability (GOP,
Economic Survey 2007-08).
Cotton is the important non-food cash crop and a significant source of foreign
exchange earnings. Cotton accounts for 7.5 percent of the value added in agriculture
and about 1.6 percent to GDP. The crop was sown on the area of 3054 thousand
hectares, 0.6 percent less than last year (3072 thousand hectares). The production is
estimated at 11.7 million bales for 2007-08, less by 9.3 percent over the 2006-07
production of 12.9 million bales. Several factors are responsible for the lower
production of cotton in 2007-08. Firstly, the cotton area sown in the Punjab Province
in this season was less by 2.5 percent as compared to 2006-07, mainly due to shifting
65
of area to sugarcane. At the same time, the plant population per acre was 15 percent
short, whereas average weight of boll was also less by about 2 percent. Secondly, the
cotton area sown in Sindh was 6 percent higher than 2006-07. The average plant
population and the weight of boll was however comparatively better than the Punjab.
Thirdly, heavy rainfall in Punjab in May 2007 caused poor germination. Fourthly,
high temperature during August and September 2007 caused more shedding of
fruiting parts /bolls. Fifthly, the Mealy Bug infestation was heavy and widespread.
Repeated sprayings by the growers for the control of Mealy Bug depressed the plant
activity resulting in lower boll weight. Sixthly, Cotton Leave Curl Virus infestation
was also comparatively more than last year. Finally, it is also apprehended that the
unapproved and generation old cottonseeds purchased by the growers from private
sources in the name of Bt cotton had adversely affected the production of this crop.
Cotton prices this season in the country remained significantly higher than last
year. The seed cotton prices during the season so far has averaged at Rs.1,422 per 40
Kgs, as against average price of Rs 1,171/- in 2006-07. In other words farmers
received, on average, 21.4 percent higher prices this year (GOP, Economic Survey
2007-08).
66
group were up by 22.4 percent; petroleum group exports registered an increase of 38
percent; exports of other manufactures and other item’s posted handsome growth of
33.2 percent and 59.5 percent, respectively. Textile manufactures, accounted for
almost 57 percent of total exports, performed poorly as it registered a decline of 2.5
percent.
Exports of food group accounting for 13.2 percent in total exports grew by
22.4 percent and contributed 26.1 percent in overall exports growth.
Export of textile manufactures, accounting for 57 percent of total exports not
only registered a negative growth of 2.5 percent but also was a drag on the overall
performance of exports.
Export of petroleum group accounting for 6 percent of total exports
contributed 18.2 percent in the overall exports growth for the year. Export of
petroleum product and Naphtha registered an impressive growth of 83 percent and 16
percent respectively.
Export of all other items accounting for over 5 percent of total exports grew by
almost 60 percent and accordingly, contributed 20.6 percent to this year’s overall
exports growth.
Pakistan's exports are highly concentrated in a few items namely, cotton,
leather, rice, synthetic textiles and sports goods. These five categories of exports
account for 72.4 percent of total exports during the first nine months of 2007-08 with
cotton manufacturers alone contributing 54.7 percent, followed by rice 7.1 percent,
leather 6.1 percent, synthetic textiles 2.9 percent and sports goods 1.6 percent (GOP,
Economic Survey 2007-08)
Like the concentration of Pakistan’s export in few items, the country’s exports
are also highly concentrated in only few countries. USA, Germany, Japan, UK, Hong
Kong, Dubai and Saudi Arabia alone account for almost one-half of Pakistan’s export.
Continuing the past trend, these seven markets remained the major destinations for
Pakistani export during the current fiscal year with a marginal diversification.
Since Pakistan’s exports are highly concentrated in few items and few
countries, a more diversified export mix both in terms of commodities and markets is
necessary. Heavy concentration of exports in few commodities and few markets can
lead to export instability. Besides the issue of export diversification, other broad-
based measures need to be undertaken to address the constraints faced by the export
sector.
67
3.4.2.2 IMPORTS
Imports during the year 2007-08 grew by 28.3 percent as compared to 2006-
07, reaching to $ 32.06 billion. After growing at an average rate of 29 percent per
annum during 2003-04, Pakistan’s import growth slowed to a moderate level of 6.9
percent in 2006-07. Import’s growth exhibited a sharp pick up in 2007-08 in the back
of extra ordinary surge in the imports of petroleum products as well as imports of
food group and raw material. Non-oil imports were up by 22.5 percent and non-oil
and non food imports surged by 18.8 percent during year 2007-08. Imports of food
group were up by 48.6 percent in the 2007-08 mainly on account of unanticipated
imports of wheat amounting $ 819 million and extra ordinary surge (70.4 percent) on
the imports of edible oil due to sky-rocketing price of palm oil in international market.
Within food group, more than 67 percent increase is attributed to imports of wheat
alone, followed by 47 percent from edible oil imports. Despite having a bumper wheat
crop of 23.3 million tons, Pakistan had to import 1.7 million tons of wheat at a time
when the prices in international market were all time high.
Imports of food group accounted for 11 percent of total imports but
contributed 16.3 percent in the overall growth of imports in the 2007-08.
Imports of machinery posted a modest increase of 6.9 percent in the year
2007-08 reaching to $4224.5 million. Within machinery group, imports of power
generating machines; construction and mining machines and other machinery showed
a substantial increase of 38.2 percent, 33.1 percent and 9.9 percent, respectively.
Imports of petroleum group witnessed an extra ordinary surge at 47 percent,
amounting to $8670 million. Within petroleum group, both product and crude posted
an increase of 53.6 percent and 40.1 percent, respectively in year 2007-08. Petroleum
group accounts for 27 percent of total imports but contributed 39 percent in the
overall import growth for the year.
The imports of consumer durable registered a decline of 1.6 percent in year
2007-08. Within consumer durables, imports of electrical machinery and appliances
grew by 14.3 percent while imports of road motor vehicles registered a decline of 8.6
percent.
Imports of raw material, accounting for 16.6 percent of total imports, grew by
38.6 percent in the year 2007-08. With exception of insecticides, which grew only by
1 percent, all other categories of raw material registered substantial increases.
68
Fertilizers, plastic material, iron, steel and scrap, amounting for 45 percent of total
raw material imports, grew respectively by 193.1 percent, 12.3 percent and 74
percent.
Unlike in the recent past, imports of telecom remained more or less at $1.9
billion which was the level in the year 2006-07, suggesting that the expansion phase
of various cellular companies appears to have saturated for the time being.
Like exports, Pakistan's imports are also highly concentrated in few items
namely, machinery, petroleum & petroleum products, chemicals, transport
equipments, edible oil, iron & steel, fertilizer and tea. These eight categories of
imports accounted for 75.5 percent of total imports during the year 2007-08. Among
these categories machinery, petroleum & petroleum products and chemicals
accounted for 57.3 percent of total imports.
The composition of Pakistan’s import shows that they had not witnessed any
significant change over the last ten –fifteen years. The share of raw material for
consumer goods had been on a rise while that for capital goods had almost remained
stagnant.
Composition of imports during the year 2007-08 shows that share of consumer
goods stood at 10 percent and capital goods declined to 31 percent from 37 percent,
while that of raw material for consumer goods increased by five percentage point
from 46 to 51, due to higher domestic production.
Like exports, Pakistan’s imports are also highly concentrated in few countries.
USA, Japan, Kuwait, Saudi Arabia, Germany, the UK and Malaysia have been the
major sources of Pakistan’s imports since last ten years. Over 40 percent of Pakistan’s
imports continue to originate from these seven countries. During year 2007-08, Saudi
Arabia, followed by USA and Japan had been the major supplier of our imports.
The international surge in oil and commodity prices have led to an increase in
the import bill of petroleum and some essential food items, thus causing deterioration
in terms of trade. The terms of trade with base year 1990-91 aggregated to 58.35
during 2007-08 as compared to 64.1 of 2006-07, showing a deterioration of 9 percent.
The deterioration in the terms of trade has also contributed to deterioration of the
current account deficit.
69
3.4.3 TRADE BALANCE
Pakistan’s merchandise trade deficit has been in the range of $ 2 billion during
2000-2003 but started deteriorating thereafter at the back of surging oil import bill;
continued strength in domestic demand, triggering consequential pick up in
investment; continuous occurring of one-off imports (sugar, wheat, oil rigs,
commercial aircraft etc.) and abrupt and sharp deceleration in export growth,
particularly in 2006-07. Merchandised trade deficit jumped from $ 2 billion in 2002-
03 to $12 billion by 2005-06 –several fold increase in just three years.
The merchandise trade deficit worsened sharply to $ 17 billion as compared to
$ 11 billion in the year 2006-07. The surge in merchandize trade deficit owes to an
outsized increase of 28.3 percent in imports that more than offset a modest export
growth 10.2 percent. On the basis of existing trend, the trade deficit is likely to touch
$ 20.5 billion or 12.3 percent of GDP during 2007-08 (GOP, Economic Survey 2007-
08).
Pakistan’s current account deficit (CAD) further widened to US$ 11.6 billion
during Jul-Apr FY08 against US$ 6.6 billion in the comparable period of 2006-07,
showing an increase of 75.6 percent. Even when compared to the size of the economy,
CAD was substantially high at 6.9 percent of GDP during 2007-08 as against 4.6
percent for the 2006-07. Services account deficit widened by 44.2 percent during Jul-
April FY08 to reach $ 5.6 billion. This deterioration was contributed by relatively
high import growth and decline in export of services. Pakistan’s total foreign
exchange reserves stood at $ 12,344 million as of end April 2008, significantly lower
than end June 2007 level of $15,646 million (GOP, Economic Survey 2007-08).
3.5 Competition of Cotton with Other Crops for Labour and Time
of Management
Cotton crop faces competition for labour and time of management from other
crops of the season. Such crops are mainly, sugarcane, rice and spring and autumn
maize crops. As is clear from Annexure-A, this competition is acute during the
months of August and September. Plant protection and fertilizer application of cotton
are on the peak during this period. On the other hand, demand of labour during these
months for rice and maize is also maximum as transplanting of rice, fertilizer
70
application, granule application and thinning of maize need to be done during the
months of August and September. If we can mechanize the competing labour
intensive operations of maize and rice, this will result in more availability of labour
for plant protection, fertilizer applications and other crucial application for cotton crop
during months of August and September. Another severe competition is during the
month of May when harvesting of spring maize and hoeing and application of
fertilizer and pesticide to the sugarcane crop give serious competition for labour
required for seed bed preparation and sowing of cotton. Wheat harvesting and
threshing during the months of April and May give another serious competition to
cotton for labour because during this period the seed bed preparation and sowing
operation of cotton are in progress.
Weed control of cotton during the months of July faces competition from other
operations of the same crop like gap filling, fertilizer application and thinning. In
central cotton zone, where wheat-cotton is the main crop rotation, competition from
wheat for labour becomes more prominent during planting time of cotton when lot of
tractor power is needed for tillage and sowing bed preparation for cotton. Cropping
pattern including all the major crops in Pakistan is explained in Annexure-B.
71
On a global basis Pakistan is the fourth largest cotton producing country of the
world after China, India and USA. Pakistan's share of total world cotton production in
2004/2005 stood at 9.47 percent (Cotton Statistical Bulletin, 2006). Pakistan is 3rd
largest consumer with 10 percent of world production, 3rd largest yarn producer with 9
percent, 2nd largest yarn exporter with 26 percent, 3rd largest cloth producer with 7
percent and 3rd largest cloth exporter with 14 percent of world cotton production
(ICAC, 2005) which is given in Table 3.1.
Production (million metric tons) 5.973 4.364 4.448 2.291 1.143 6.477
Yield (kg per hectare) 1106 477 858 705 800 713
72
Fig. 3.1 Pakistan’s Share in World Cotton Production (2006-07)
China
Others 24%
26%
Uzbekistan
5%
India
Pakistan 18%
9%
USA
18%
Percent Change in Area, production and yield of cotton from 1947 to 2004 are
given below in Table 3.3.
Table 3.3 Percent Change in Cultivated Area, Production and Yield Per
Hectare of Cotton from 1947/48 to 2003/2004 – Pakistan
Area percent Production percent Yield percent
Year (000 Ha) Change (000 bales) Change Kg / Hec Change
73
Area percent Production percent Yield percent
Year (000 Ha) Change (000 bales) Change Kg / Hec Change
74
Area percent Production percent Yield percent
Year (000 Ha) Change (000 bales) Change Kg / Hec Change
Table 3.3 explains that cultivated area from 3056000 hectors in 1947 changed to
2,989000 hectors in 2004. At the same time the production of cotton increase from 1106000
Bales in 1947, to 10,048000 bales in 2004. The yield of cotton per hectors increased from
362kg/hec in 1947 to 572kg/hec in year 2004.
75
Fig. 3.2: Cotton Area, Production & Yield in Pakistan
YIELD Kgs/ha.
10.50 700
9.00 600
7.50 500
6.00 400
4.50 300
3.00 200
1.50 100
0.00 0
19 8
19 3
19 4
19 2
19 4
20 k
20 2
20 3
20 4
20 5
6
-4
-8
-8
-9
-9
-2
-0
-0
-0
-0
-0
47
82
83
91
93
94
01
02
03
04
05
19
Punjab is the main cotton growing province of the country contributing around
81% of the total produce. Keeping in view the importance and productivity levels,
Punjab has been categorized into three cotton growing regions as described in Table
3.4.
Core areas contribute 91 percent in the total production of the Punjab and
average yield comprises of 839 kg per hectare during 2004-05. While non-core areas
contribute 8.5 percent with an average yield of 472 kg per hectare and marginal areas
contribute 0.78 percent in the total production of the province. (PCCC 2006).
76
Sindh is the second largest province in production of cotton crop. Table 3.5
and 3.6 shows area, production and yield of cotton crop for Punjab and Sindh
Province respectively.
Punjab province is the major cotton producer. As is evident from Table 3.5
during the period 1947-2005-6 production ranged from 0.735 to 10.250 million bales
from an area of 0.897 to 2.5 million hectare. During the 1960s the area under cotton
increased by 60% but production increased at a greater pace, i.e., by 162%. In 1970-
71 production was recorded 2.22 million bales on an area of 1.3 million hectares. The
yield was 290 kg/hec. Throughout the 1970s, there was little significant expansion in
the area and yield, and so production did not increase by more million bales a year. In
the mid 1980s production almost doubled as compare to 1980 crops and reach a level
of 5.701 million bales in 1985-86, and this was attributable to both area and yield
improvements. It is evident from Table 3.5 that the growth of cotton received
considerable momentum in the 1980s and this was maintained in subsequent years
and production surpassed targets. On an annual average basis, production increased at
a rate of 18.61 percent during the decades largely because of the 15 percent increase
in the yield, however, expansion in the area was recorded at 3.31 percent annually.
A boom year for cotton production in Punjab was 1991-92. A record level of
11.417 million bales was achieved on a 24.5 percent improvement in the yield and a
7.64 percent expansion in area. After this record level, production declined in 1992-93
by 28.5 and again in 1993-94 by 20.81 percent. Yield also declined by 32 percent and
14 percent in these two years respectively. The situation improved in both 1994-95
and 1995-96 as is evident from Table 3.25 in year 2004-05 the production increase
and reach the level of 11.50 million bales from an area of 2.55 million hectare. The
high share of production compared to area reflects an above average yield in the
province. There are several reasons for this. First favorable weather conditions at
sowing time and second, there was rebuilding of confidence amongst growers due to
better control over the Cotton Leaf Curl Virus (CLCV)
77
Table 3.5: Area, Production Yield/hectare in Punjab from 1947/48—2004/2005
Third improved returns during the decades because of higher market prices
were obtained. Fourth, there was shift from sugarcane and rice to cotton due to
difficulties faced by the growers in the disposal of sugarcane to factories and the sales
of paddy at government rates in previous seasons. Fifth, an increased number s of the
78
bolls per plant were obtained which resulted in better crop yield. Finally, control
measures were put into place against the attack of insects and pests.
Table 3.6 shows area, production,yield and the change in above mentioned
factors from year 1947 to 2005-06 in Sindh Province of Pakistan.
79
The area under production of cotton increased from 337000 hectares in 1947
to 423000 hectares in 1970-71. Yields also improved. During the decade 1971-72 to
1979-82, on an annual average basis, the area and yield rose at the rate of 3.73 percent
and 3.6 percent respectively. As a result production increases by 9.18 percent. During
the 1980s area, yield and production declined. However 1983-84 witnessed the
declined trend in Sindh.
During 1990s, the situation was also effected by Leaf Curl Virus attack
particularly in 1992-93 and 1994-95. However, besides these two years, the area,
yield and production all increased. On an annual average basis the area under cotton
expanded by 3.87, and yield by 11.65 percent. This increased the production to 15.32
per year. The main reason for the better results was more lucrative prices, which
induced the growers to bring more area under cotton crop, favorable climatic
conditions and the absence of any serious pest and disease attack. The detail
information is explained in the Table 3.26.
The share of Sindh in the total area contracted on a relative basis from 33
percent in 1947 to 22 percent in 2004-2005. The main reason was the shift to
sugarcane due to increase demand fro the crop and relatively higher prices. As a
result, the share of cotton production declined from 33 percent in 1947 to 22 percent
in 2004-2005. The share of production was higher relative to area till 1983-84 and,
since then, it has declined. The number of farms devoted to cotton is also limited in
Sindh as compare to Punjab. The share of other provinces is negligible. In NWFP
efforts are now being made to cultivate cotton in Dera Ismail Khan district where
more supporting infrastructure is being developed.
The per hectare yield of main crops in Pakistan has increased due to the
introduction of new technology in the agriculture sector but it is still low which
increases the cost of production and the growers do not compete at international level.
80
3.6.3 World Cotton Area, Production, Yield and Pakistan's Position
in Cotton Production
The progress made in the cotton sector growth over the past 60 years can be
summarized in Table 3.7 below:
There has been phenomenal growth in the mill consumption of cotton over the
years which is attributed to both the setting up of new mills and their improved
capacity. At the same time, the exports are facing fluctuating situation.
81
3.6.4 ACREAGE, PRODUCTION, YIELD, CONSUMPTION AND
EXPORT OF COTTON IN PAKISTAN
Table 3.8 shows the statistical history of Pakistan's cotton area, production,
yield, consumption and export since independence in 1947. At that time the
production of cotton was estimated at 1.106 million bales on an area of 1.237 million
hectares and the yield was 152 kgs per hectare. In the mid 1950, 1.221 million
hectares were planted. The yield increased after 1950 and reached to 222 kgs per
hectare by 1960. The area sown hardly changed. The effect of mechanization which
was introduced on a large scale in the 1960s, was dramatic. There was a rapid rise in
yield after 1960s, and by 1970 the yield enhanced to 292 kgs per hectare. The area
sown increased to 1.756 million hectares and production rose to 3.012 million bales.
82
1974-75 2,031 3,567 299 2,427 1358.985
1975-76 1,851 2,889 265 2,468 359.931
1976-77 1,865 2,446 223 2,108 75.659
1977-78 1,843 3,233 298 2,094 613.618
1978-79 1,891 2,662 239 2,280 303.870
1979-80 2,081 4,282 350 2,354 1520.320
1980-81 2,108 4,201 339 2,397 1944.989
1981-82 2,214 4,400 338 2,703 1398.000
1982-83 2,263 4,844 364 2,816 1506.130
1983-84 2,221 2,908 223 2,692 566.030
1984-85 2,242 5,930 450 2,702 1515.630
1985-86 2,364 7,154 514 2,976 3812.145
1986-87 2,505 7,760 527 3,935 3860.981
1987-88 2,568 8,633 572 4,282 3292.000
1988-89 2,620 8,385 544 4,914 4465.125
1989-90 2,599 8,560 560 6,385 1802.812
1990-91 2,662 9,628 615 7,547 1441.669
1991-92 2,836 12,822 769 7,461 2547.422
1992-93 2,836 9,054 543 7,801 1498.407
1993-94 2,805 8,041 487 7,834 324.965
1994-95 2,653 8,697 557 8,164 215.310
1995-96 2,997 10,575 600 8,975 1824.676
1996-97 3,149 9,374 506 8,544 208.180
1997-98 2,960 9,184 528 8,616 442.000
1998-99 2,923 8,790 511 8,518 9.000
1999-0 2,983 11,240 641 9,443 580.000
2000-01 2,928 10,732 623 9,882 710.000
2001-02 3,116 10,612 579 10,529 268.000
2002-03 2,794 10,200 621 11,440 323.000
2003-04 2,987 10,550 601 11,434 218.082
2004-05 3,136 14,265 773 12,633 516.187
2005-06 3,050 13,019 726 14,224 412.000
2006-07 3,075 13,000 719 15,182 263.000
Source: i) Agriculture Statistics of Pakistan 2005
During the mid-1970s production fell back due to a shift towards food crops
and there was a particularly low crop of 2.889 million bales on an area of 1.851
million hectares in 1975-76. Production reached to 4282000 bales in 1979-80 because
of an increase in yield i.e. 350 kgs per hectare and area increased to 2.081 million
hectares. During the 1970s the area with cotton increased at an annual average rate of
1 percent and the yield by 1.64 percent as a result total cotton production rose at
annual average rate of 3.8 percent. In 1980s, assisted by incentive schemes introduced
by the Government the production reached 4.8 million bales in 1982-83 but fell to
83
only 2.9 million in 1983-84 due to a severe pest attack. It then increased to 8.633
million bales in 1987-88 due to an increase in both area and yield. In the mid summer
of that year, floods damaged the crop and reduced average yields, and hence output
fell in the 1988-89 season. In 1989-90, output was maintained at 8.560 million bales.
Annual average increase in production and yield was 11.65 percent 2.27 percent and
9.07 percent respective (GOP, Economic Survey of 1994-95).
The data in Table 3.8 further indicates that in 1991-92, 12.8 million bales were
produced with yield of 769 kg/hectare. However production declined to 9.1 million
bales in 1992-93 and further to 8 million bales in 1993-94 as a result of heavy rains
and floods in Sindh and Punjab which caused a decline in both area and yield
(especially in Multan and Vehari districts). The higher than usual humidity caused an
out burst of leaf curl virus. This situation cast a shadow over the performance of the
agricultural sector as a whole which then adversely affected the national economy.
3500
3000
2500
000 hactares
2000
Area
1500
1000
500
0
19 8
19 6
19 6
19 6
19 2
19 4
19 6
19 8
19 0
19 2
19 4
19 6
19 8
20 0
20 2
20 4
6
-4
-5
-6
-7
-8
-8
-8
-8
-9
-9
-9
-9
-9
-0
-0
-0
-0
47
55
65
75
81
83
85
87
89
91
93
95
97
99
01
03
05
19
Years
However, this setback was reversed and corrective steps enabled farmers to
improve production. In 1994-95, 8.7 million bales were produced. The production in
1995-96 was 10.6 million bales but again declined in 1996- 97 by 12 percent to a
level of 9.0 millions bales compared to previous year. The reason, as reported by the
Provincial Agricultural Department, is a 19 percent decrease in the yield which is
84
lowest over the last ten years due to higher pest infestation particularly of white fly
spread during the season as the weather conditions were highly favorable (APCOM ,
1997-98). During the 90's decade, in-spite of achieving the highest level of production
and yield performance, the cotton crop has faced setbacks due to CLCV and heavy
rain and floods. During the decade, on an annual average basis, production increased
by 1.11 percent and the area by 1.08 percent but the yield increased by 0.28 percent.
This indicates a miserable progress of cotton in Pakistan. It is further indicated from
the table 3.8 that output as well as yield per acre of cotton improved during the period
2000/2001 to 2007/2008.
14000
12000
10000
000 bales
8000
Production
6000
4000
2000
0
1947-48
1955-56
1965-66
1975-76
1981-82
1983-84
1985-86
1987-88
1989-90
1991-92
1993-94
1995-96
1997-98
1999-00
2001-02
2003-04
2005-06
Years
Table 3.8 explains consumption and export of cotton from 1947 to 2007-08. In
year 1947, the consumption was 0.075 million bales and export was 1.17 million
bales. In 1950, the consumption increase to 0.15 million bales and exports to 1.3
85
million bales. The effect of mechanization which was introduced on a large scale in
1960s was dramatic. There was a rapid increase in consumption in 1960s i.e. 1.402
million bales and exports expand to 0.247 million bales and in 1970, it reached to 2.42
million bales for consumption and export further expanded to 0.599 million bales.
16000
14000
Consumption (000 bales)
12000
10000
8000
6000
4000
2000
0
1947-48
1950-51
1953-54
1956-57
1959-60
1962-63
1965-66
1968-69
1971-72
1974-75
1977-78
1980-81
1983-84
1986-87
1989-90
1992-93
1995-96
1998-99
2001-2002
2004-05
During mid 1970s, consumption and exports fell back to 2.108 million bales
and 75.659 million bales respectively due to the shift towards food crops but in 1980s,
it again increased to 2.397 million bales and 1944.989 million bales for consumption
and exports respectively. It was mainly due to increase in the yield of cotton.
In year 1990, the cotton consumption was 7.547 million bales while export
was 1.442 million bales and it increased to 8.975 million bales and 1.825 million
bales in the year 1995-96 respectively but decreased in year 1996-97 mainly due to 19
percent decrease in yield as reported by Provincial Agriculture Department.
86
Fig. 3.6 Pakistan cotton exports trend.
5,000,000
4,500,000
4,000,000
Exports (bales) 3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
1947-48
1949-50
1951-52
1953-54
1955-56
1957-58
1959-60
1961-62
1963-64
1965-66
1967-68
1969-70
1971-72
1973-74
1975-76
1977-78
1979-80
1981-82
1983-84
1985-86
1987-88
1989-90
1991-92
1993-94
1995-96
1997-98
1999-00
2001-02
2005-06
2003-04
In year 2005-06, the export of cotton was 0.412 million bales while
consumption was 14.224 million bales. It was observed that the consumption and
export has a direct link with the production of cotton. Production increases the
consumption also increases and vice-versa. A comparison of consumption with
production of cotton is explained in Fig. 3.8 from the year 1947 to 2006.
Production Consumption
16,000
14,000
12,000
(000 bales)
10,000
8,000
6,000
4,000
2,000
0
1947-48
1949-50
1951-52
1953-54
1955-56
1957-58
1959-60
1961-62
1963-64
1965-66
1967-68
1969-70
1971-72
1973-74
1975-76
1977-78
1979-80
1981-82
1983-84
1985-86
1987-88
1989-90
1991-92
1993-94
1995-96
1997-98
1999-00
2001-02
2005-06
2003-04
87
3.6.6 PROBLEMS OF COTTON MARKETING IN PAKISTAN
Marketing of cotton primarily depends upon its fibre. Cotton fibre is one of the
largest known single cell. It originates from the epidermises of the seed coat at about
the time the flower opens. There are differences in fibre qualities from seed to seed.
The properties of the fiber depend upon the followings:
i) Staple length:
The staple length is one of the most important fibre property to the end-user,
the spinner. It plays a vital role in determining the commercial value and use of lint
cotton. Based upon its measurement in terms of inches, staple length in the country as
at present is classified as per table below:
88
Category Measurement Domestic Production (%)
Short Under 13/16” -
Medium 13/16” to 1” 11.28
Medium Long 1-1/32” to 1-3/32” 10.25
Long 1-1/8 to 1-5/16” 78.47
Extra Long Above 1-5/16” -
Total 100.00
Fineness of lint is associated with wall thickness and perimeter of the fibre.
Various direct and indirect methods are in use. The direct method directly provides
the weight of fibre per unit length. These may be the most reliable but is very time
taking. The instrument which is most widely used at present is the ‘micronaire’. The
primary purpose of the instrument is to measure the fineness of cotton fibres, but it
may also give an idea of maturity because of its relationship with the fineness (weight
per inch) of fibre. The instrument is based on relationship of air permeability of a
sample to the surface area of fibres (Merrill, et al. 1949). The readings could denote
weight per inch of the fibres within a narrow range and the grading is generally as
under (Sattar, 1960, Christidis, et al. 1955).
Microniare Class
Below 3.0 Very fine
3.0 to 3.9 Fine
4.0 to 4.9 Average
5.0 to 5.0 Slightly coarse
6.0 and above Coarse
It was found that 68% of the world cottons had values 4.4 to 5.1 with an
average of 4.86.
The fineness of all Pakistani cotton is distributed over a wide range of
variation, varying with degree of maturity. Desi cottons, however, are very mature
89
and micronaire reading do not seem to very much with whatever little variation is
there in maturity (Ali , 2007).
Maturity of fibre
The maturity of cotton fibre is adjudged by the thickness of the cell wall in
relation to the width of the fibers (Gulati, 1957). Swelling of the fibres with 18
percent NaOH orientates them according to the thickness of the wall in relation to the
lumen. When examined under the microscope, these treated fibres can be classified as
mature (straight), half mature and immature (convoluted) fibres. The classification is
as follows.
Fibre strength
The strength of fibre has been measured in terms of breacking load, breaking
length, tensile strength, tenacity and toughness. The latest most used instrument is the
Pressley Strength Tester which gives an index for strength in pounds per square inch
and is measured from a small tuft (Ali , 2007).
90
Strength Classification Strength Classification
‘000’ lbs/sq .inch ‘000’ lbs/sq .inch
93 or above Superior 96 and above Very strong
87 to 92 Very strong 86 – 95 Strong
81 to 86 Strong 76 – 85 Average
75 to 80 Average 66 – 75 Fair
70 to 74 Fair 65 and below Weak
Below 70 Weak
It was found that 92 of the cottons fell between 85 and 92 thousand lbs. p.s.i.
in fibre strength. Cotton with strength more than 93,000 lbs. p.s.i. are either long or
extra long cottons, mostly of barbadense type (Ali Mahboub, 2007).
Strength of fibre is also greatly influenced by environment created by
agronomic and soil moisture conditions and temperature during development. Data of
flowering and date of picking have a marked influence on this attribute depending
upon the temperature and moisture conditions under which the bolls mature (Ali,et al
1968 and Christidis et al, 1955).
Uniformity ratio
Uniformity ratio (U.R.) is worked out from the ratio of mean length and Upper
Half Mean Length given by the fibrograph. It is expressed in percentage and is
classified as follows (Ali, 2007).
Besides length, strength, fineness and maturity, there are other quality
attributes of cotton fibre such as fibre friction, wax content, slipperiness, etc. but these
are not at present used in evaluating the cotton in the trade.
91
The crash of cotton prices was termed as 'the failure of free market
mechanisms' by the growers and renewed demands for re-establishment of public
sector interventions. Mistrust between growers and the industry (mainly the spinners)
reached new heights, putting the Government in a tight spot whereby it had no option
but to choose between the survivals of the growers versus the survival of the spinners.
In fact it is not the failure of a market mechanism but the absence of a real market
mechanism that creates volatility in the system.
a. Cotton prices are linked to supply alone with no regard for quality and
international linkage. Hence the level of production determines the price of
cotton. Fluctuations in production (which are natural) create violent price
fluctuations to the detriment of either the growers or the industry.
b. Falling international prices and poor quality in domestic cottons makes exports
non-competitive. The local industry is geared for low quality cotton and
cannot sustain quality premiums.
c. Cotton arrivals are concentrated in three months but consumption is all year
round. The absence of forward trading and hedge markets adds to the volatility
of prices, and makes markets susceptible to manipulation in the hands of those
who have access to liquidity.
d. Middle markets are virtually non-existent. Either the ginners or the spinners
have to carry stocks, distracting their cash flows from their main line of
business and increasing their inventory costs.
e. The majority of growers are small and cannot afford to market their cotton lint
and seed separately after contract ginning. Ginners have to operate as
92
processors and traders concurrently, giving them a manipulative advantage on
the one hand and a handicap of risk on the other hand, especially in the
absence of a hedge market.
g. Ginners have a limited capacity to hold cotton - 1.5 bales at the most at one
time. Arrivals exceed uptake during the months of November to January by at
least one million bales per month. Financing becomes a limiting factor in their
operations. Price fluctuations, especially downward shifts, further reduce their
liquidity and holding capacity. Therefore, there is a need for either a public
sector agency to carry stocks or private sector warehousing companies.
So, this research study analyses the marketing problems of cotton growers and
finds out the main reasons and suggests the solutions, so that they may be able to get
faire price in the market. This will bring improvement in their living conditions.
93
Support price policy has assured the grower of guaranteed prices even in
depressed market conditions and falling international prices. Pakistan grower received
fair price of his produce during 2004-2005 season despite increased production of
cotton of about 15 million bales which was the highest in the history of Pakistan.
Pakistan being an agricultural developing country has to produce more cotton
to earn more foreign exchange. With necessary changes in the structure of the cotton
economy, and Government assurance of support price to the cotton growers,
production of cotton in 2004-2005 seasons exceeded the target of 10.72 million bales.
The actual production of cotton during 2004-05 was close to 15 million bales of 170
kgs (Akhtar, 2005).
The government has made a suitable enhancement in seed cotton prices to
Rs.975/per 40 kgs. for 2005-2006 crop to enable the grower to meet the increasing
cost of cotton production. The government in its cotton policy has inducted Trading
Corporation of Pakistan in implementing the price support policy of the Government
with responsibility of price stabilization and with the provision for free import and
export of cotton to the private sectors.
The rising cost of production in developing countries like Pakistan is
hampering production efforts, mainly because of increasing import prices of farm
inputs which has a direct impact on yields. The per acre yield in Pakistan is 781 kgs.
per hectare while in other major cotton producing countries, it is much higher. Thus,
there is immense scope for increasing cotton production in Pakistan by improving its
cotton yield.
The prime need of cotton producing/developing countries is to achieve stable
conditions in the cotton trade by avoiding excessive price fluctuations and assuring
price level which would be remunerative and just to the producer, equitable to the
consumer, and sustain the real income of individual developing countries through
increased export earnings.
With increasing consumption of more than 14 million bales of local size
cotton due to rapid expansion and Balancing, Modernization and Restructuring
(BMR) of the textile industry in Pakistan, there is need for quantitative and qualitative
improvement in the production of cotton. The Corporation besides its price
stabilization role also exercises a check on quality and has made tremendous efforts in
improving the standard of ginning and production of contamination-free clean cotton.
94
Pakistan cotton occupies a special place in short to medium long staple
groups. Due to technological advancement and changing trade patterns, new varieties
are replacing the old ones and Pakistan can now offer a wide range of cotton from
short to long staple in order to meet the demand of more foreign /local buyers and
spinners (Akhtar, 2005).
The main task of the APCom is to ensure the involvement, coordination and
cooperation of various concerned agencies like local markets committee, scattered in
many of the federal ministeries, provincial departments, autonomous and semi-
autonomous organizations in the government and private sector and even with the
growers who are the key players in the game.
The setting of support price of the farm produce by the government to achieve
its desired objectives can only be realized and accomplished if the support price
programme is efficiently and effectively implemented. The main concept of the
support price is to safeguard the interest of the growers particularly in a bumper crop
when the prices in the post harvest months tend to fall below the government fixed
prices. However, in a poor crop year the free market prices often tend to remain
95
higher than the support prices. In this scenario, the farmers are free to sell their
produce to anyone and any where, where they preferred to do so.
Table 3.9 and Fig. 3.8 shows the comparison of support prices with the
average market prices prevailed in the market and announced by the market
committee.
Table 3.9 Seed Cotton Market Price vs Support Price (Rs. per 40 kg)
Year Market Price Support Price
1960-61 42.33 -
1961-62 31.67 -
1962-63 31.46 -
1963-64 34.35 -
1964-65 39.71 -
1965-66 39.99 -
1966-67 N.A -
1967-68 N.A -
1968-69 36.6 -
1969-70 N.A -
1970-71 56.17 -
1971-72 49.06 -
1972-73 59.68 -
1973-74 84.23 -
1974-75 87.65 -
1975-76 101.01 144.68
1976-77 128.62 159.68
1977-78 141.48 159.68
1978-79 143.62 159.68
1979-80 158.70 171.00
1980-81 182.46 171.00
1981-82 182.25 178.00
1982-83 189.43 183.00
1983-84 286.86 186.00
1984-85 208.00 189.00
1985-86 201.33 193.00
1986-87 212.00 193.00
1987-88 231.50 193.00
1988-89 244.33 196.00
1989-90 282.83 211.00
1990-91 330.20 245.00
1991-92 313.83 280.00
1992-93 389.20 300.00
1993-94 540.67 315.00
1994-95 831.60 400.00
1995-96 760.40 400.00
1996-97 848.00 500.00
96
Year Market Price Support Price
1997-98 840.50 500.00
1998-99 941.67 825.00
1999-2k 657.50 725.00
2000-01 873.13 725.00
2001-02 758.86 780.00
2002-03 954.80 800.00
2003-04 1328.00 850.00
2004-05 926.67 925.00
2005-06 1084.67 975.00
2006-07 1159.20 1025.00
Source: Agriculture Statistics of Pakistan 2006- 07.
1200
1000
800
600
400
200
0
1960-61*
1962-63*
1964-65*
1966-67*
1968-69*
1970-71*
1972-73*
1974-75*
1976-77*
1978-79*
1980-81*
1982-83*
1984-85*
1986-87
1988-89
1990-91
1992-93
1994-95
1996-97
1998-99
2000-01
2002-03
2004-05
2006-07
As stated earlier, APCom was established in 1981. In year 1981 to 1983, the
market price and support price almost remained the same. From 1983 to 1984, the
market prices of cotton started showing increase over the support price announced by
the government and on an average it reached the level of Rs. 540.67, while the
support price was Rs.315 in year 1993-94. Year 2003-04 experienced that Rs.850
support price could not really compete with the shooting up price of cotton which was
Rs.1328. So the trend shows that the market price remained higher as compared to the
support price announced by the government.
Despite an improvement in the cotton crop, the current per hectare yield of
cotton in Pakistan is, however, still below the levels being obtained in a number of
97
countries in the world as depicted in Table 3.10 and Fig. 3.9 below. China is having
the highest yield/hec. In year 2004-05 China’s yield was 1111 kg/hec.
India is the lowest of five countries tabulated but it should be noted that
India’s 60% growing area is rain-fed (SMEDA-2005).
1400
1200
1000
Yield (Kg/ha)
800
600
400
200
0
6
5
-9
-9
-9
-9
-0
-0
-0
-0
-0
-0
95
96
97
98
99
00
01
02
03
04
19
19
19
19
19
20
20
20
20
20
98
attributed to the ravages of cotton leaf curl virus in the absence of resistance varieties
as well as the improper crop and pest management practices still being followed by a
large number of growers.
Pakistan has the potential to increase the area under cultivation in NWFP and
Baluchistan specially. The total area comes to 450,000 acres. This increased area can
produce more than 1.3 million bales at very conservative average per acre yield of 13
maunds per acre. However some areas still need more canal water. Sibi Division
would need water from the extension of Pat Feeder Canal, which is yet to be
completed.
99
3.8 CONCLUSION
Few people would have accepted that Pakistan would be able to feed its
growing population which increased from around 34 million in 1947 to 156 million in
2006. Not only has this been achieved, but rice has been exported nearly every year,
and even wheat occasionally. Pakistan has diverse agro-climatic conditions, good
natural resource base (land and water) and large network of irrigation system suitable
for diversified and intensive agriculture production system. Agriculture sector,
comprising mainly of crops and livestock sub-sectors in almost equal proportions,
provides livelihood for two-thirds of country’s population living in rural areas,
contributes 22 percent to GDP, 60 percent to exports and 45 percent to employment of
the labour force. This is evident from the Annexure-C, which shows principal exports
of Pakistan which are mainly agro-based.
100
CHAPTER 4
4.1 INTRODUCTION
101
National affairs and induces in Punjab a keen awareness of the problems of the
Pakistan's other important provinces and territories.
102
Fig. 4.1: Map of Punjab Province
K
SG
BH
JG
FSD
LYH
TTS
OK
KW SWL
MZ PKP
Multan
DGK VR
BW
L
RJP
Bahawalpur
RYK
Punjab is the main cotton growing province of the country contributing around
81% of the total produce. Keeping in view the importance and productivity levels,
Punjab has been categorized into three cotton growing regions as described in Table
3.4 in Chapter 3.
Punjab province is mainly a fertile region along the river valleys, while deserts
are also located near the border with India, which are the Thar and Cholistan deserts.
103
The Indus River and its many tributaries traverse the Punjab from north to south. The
landscape is amongst the most heavily irrigated on earth and canals can be found
throughout the province. The foothills of the Himalayas are found in the extreme
north as well. (Wikipedia Encyclopedia).
Punjab’s population was 86,084,000 in year 2005 and is home to over half the
population of Pakistan (Wikipedia Encyclopedia). The major language spoken in the
Punjab is Punjabi and Punjabis comprise the largest ethnic group (and overlap into
neighbouring India). Punjabis themselves are a heterogeneous group comprising
different tribes and communities.
Due to its strategic location in the Asian sub-continent, wave after wave of
migrants poured into the area and settled on its fertile lands and today, although
originally belonging to the Aryan stock, there has been some settlements of Iranians,
Central Asians, and Afghans who have come individually or in groups. This
admixture has further diversified Pakistani Panjabi's from Panjabi's across the border
in India.
Southwest monsoon is anticipated to reach Punjab by May, but since the early
1970s the weather pattern has been irregular. The spring monsoon has either skipped
over the area or has caused it to rain so hard that floods have resulted. June and July
are oppressively hot. Heat records were broken in Multan in June 1993, when the
mercury was reported to have risen to 54°C. In August the oppressive heat is
punctuated by the rainy season, referred to as barsat, which brings relief in its wake.
The hardest part of the summer is then over, but cooler weather does not come until
late October (Wikipedia Encyclopedia).
104
Punjab experiences dry climate but extensive irrigation makes it a rich
agricultural region. Its canal-irrigation system established by the British is the largest
in the world. Wheat and cotton are the largest crops. Other crops include rice,
sugarcane, millet, corn, oilseeds, pulses, fruits, and vegetables. Livestock and poultry
production are also important.
Rice and Cotton are important crops. They are the cash crops that contribute
substantially to the national exchequer. Attaining self-sufficiency in agriculture has
shifted the focus of the strategies towards small and medium farming, stress on barani
areas, farms-to-market roads, electrification for tube-wells and control of water
logging and salinity.
The literacy rate has increased greatly since independence. In 2003, over 53%
of the population of the province was estimated to be literate by the Labour Force
Survey. Table 4.1 shows the education level of Punjab estimated by the Government
of Pakistan in 1998.
Enrolment
Qualification Urban Rural Total
Ratio(%)
— 23,019,025 50,602,265 73,621,290 —
Below Primary 3,356,173 11,598,039 14,954,212 100.00
Primary 6,205,929 18,039,707 24,245,636 79.68
Middle 5,140,148 10,818,764 15,958,912 46.75
Matriculation 4,624,522 7,119,738 11,744,260 25.07
Intermediate 1,862,239 1,821,681 3,683,920 9.12
BA, BSc degrees 110,491 96,144 206,635 4.12
MA, MSc degrees 1,226,914 764,094 1,991,008 3.84
Diploma, Certificate 418,946 222,649 641,595 1.13
Other qualifications 73,663 121,449 195,112 0.26
Source: Government of Pakistan, Population Census Organasition, 1998
105
4.3 MULTAN HISTORICAL PERSPECTIVE
Multan is known as the 'City of Sufi Saints (Peer) and Shrines. The city is full
of bazaars, mosques, shrines and superbly designed tombs. A network of rails,
highways and air flights has well connected Multan to the rest of the world (Helders
2005).
Multan is one of the oldest cities in South Asia, the exact age has yet to be
determined. Its modern name comes from its old Sanskrit name Mūlasthān. It has seen
a lot of warfare because of its location on a major invasion route between South Asia
and Central Asia. It is famous for its Sufi shrines.
Over hundred years Multan was ruled by various Hindu empires. It is believed
to have been visited by Alexander the Great. It is said that when Alexander was
fighting for the city, a poisoned arrow struck him, making him ill- and eventually
leading to his death.
Multan is located very close to Harappa, the Indus Valley Civilization site.
Some have suggested that Harappa and Mohenjodaro could be linked with the two
Avataras of Vishnu - Narasimha and Waraha respectively (Stephan, Heldus World
Gazetteer).
Under the Mughal Empire, Multan enjoyed over 200 years of peace, and
became known as Dar al-Aman (Abode of Peace). The Khakwani Nawabs of Multan
gave it a lot of financial stability and growth to the local farming sector.
Multan witnessed difficult times as Mughal rule declined. After Ahmad Shah
Durrani's dynasty went into decline, it was ruled locally by the Pashtun Khakwani and
Sadozai chieftains. The Sadozais having gained the favor of the king and having the
106
Khakwani Nawab removed. This period saw the rise of Sikh power and frequent
clashes took place between the Muslims and Sikhs. It was later captured by Sardar
Hari Singh in 1818 for Maharaja Ranjit Singh (Stephan, Heldus World Gazetteer).
The Sikh ruler Maharaja Ranjit Singh with his Capitol at Lahore conquered
Multan and thus became master of the whole of Punjab in 19 Century. Sikh armies
under General Hari Singh Nalwa defeated and killed the ruler of Multan Muzaffar
Khan Saddozai. The death of Muzaffar Khan was in fact the death of Muslim rule in
Multan. However, Sikh rule would not last long, as the British were eventually
provoked into checking the Sikh strength in Punjab. After a long and bloody battle,
Multan was made part of the British Raj. During this time, Sardar Karan Narain's son
became an icon during the British Raj and was awarded titles 'Rai Bahadur' and
Knighted 'Sir' by Her Majesty. The British built some rail routes to the city, but its
industrial capacity were never developed (Stephen, Heldus World Gazetteer).
Agricultural export is a large portion of income for the local population. The
city of Multan is located in southern Punjab province at almost the exact center of
Pakistan. The very next major adjoining city is Sahiwal. The area around the city is a
flat plain and is ideal for agriculture. There are many canals that cut across the Multan
District that provide water from nearby rivers. It is extremely hot in the summer.
107
and oil mills and large-scale power generation projects. It is famous for its handicrafts
(carpets & ceramics) and cottage industries.
Wheat, cotton and sugarcane are the main crops grown in the district.
Moreover, rice, maize, tobacco, bajra, moong(lentils), mash(lentils), masoor(lentils) ,
oil seed such as rape / mustard and sunflower are also grown in minor quantities in the
district (Stephen, Helders-World Gazetteer).
In 1748 Nawab Muhammad Bahawal Khan Abbasi founded this city whose
descendants ruled the area until it joined Pakistan in 1947. The Bahawalpur (princely
state) was one of the largest states of British India, more than 450 kilometres long,
and was ruled by Nawab Sir Sadiq Muhammad Khan Abbasi V, who decided to join
Pakistan at the time of independence in 1947 and was merged in west Pakistan on
14th October 1955 (Helders 2005).
108
the Afghan Governor of that province and was forced to flee. The state was merged
into the province of West Pakistan on 14th October 1955. (Helders ,2006).
The City is located favourably for commerce, lying at the junction of trade
routes from the east, south-east, and south. It is a centre for trade in wheat, cotton,
millet, and rice grown in the surrounding region. Dates and mangoes are also grown
here. Canals supply water for irrigation. The principal industries are cotton ginning,
rice and flour milling, and the handweaving of textiles (Helders 2006)
109
has soap making and cotton spinning factories, as well as enterprises producing silk
and cotton textiles, carpets, and pottery (Buyer and Royal websites).
Cotton markets in Pakistan have suffered from uncertainty since the trade was
de-regulated in 1993-94. From the mid seventies, the CEC virtually dictated cotton
trade and prices through direct intervention and export control mechanism. Due to the
concurrent withdrawal of export duty through the Bench Mark System and a drop in
production due to CLCV, domestic prices soared above export parity prices. From
1995-96 onwards domestic consumption passed the 9 million bale mark, further
adding to the bullish trend of prices. Local industry resorted to imports, cotton arrivals
are concentrated in three months but consumption is all year round. The absence of
forward trading and hedge marks adds tot the volatility of prices and makes market
susceptible to manipulation in the hand of those who have access to liquidity
(SMEDA, 2005).
110
Fig 4.2 Marketing Channel of Cotton in Pakistan
They acquire title to the cotton they sell and bear the
In principle, they buy
risks. They may supply producers with inputs as
the major part of
well as credits
their cotton from the
poorest and smallest
producers and the
Cotton ginners quantities purchased
are more limited than
Village Beopari deliver cotton
Located close to the the ones of the
supplies to ginners
production sites commission agent
1/3 2/3
Fibers Seeds
Merchants Merchants
Source: Dormand, A. Kydd J. and Poultan. C (2002) crop production under market libralization.
This is the main cotton marketing channel which elaborates whole of cotton
seed marketing process in Pakistan. This channel shows different routs of seed cotton
marketing, through which it passed till it is finally used. This channel depicts that the
cotton seed passes through the whole channel and changes its shape at almost every
step. Every component of marketing channel plays its role and carries the equal
importance. However those who are called agent, play a key role in the whole
process. It was observed that the grower’s produce is disposed off in three ways, in
the study area.
111
i. To marketing agents also called as (commission agents). In some cases it was
also noted that some large growers sold cotton seed (phutti) to Marketing
Agents directly.
ii. Secondly, growers sold their produce to other merchants i.e., village beopari /
Commission Agent.
iii. Similarly in the study area it was noted that there were some growers
especially large farmers who sell their crop/produce to the ginners directly.
These are the farmers who primarily grow cotton in their fields. They perform
various practices right from sowing of cotton to picking, storing and finally selling the
cotton. With a large number of small and uneducated growers, it is difficult to manage
quality since many intermediary marketing agent are involved from farm to the
ginning factories. These growers / farmer who are mostly uneducated are engaged in
the cotton production process which they have learned from their forefathers. They
have also acquired the latest knowledge from various sources like extension work,
pesticide selling agents and co-farmers. They grow cotton and pick the cotton through
the local women as manual picker. After finishing the picking process, cotton is sold
to village beopari who visit the farmers at door steps. Therefore cotton produced by
farmer is mostly marketed through these beopari / commission agent.
These are the persons who purchase the seed cotton from growers and after
weighing and loading it into a transportation vehicle i.e. tractor trolley, truck, mini
truck, or it may be a bullock cart as well, for shifting / carrying to the ginning factory.
Where it is sold to the ginning factory depending upon the market conditions, profit is
4.5.4 GINNERS
They purchase the seed cotton either directly from growers or through village dealers.
112
The cotton seed thus purchased is processed in the ginning factory, seed and lint is
separated, lint is pressed and converted into the bales. The lint is sold through
commission agents to spinners. The commission agents receive commission from the
spinners @35 paisa per Rs.100. The by-product of seed cotton is cotton seed, which
may go to oil mills as well as for extraction of oil. The cotton seed is purchased by oil
mills for further processing. Ginners have to operate as processors and traders
concurrently, giving them a manipulative advantage on the one hand and handicap of
The oil mills are functioning effectively in the cotton marketing as well. They
purchased the cotton seed from ginners, it is processed into two products i.e., oil and
cotton seed cake. The oils is used for cocking purposes after further processing by
ghee mills while the seed cakes are used for feeding to the mulch animals.
Oil mills purchased cotton seed through commission agents. The commission
agent receives commission @35 paisa / Rs 100 each from oil mills and ginners. The
oil mills produce oil and seed cake. The oil is sold through commission agent to the
ghee mills. The commission agent charge commission @ 50 paisa per Rs.100, both
from oil mills and ghee mills. The seed cake produced is sold to merchants / beoparies
through commission agent. Here commission agents receive 85 paisa per Rs.100 only
from oil mills. The oil mills owners sell these products through different dealers. Oil
mills produced crude oil and supply to the ghee mills for further processing as
cooking oils and seed cake is sold to the traders through specialized commission
agent.
113
4.5.6 SPINNERS
Spinners purchase the lint in the form of bales prepared by ginner through
commission agents. Then lint is processed and converted it into the cotton yarn. Then
this yarn is sold to the weaving units and textile mills. Spinning is the process of
converting fibers into the yarn. Spinning is the beginning of value chain, so all the
later value added processes of weaving, knitting, processing, garments and made ups
The process of separating lint from seed cotton is called ginning. Lint is the
term used for fiber after the seed has been removed at the gin. Historically the lint was
removed from the seed by hand. In 1973, Eli Whitney invented the saw gin, which
was a collection of circular blades installed on a central shaft and in 1840, McArthy
invented the first roller gin, which consisted of single or double rollers covered with
rough leather used to separate lint against a set of dull knives. Figure 4.3 describes the
network of cotton ginning industry throughout Pakistan.
114
Figure 4.3: Location of Ginning Factories in Pakistan
Pakistan is a major cotton producing Country with good quality lint and long
staple varieties. However, cotton sector suffers from a number of problems related to
non-applications of standards, ginning practices and poor management. There are
1,221 ginning factories in Pakistan (PCGA, 2005).
115
4.7 Seed Cotton Transportation and Storage
It was observed in the study area that seed cotton is transported to the ginning
factories in jute bags sewn with jute yarn on tractor trolleys fitted with framers
wrapped in cloths, polypropylene bags Sown together to form a big cotton-holder. It
takes a big volume of cotton which can be carried to the factory from the farm or
wholesale market. Shreds of the white colored polypropylene and the jute thread
(sayba) are mixed in the seed cotton in this way, which is the main source of
contamination in the process of spinning and weaving.
There is no proper storage facility available, so the cotton can not be stored
under cover. It lays open in the gin factory's or wholesale market's yard and all the
dust and trash gathers into it. Contamination such as toffee wrappers and dust from
passing vehicles finds its way into it. Dew adds to the moisture content and causes
deterioration of the color quality of cotton fiber which affects its dyeing and finishing
characteristics.
Ginning factories mostly buy seed cotton from the commission agent and lays
it out to dry in the sun for 3 to 4 days. The ginners pay the commission agent, once
the rate for seed cotton has been agreed upon. The ginning factories also contract
processing for big grower or for commission agent who stock up on cotton lint.
Ginning factory profits are linked to the Ginning out Turn (G.O.T.) which is the
percentage of lint in the seed cotton.
"Khoat" (trash content) is the local term used to describe the discrepancy
between the seed cotton purchased by the ginners and the sum of weight of cotton lint
and seed. Moisture control in seed cotton is a major issue. If the moisture content are
excess of 10 percent in seed cotton, it causes serious problems and uses more electric
power. Power consumption is a major cost factor during the ginning process. Early
morning picking of cotton is a main source of moisture, which is retained in the lint
since cotton is highly hydroscopic in nature. High level of moisture may results in
weakening of the seed and weakened seed breaks during the ginning process and its
removal is not possible. Ginning process of cotton in Pakistan is explained below in
Figure 4.4.
116
Figure 4.4: Ginning Process of Cotton
Mixing
Pneumatic Conveyor
Opener / Pre-Cleaner
Saw Gin Cotton Seed
Cotton Lint
Lint Cleaner
Pre-Bale Press
Bale Press Cotton Bales
Source:SMEDA, 2005
117
4.8 THE GINNING PROCESS
After arrival of seed cotton at the ginning factories, it is dried in large dryers
using heated air to reduce its moisture content. A cylinder cleaner then removes the
leaves and other small trash from the seed cotton by shaking it with spied cylinders. A
stick machine removes any large sticks or hulls. Saws grab the seed cotton and whip it
over metal bars to sling off its trash. If the seed cotton requires additional drying and
cleaning, gins will often repeat the process. Lack of moisture at ginning can also
lower the quality of the fiber and contribute to ginning problems. To prevent fiber
damage and to facilitate ginning, gins try to balance the moisture content in the seed
cotton during drying, so that it is neither too wet nor too dry.
The seed cotton is now ready for ginning. Cotton is conveyed to the roller gin,
for separation of seed and fiber.
Lint cleaners remove the small trash from the ginned lint left behind by the
cylinder cleaner and stick machines. Saw-lint cleaners grab the lint with a cylinder
saw and whip it over metal bars to dislodge its trash.
Finally, a bale pressing unit compresses the ginned lint into bales, the bales are
then wrapped with a protective covering, now these bales are send to warehouses for
onward dispatch to spinning units.
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4.8.5 Ginning and Pre-Ginning
There are three types of saw gins depending upon the type and number of ribs;
the plain, the single rib huller, and the double rib huller. The number of saws on the
shaft determines the size of a single gin stand, ranging from 90 to 150.
The speed, material of saws, saw teeth, design and sharpness, geometry of ribs
and space between two ribs are very important parameters in the ginning process.
Sharpening of the saws is a very serious problem faced by the ginners. It was
observed that almost every ginning factory owner engages skilled personnel on a full
time basis to sharpen the saws. The aim is to reduce costs, however it effects the
staple length of the fiber badly.
The sharpening and re-sharpening of saws results in the blade loses diameter;
a 1/16 inch which results in 15 percent reduction in production efficiency. The loss in
efficiency is compensated at times by increasing the rpm. Sharpening of blades result
in change of angle of the teeth. This damages the fiber, adding to neps and floating
fiber (SMEDA, 2005).
After the ginning is completed, the lint is handled and baled by the post
ginning machines, which plays a vital role in producing high grade cotton. When the
119
lint is removed from the saws, it is in a loose fluffy condition and practically floats in
the air currents produced by the rapid revolution of the brush or by the current of air
blast used to doff the lint from the saws.
The lint cleaner is used for combing and final cleaning to remove the foreign
matter left in the lint. Saw-lint cleaners grab the lint with a cylinder, and saw and
whip it over metal bars to dislodge its trash.
In study area it was observed that, very few lint cleaners have been installed in
the ginning factories but the spinner/textile mill owners are extensively using them.
Table 4.2 and 4.3 describes the ginning sector of Pakistan (Province wise) and
summary respectively. It provides a description of ginning units installed. The
industry is based on technology which was introduced in the late 40s and early 50s.
Many of these units are leased out for one or more seasons. The units in Bahawalpur
and Multan operate from the middle of October to mid- / February.
The majority of saw gins currently existing in the study area are of the 90 saw
blades type. Only 10 percent of the gin factories seem to have lint cleaners, and even
those are not being used. In Multan and Bahawalpur, the ginning factories having oil
expeller units are earning more profit.
PUNJAB
Sr. District No. of Number of Sawgins Number of
No. Factories 80 90 100 120 Press FEC Opnr Lt Clr SR DR Exp
6. Rajanpur 49 0 127 82 4 49 9 0 0 0 0 28
8. Sahiwal 52 0 127 77 0 53 0 0 1 0 0 67
9. Pak Patten 40 22 87 54 8 41 0 0 0 0 0 41
120
10. Okara 18 0 59 17 0 19 1 1 0 0 0 36
11. Kasur 3 0 8 5 0 3 0 0 0 0 0 0
12. Jhang 26 0 88 24 0 27 1 1 0 0 0 32
13. TT Singh 42 4 87 91 0 43 2 0 0 0 0 56
14. Faisalabad 20 0 46 47 4 22 0 0 0 0 0 12
15. Mianwali 2 0 7 0 0 2 0 0 0 0 0 0
16. Leiah 8 0 16 16 0 8 1 0 0 0 0 13
17. Bhakkar 4 0 0 16 0 4 0 0 0 0 0 4
Total Punjab 1063 136 2758 1842 96 1123 120 361 108 146 143 2432
2. Tharparker 14 4 89 0 0 14 10 22 8 0 0 41
3. Sanghar 66 9 271 10 0 66 4 19 1 3 10 39
4. Nawabshah 19 0 87 3 0 22 1 22 1 25 0 0
5. N. Feroze 10 0 47 0 0 10 0 16 2 40 89 10
6. Khairpur 12 0 45 0 0 12 0 6 1 21 0 11
7. Ghotki 40 0 162 2 0 40 6 30 4 7 0 43
8. Sukkur 10 0 44 0 0 11 0 8 1 0 0 2
9. Daddu 5 0 20 0 0 5 0 5 0 0 0 0
10. Balochistan 2 0 5 6 0 2 0 0 0 0 0 8
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Table 4.3: Summary of ginning factories – Pakistan
1. Punjab 1063 136 2758 1842 96 1123 120 361 108 146 143 2432
Total 1263 158 3614 1877 96 1327 153 507 130 242 242 2622
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Summary of above mentioned production capacity of ginning factories are explained
in Table 4.4 below:
The process of converting fibers into yarn is called spinning. Spinning is the
first process in the chain that adds value to cotton by converting seed cotton into a
new product i.e. cotton yarn. The value added processes of weaving, knitting,
processing, garments and made-ups are dependent upon the process of spinning.
123
Figure 4.5: Spinning Process
124
4.10.1 Spinning Industry in Pakistan
10
installed working
9
8
7
(000) spindle
6
5
4
3
2
1
0
1970 1972 1973 1975 1977 1979 1980 1982 1983 1985 1987 1988 1990 1992 1993 1995 1997 1998
installed 2.397 2.863 3.266 3.366 3.546 3.585 3.781 4.229 4.313 4.445 4.356 4.393 5.271 6.216 6.86 8.61 8.23 8.368
working 2.327 2.65 3.057 2.823 2.65 2.585 2.701 2.832 2.986 2.872 3.469 3.607 4.889 5.333 5.52 6.262 6.538 6.631
4.11 CONCLUSION
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textile mills are also located in the study areas. The proceeding chapters will focus on
the problems being faced by the stakeholders of the cotton marketing in production
and marketing of cotton. Basing on the study conducted in the core areas of cotton
production, the key issues along with the suggestions / recommendations will be
presented in the last chapter.
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CHAPTER 5
5.1 INTRODUCTION
The two major districts of the Punjab province of Pakistan, Bahawalpur and
Multan are situated in the Southern part of Punjab province. This zone is situated in
between 31° and 33° latitude. These districts are irrigated by the Ravi, Chenab and
Bias Rivers. The quality of water of these rivers is considered to be the best among all
the rivers of the province. Cotton is the main Kharif cash crop of this region.
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5.2.1 Climate
5.2.2 Infrastructure
The average farm size in these districts is smaller than rest of the Punjab;
mainly because of relatively less land availability. Supporting infrastructure such as
proportion of irrigated area and numbers of tube wells are comparatively more
developed as compare to other parts of Punjab province. All these factors contribute
to get enhanced cotton production than others parts of the province as well as
Country.
128
factories are also found here. Hence this area was selected for this research study. A
total sample of 310 respondents was chosen for the study. This sample comprised of
growers, village biopari / commission agent, ginners and spinners.
Stage-I: Total sample was allocated to the whole Multan and Bahawalpur
regions. Since the existing statistics of growers, ginners and spinners was more or less
similar to each other in both the districts of Multan and Bahawalpur, it was decided to
distribute the sample equally among the two districts. Thus, fifty percent of the whole
respondents of small medium and large categories were taken from Multan district
and remaining fifty percent from Bahawalpur District. In this way 155 respondents
were selected as sample from each district.
Stage-II: Ten villages from five union councils of two tehsils of each district
were selected randomly. The number of sample farmers for each district was
proportionately distributed among the randomly selected villages based on the share
of small, medium and large farmers in these villages.
Stage-III: Sample was selected from the list of small farmers in those
villages. As the size of farm increases, proportion of small farmers decreases.
According to provincial statistics, the proportion of small farmers having land
holdings of less than 12.5 acres was about 90 percent that of medium farmers having
land holding more than 12.5 acres but less than 25 acres were about 7 percent and
large farmers having 25 acres of land were about 3 percent. Keeping in view these
statistics, major portion of the sample growers comprised of small farmers, followed
by medium and large farmers.
However the number of ginning and spinning factories were taken in their
equal proportion from both the districts. In all 120 small, 50 medium and 30 large
farmers, 30 village biopari / commission agents, 50 ginners and 30 spinners were
selected from the two districts of Multan and Bahawalpur region. The detail of sample
distribution is given in Table 5.1.
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Table: 5.1: Sample Distribution
130
To develop measurement scales compatible with the statistical techniques
intended to be used for data analysis.
To maintain sequence of the questions in a logical fashion.
As the primary purpose of the research was to obtain first hand information
about some of the aspects of cotton marketing problems in Pakistan, survey method,
based on structured interviews was chosen as the research technique. Although, it was
deemed to be costly in terms of time and resource constraints, yet the degree of
information was expected to be higher and more intensive as compared to the
telephonic surveys. Interview-based survey was also considered to be advantageous
(Sekaran 1992, Zikmund 1994, and Ghauri et al. 1995) on the following grounds.
131
To gain accurate, comprehensive and dependable information as compared to a
mailed / telephonic survey.
To avoid any misunderstanding of questions by respondents leading to a response
bias.
To ensure versatility and flexibility in discussions.
To secure a higher response rate by motivating the respondents.
Ability to provide a more clear and comprehensive explanation of the questions.
Reduced possibility of item non-response i.e., seeking answers to all of the
questions.
Possibility for the occurrence of an interviewer bias during the on-site visits.
More costly in terms of resource constraints.
Lower anonymity of respondent; an obstacle in seeking answers to confidential
questions.
Difficult to follow up once the interview has taken place.
Low response resulting from the time constraints of the executives for an
interview.
Doing research in any area of discipline involves great amount of efforts and
time to produce a good piece of work. Some of the problems are an indispensable
feature of the research process. The nature of the problems might be identical but the
intensity of them varies across countries e.g. developed versus developing countries in
any area of research. The present research is no exception as certain problems
appeared to be unavoidable while doing this research. It would be appropriate to
mention some of the general difficulties encountered in conducting the present
132
research. This might enable the future researcher to overcome these difficulties prior
to carrying out the formal research.
5.5.3.2 Limitations
In order to estimate the cost of production of cotton crop in the Multan and
Bahawalpur districts, the crop budgeting technique was used, in which crop budgeting
inputs are included for the production process of seed cotton. These inputs include
fixed as well as variable inputs. Among fixed inputs the major input was the land rent.
Similarly there were owned as well as purchased inputs. Among owned inputs the
important were family labor, land, tube well and tractors used for cultivation. In the
133
sample, most of the growers were of the small farming category which constituted 60
percent of the entire farmer sample. This category of the respondents was resource
deficient and was mostly using hired tractor power. They were also purchasing
tubewell water for irrigation purpose. That is why for the sake of comparison; it was
assumed that all the respondents living in the study area should be treated with similar
rates and these were the village prevailing market rates.
Cost of processing the cotton by ginners and spinners was calculated on the
same pattern. Cost benefit ratio for them was also calculated.
5.7.1 Seed
The price prevailing at the sowing time was used for computing the cost of home
produced seed used. However, actual amounts spent on seed were used if the seed was
purchased.
5.7.2 Fertilizer
It was priced on the basis of actual price paid for fertilizer applied coupled with the
costs of transportation.
The home produced farm yard manure was valued at the prevailing village rate. If
purchased farm-yard-manure, it was priced on the basis of actual price paid for it by
sample farmers in the study area.
For the estimation of cultivation cost the prevailing village tractor hiring rates were
used. There are rate fluctuations on the basis of horse power of the tractors. But an
average figure was estimated to estimate the final value of cultivation.
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5.7.5 Irrigation Water Cost
In order to fulfill the emergent needs of the irrigational requirements of the cotton
crop, most of the farmers were supplementing their canal water with tube well water.
The cost of tube well water was estimated by taking into account the number of
irrigations applied to cotton and hours required for one irrigation. Thus, the number
was multiplied by the number of irrigation. The average rate for one irrigation in the
respective area was used to get the irrigation cost of the tube well.
Among all the field crops, cotton was the most important crop on which maximum
numbers of the plant protection measures were being used in the area. Different
pesticides used at different intervals had different costs depending upon the pest
against which the pesticide was to be used. Generally the pesticides used at the start of
crop had less cost per spray while at the later stage cost of spray was higher.
In order to arrive at the average cost per spray the weighted average method was used.
weighted average=∑(wi*xi)/∑wi
The average figure for spray cost was arrived at, was used to multiply with the
number of sprays applied by different category of the farmers.
Labor was used in each and every operation of the farm produce starting from
seedbed preparation to harvesting and sale of the produce. To calculate the total labor
cost for a cotton crop, it was divided into two parts i.e. pre-picking and picking labor.
As the respondents were not keeping any record for labor operations, they could not
convey the exact time duration for various operations. The labor standards given in
135
Farm Management Handbook (1993) were used to work out the total labor hours
required for the production of cotton prior to picking of cotton.
For the estimation of picking cost, it was envisaged that at most of the farms women
labor was being used and in practice they were getting 1/16th part of the total output
they picked. Thus in order to work out the total picking cost of cotton a 1/16th part of
the total produce was used as the picking cost of cotton for all the category of the
farms. Then this much quantity of product was multiplied by the village prevailing
rate of produce.
These are the rates of land revenue and water charges which are collected by
Government in the form of Abiana at the end of crop season for different crops. These
are fixed for each crop. Thus the actual amount paid to the Government for cotton
crop was taken into account for working out the cost of land revenue and water rates.
The farm budgets of cotton crop were estimated. In order to estimate the
budgets, physical units of the inputs such as ploughing, planking (Tractor and
bullocks) seed, Fertilizer such as Nitrogen (N), Phosphorous (P), Potassium (K), Di-
Ammonium Phosphate (DAP) and Urea, irrigations by canal and tube wells,
interculture, hoeing, plant protection measures, labor in hours for each crop were
multiplied by the village prevailing rates to arrive at the cost of each input.
The cost benefit ratio was estimated for growers (all categories), ginners and
spinners to get the idea that whether the cotton production and processing was paying
them some thing or not. It was estimated by using the following formula.
136
Where GI is the Gross Income per acre of cotton and
For all the categories of farmers these were estimated by using the Cobb
Douglas production Function in the following form.
137
X6 = variable representing Plant protection cost (Rs/ acre)
= Constant
All the data were on per acre basis. β represented the respective coefficients
for all the independent variables. The Cobb Douglass production function model was
estimated for all the categories of farmers of Multan and Bahawalpur region.
The impact of policy on comparative advantage and farm level profits; the
influence of investment policy on economic efficiency and comparative advantage;
and the effects of agriculture research policy on changing technologies (Monke et al,
1989).
The basis of PAM is a set of profit and loss identities that are familiar to any
businessman (Nelson et al, 1991). The primary strength of the PAM is that it allows
varying level of desegregations and makes the analysis of policy-induced transfer
straightforward. Along with strength, PAM also suffers some weaknesses, one of
which is the assumption of fixed input-output coefficients.
The PAM is based on estimation of budgets using market prices and social
prices. The basic format of the PAM is a matrix of two way accounting identities; one
set defining profitability and the other defining the difference between private and
social values of a commodity system.
138
Table 5.2:Policy Analysis Matrix (PAM)
Costs
Tradable Domestic Profit
Description Revenues Inputs Factors
Private Prices A B C D
Social Prices E F G H
Policy Transfer I J K L
Source: Monke and Pearson 1989
Note:
(i) Private Profitability D= A - (B+C)
(ii) Social Profitability H= E - (F+G)
(iii) Output Transfers, I = A-E
(iv) Input Transfers, J = B-F
(v) Factor transfer, K= C-G
(vi) Net Policy Transfers, L= D-H
The data in the first row provide a measure of profitability (D), defined as the
difference between observed revenue (A) and costs (B+C). The private profitability
demonstrates the competitiveness of the agricultural system, given current
technologies, prices for input and output, and policy. The second row of the matrix
calculates the social profit that reflects social opportunity costs. Social profits provide
a measure of efficiency. A positive social profit indicates that the country uses scare
resources efficiently and has a static comparative advantage in the production of that
commodity at the margin. Similarly, negative social profits suggest that the sector is
wasting resources, which could have been utilized more efficiently in some other
sector. In other words, the cost of domestic production exceeds the cost of imports
suggesting that the sector cannot survive without government support at the margin.
The third row of the matrix estimates the difference between first and second rows.
The differences between private and social valuations of revenues, costs and profit
can be explained by the effects of policy interventions.
DRC, the most useful indicator of all the three, used to compare the relative
efficiency or comparative advantage between agricultural commodities and is defined
as the shadow value of non-tradable factor inputs used in an activity per unit of
tradable value added (G/(E-F). The DRC indicates whether the use of domestic factor
is socially profitable (DRC<1) or not (DRC>1).
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5.12 PRIVATE PROFITABILITY
The data entered in the first row of Table 5.2 provides a measure of private
profitability; defined as the difference between observed revenue and costs valued at
market prices (private values) received or paid by farmers, merchants or processors in
the agricultural system. The private values implicitly include the effects of all policy
interventions, both in direct and indirect subsidies, taxes and all market distortions
and failures.
The second row of the matrix utilizes social prices (Table 5.2) and the social
profitability is defined as the difference between revenue and costs of domestic
factors and tradable inputs priced at social opportunity cost (social values).Social
values provide a benchmark policy environment for comparison as these are
considered that would hypothetically occur in a free market with out policy
intervention.
140
some other sector i.e. system is producing at social costs that exceed the costs of
import. But for the existance and growth of the sectors government assistant is
indispensible.
The second identity by third row of Table 5.2 is concerned with the
differences between private and social valuations of revenues, costs, and profits. For
each entry in the matrix, any divergence between the observed private (actual market)
price and the estimated social (efficiency) price must be explained by the effects of
policy or by the existence of market failures. Distorting policies that lead to an
inefficient use of resources enhance the stated divergence. The efficient policies by
offsetting the effects of market failures create greater income and thus correct
divergences by reducing difference between private and social valuation.
The NPC is a measure of the extent to which domestic price policy protects
domestic producers or consumers form the direct input or output of the foreign
markets (Tsakok, 1990). As an indicator of policy effects, an NPC lower than one
means that production of a particular commodity is taxed either because of market
failure or government intervention. Conversely, an NPC greater than unity suggests
141
inefficiency of a country in producing that particular commodity and that the price is
heavily affected by the government policies or other factors.
EPC=A-B/E-F
Using the border prices as the reference price, and EPC greater than unity,
implies price protection and positive incentives to the domestic producers of that
commodity while the opposite is true when the EPC is positive but less than unity. If
EPC is equal to one, the structure of protection is neutral. Producers are neither
favored nor discriminated against. If EPC is less than zero (which is not possible for
the NPC), it means that either:
In the first case producer will not stay in the business until government
subsidizes to remain in an unprofitable business. In the second case the economy is
losing exchange by domestic production of the commodity, as the cost of traded
inputs exceeds the gross value of output. The EPC is a more reliable indicator of the
effective incentives than the NPC, as the former recognizes that the full impact of a
set of policies include both output price enhancing effects (import tariffs) and cost
reducing effects (input subsidies). The EPC nets out the impact of protection on inputs
and outputs and reveals the degree of protection accorded to the value-added process
in the production activity of the relevant commodity. The EPC quickly became and
still remains a dominant indicator of policy effects in empirical studies.
142
5.13.4 Domestic Resource Cost Ratio
DRC = G/E-F
The Domestic Resource Cost (DRC) analysis is further refinements toward the
development of more practical measures of comparative advantage. This ratio is used
to compare different economic activities in terms of social costs of domestic resources
employed in earning or saving a unit of foreign exchange. The basic conceptual
formula is
DRC = ∑atVnt/Pob-∑atptb
Where as:
143
importance of exchange rate policy in contributing to comparative advantage. An
alternative formulation is
The Policy Analysis Matrix requires a comprehensive set of data. In the study,
data on various variables were collected from field surveys. The collection of the
needed data and its manipulation was done by different approaches. The
unavailability of required data was a major constraint.
Input technical coefficients are the physical quantities of inputs, which used in
producing the agricultural products. Output technical coefficients are also the physical
quantities. It is essential that data on physical output and inputs be compiled on a per
unit basis of land, thus the data are compiled on per acre basis.
144
i) Tradable/purchased Inputs: The purchase inputs include seeds, fertilizers,
manure, chemicals, and machinery etc.
The output price data is the prices received by farmers at their farm gate.
These are called Private prices/market prices of the outputs: These are the farm gate
prices; the prices paid by farmers to purchase their inputs and prices received from
selling their output. These prices are used to calculate the actual revenues and costs
received or paid by farmer i.e. the private budget.
Economic prices are estimated on basis of export and import parity prices
depending upon the commodity. The export parity prices are used to calculate the
economic prices of the crops that are exported in previous years and vice versa. World
prices are the prices for tradable commodities, which were traded at different markets
in different countries. The world prices are collected from various publications and
website of Food and Agriculture Organization of The United Nations. The State Bank
of Pakistan (SBP) and Ministry of Agriculture are the main sources for providing the
data on official exchange rates, values of exports and imports of taxes on international
trade and transactions.
145
5.13.10 Social Valuation of Tradable Inputs and Outputs
The social valuation of tradable outputs and inputs is a major segment in the
building process of the PAM. Social prices in the PAM are also referred to as
efficiency prices or economic prices. The world prices of inputs and outputs are the
cornerstone for estimating the efficiency prices. The calculation of economic prices of
tradable outputs and inputs envisaged the estimation of shadow exchange rates,
import and export parity prices of tradable outputs and inputs.
A foreign exchange rate is the ratio of the number of domestic currency units
to one unit of an internationally traded currency (usually US $). To value the prices of
imports and exports, an average official exchange rate is used by taking the three-year
average; so that domestic prices of various commodities could be compared with their
equivalents in the world market. When the foreign exchange market is distorted, the
official exchange rate may not fully reflect the real cost of foreign currency. A
shadow exchange rate that reflects the opportunity cost of the foreign currency instead
is used. Shadow exchange rate (SER) is estimated from the official exchange rate
(OER) using a social conversion factor (SCF) as following:
SER=OER/SCF
Where
146
5.13.12 Imports and Exports Parity Prices of Tradable Outputs and
Inputs
At the border the import and export parity prices are the Cost Insurance
Freight (CIF), Free on Board (FOB) prices. These prices are used as reference prices,
since they represent what a commodity can earn as an export or cost as an import
commodity. When these prices are converted into domestic currency with the shadow
exchange rate, they became the social border prices. The farm-gate import and export
parity prices are derived from the border parity price by allowing for social costs
associated with moving the import commodity from border to the farm- gate or
moving the export commodity from the farm-gate to the border. For correctly
comparing two different prices, the following two conditions are considered:
147
5.13.13 Social Valuation of Non-Tradable
With the calculation of private values of revenues and costs, private budgets
are constructed, while construction of social budgets involved the calculations of
social values of revenues and costs. All are decomposed into tradable and non-
tradable.
Further more, to verify these factors whether they are attractive or detractive
for the marketing of cotton, some hypothesis are developed. As the data pertaining to
these variables is qualitative. For the analysis of such qualitative data a commonly
used model namely logit model is applied .This model uses the binary values of the
variables.
148
Yi = α + Xi + Ui
Where
In this model the response variable is binary assuming only two values i.e. one
in case of yes, and zero otherwise. In order to quantify these factors, following null
hypothesis (Ho) are formulated:
HYPOTHESIS
i) Ho: Farm gate selling facility for cotton is an attractive factor for cotton
marketing.
ii) Ho: Easy Cash Payment from cotton is an attractive factor for cotton
marketing.
iii) Ho: Easy post harvest handling practices for cotton is an attractive factor
iv) Ho: Cotton was a prestigious crop for farmers thus an attractive factor for
cotton marketing.
vii) Ho: Kind deduction by village dealers is a discouraging factor for the
cotton marketing.
viii) Ho: Lack of information for cotton prices is detractive factor cotton
149
marketing.
i) H0: VB/CA can buy the cotton from the growers on the promise of making
delayed payment is an attractive factor in cotton marketing.
ii) H0: Easy marketing of cotton makes it an attractive factor for cotton
marketing at VB/CA level.
iii) H0: Easy and cheap availability of labour in the study area makes it an
attractive factor for cotton marketing for VB/CA.
iv) H0: Deductions by the ginners due to variety mix in Phutti is not a
detractive factor in cotton marketing.
ii) Ho: High profit margins due to by products, an attractive factor for
cotton marketing.
iii) Ho: High demand for the by products, an attractive factor for cotton
marketing.
iv) Ho: Late payment from Banks detractive factor for cotton marketing.
vi) Ho: Kind deduction by ginners is a discouraging factor for the cotton
marketing
150
5.14.4 At Spinners Level
ii) Ho: High profit margins enterprise, an attractive factor for cotton
marketing.
iii) Ho: High demand for the byproducts, an attractive factor for cotton
iv) Ho: Factory gate supply of products, an attractive factor for cotton
marketing.
v) Ho: Late payment from Buyers is detractive factor for cotton marketing.
vi) Ho: Low quality of yarn due to mixing up of cotton varieties is a detractive
All types of the respondents were interviewed and response for the factor was
recorded in 'Yes/No' form.
= 1 + exp (XiP)
151
Then, the marginal effect of a particular independent variable X, on the probability of
the occurrence of the response is given by (Maddala, 1993).
P (Y = 1) = exp( X i P ) k
In the study area, both Multan and Bahawalpur district, different categories of
the farmers were selected i.e. small, medium and large farmers. In order to visualize
which category of the farmers is efficient in cotton production; economic efficiency in
the use of different inputs used was estimated.
The function is estimated using the Ordinary Least Squares (OLS) technique.
The marginal value products (MVPs) of the resources are estimated as under:
The partial derivative of Y with respect to X1, by definition, dY/dX1, was the
Marginal Physical Product of X1 (MPPx1) or
Which is = bi*Y/Xi
152
Where Y is the mean value of output i.e average gross income of cotton in the
respective district. Xi represents the mean value of ith input in monetary terms used in
the cotton production in the respective district. It can be found in the Cost of
production (Annexures H to R) and bis were the coefficients for respective inputs
showing the slope of Y. These coefficients are estimated through Cobb-Douglas
model of production function
5.16.1 Objective
To assess the production status of cotton in Pakistan, yield and acreage models
were analyzed. After collecting the secondary data, it was analyzed by running
Ordinary Least Square Method (OLS) on EVIEWS. Unit Root Test, Augmented
Dickey Fuller Test were also applied on the data. By using the same data, forecasting
for yield and acreage of cotton was done till year 2015. Forecasting was done by
calculating compound growth rate.
Although, no formal hypothesis is stated for the secondary data analysis, however, the
explanatory variables tested through the multivariate regression analysis are those
appearing as standard hypothesis. Cotton yield and area were used as Independent
Variables while rice price relative to cotton, wheat price relative to cotton, pesticide
value and rainfall were used as Explanatory Variables.
The secondary data was collected from United States Department of Agriculture,
Agricultural Statistics of Pakistan and Central Cotton Research Institute, Multan.
Attempt was made to use and collect the data on the variables of interest from a single
uniform source. This was intended to avoid any data inconsistencies mainly emerging
from the methodological fronts. However, in situation where it was not possible, data
was obtained from other sources with the due consideration that methodology for data
series across each data source was uniform. For time series data analysis, the OLS
regression method has been used. The stationarity of the data is checked by the
153
Augmented Dicky Fuller and Unit Root Test. The Auto-Correlation and Multi-
Colinearity, has been checked by using EVIEWS software. The out-of-sample
forecasting is carried out by calculating the Compound Growth Rate and the specified
formulae for forecasting.
To ensure parsimony in the analysis, an attempt was made to avoid the inclusion of
irrelevant variables which could veil the true effects of the relevant variables by
introducing collinearility among them. This was also ensured by not omitting the
relevant variables i.e. avoiding specification errors. In addition to that, the issue of
multi-collinearity among variables in the equation was also examined by applying the
standard diagnostic tests of colinearity. These include Simple Regression Correlation
among variables, Customary tests of significance (F-and the t-stastistics) and
performance of variables with expected signs (in most cases) affirmed overall fit of
the regression equations. There appeared to be no evidence for existence of the serial
correlation among residuals in the regression equations as Durbin Watson (D-W
statistics) was found to be in acceptable range in most the cases. Where there
appeared some degree of serial correlation, explanation is provided in the relevant
section.
154
Having obtained results of the regression analysis, estimated equations were also
tested meeting the assumptions underlying regression that is linearity, constant
variance, independence of the residuals and normality. Using the regression plots for
explanatory variables in the equation, there appeared to be no evidence of non-
linearity among the explanatory variables. Graphical analysis of the residuals also
indicated no existence of heteroscedasticity among the predictor variables. Plotting of
the residuals exhibited that there were no consistent patterns in the residuals,
indicating that they are independent.
Forecasting was done while calculating the Compound Growth Rate using following
formula:
Where,
Forecasting for area and yield was calculated using following formulae:
Having analyzed the data, results were corroborated with the existing research and are
interpretted based on strength of the estimated co-efficients of the multivariate
regression. These helped towards supporting or rejecting the existing empirical
evidence on variable/hypothesis in question. Results of the analysis helped to validate
or refute the hypothesis generated in light of the existing theoretical strands. These
results also led towards drawing some policy implications appropriate for public
policy in Pakistan.
155
In order to analyze the secondary data related to cotton, time series
econometric technique has been used for the period of 1976-2007. To check the
impact of different variables on production, following models are specified:
Model 1:
Model 2
Model 1:
Model 2
Where Log (Yield) is log of production of cotton, Log (AREA) is log of area of
production, Log (CPRR) is log of cotton price relative to rice, Log (CPRW) is log of
cotton price relative to wheat, Log (Pesticide) is log of value of pesticide, Log (RF) is
log of rainfall and ε1 is error term.
Before estimating above models, integration order of all variables has been
determined to avoid the spurious results.
5.17 CONCLUSION
The Chapter offers an explanation about the adoption of two different research
methods for seeking answers to the research questions and investigating some of the
standard hypothesis. The use of statistical analysis, comprising of Cobb Doglous
Production Function, Crop Budgeting Technique, Policy Analysis Matrix and Logit
156
Regression model are explained in detail to interpret the primary data collected.
Secondary data was analyzed using Time Series analysis and with the help of
compound growth rate, forecasting was carried out.
The research design, adopted for the primary and secondary data analysis of
marketing problems of cotton in Pakistan, proved appropriate to generate an accurate
and comprehensive amount of information required in line with the desired research
objectives. These designs were also found to be logical and productive in the sense
that there was no need to make recourse to alternative research methods for achieving
the desired goals. The research methods helped to generate a consistent and
dependable data set for the analysis. The specific methodologies also helped to
analyze the available data in a way that revealed explicit answers to the questions
formulated and hypothesis generated. Having analyzed each of the data sets, the
design also facilitated the interpretation of results based on the constructs of extant
theories / hypothesis substantiate their authenticity through existing theoretical strands
and statistical analysis. The overall research design makes the study novel is found to
be contributing towards generation of the results obtained in context of the primary
and secondary data analysis of marketing problems of cotton in Pakistan.
The next chapters present the analysis of primary data collected from the study area.
Chapter 7 presents the analysis of secondary data collected from reliable sources.
157
CHAPTER 6
MARKETING PROBLEMS OF COTTON–
PRIMARY DATA ANALYSIS
6.1 INTRODUCTION
At cotton grower’s level, the growers have a pivotal role in the main
marketing channel of cotton. Growers grow the cotton crop after performing
necessary operations till cotton picking. Seedcotton is manually picked and sold. In
the study area three different types of growers were identified i-e small, medium
and large farmers. This classification of the farmers was made on the basis of their
land holding. Small farmers were those who were cultivating less than 12.5 acres of
land, medium were the farmers who had more than 12.5 acres but less than 25 acres
of land holdings. Similarly large farmers were holdings more than 25 acres of land.
These categories of the farmers were found in both the districts of Multan and
Bahawalpur of Punjab province. Their production practices and out put
performance was found different from one another throughout the study area. The
cost benefit ratios per acre for all the categories of the farmers were calculated in
both the districts to analyze the seedcotton production and marketing.
158
The cost of processing and cost benefit ratio for ginners and spinners was
also calculated, thus providing a clear picture of the ratio of the benefits being
earned by the different stakeholders in the channel of cotton marketing in the study
area. Basing on the coefficients from the regression analysis of input variable (used
by the growers) marginal value product was calculated providing the economic
efficiency of the inputs. PAM was used to calculate the comparative advantage of
cotton crop in the study area.
In the production of cotton different types of inputs are involved. These are
fixed and variable. Some of the input like seed used are own while other were
purchased from the local markets. Among fixed inputs the rent of land and abiana
paid as revenue to government are the fixed inputs. Among variable inputs the cost
of cultivation, seed, fertilizer, irrigation and plant production measures are the
variable inputs. Similarly own inputs also included the family labor, and owned
land used for cotton cultivation.
For cultivation costs, the cost of seed bed preparation, deep ploughing, by
tractors or bullocks, planking etc are included. In both the districts it was observed
that almost all the farmers except few small farmers, are using the modern
technology for cultivation. It indicates that with the passage of time farmers are
159
shifting from traditional ways of cultivation to modern ways of cultivation in almost
all the categories of the farmers. In both the districts the cultivation cost was 8.95
percent of the total cost (Table 6.1). Most of the farmers are applying 4-6 numbers
of the cultivations. Therefore on an average the costs of cultivation for small,
medium and large farmers in the whole region came out to be Rs.1639 per acre
Table 6.2.
Multan &
Operations Multan Bahawalpur
Bahawalpur Region
Cultivation cost 9.39 8.55 8.95
Sowing cost 5.07 5.00 5.03
Fertilizer cost 11.28 12.04 11.68
Irrigation cost 9.97 10.98 10.49
Intercultur cost 9.68 9.98 9.84
Plant protection cost 18.22 17.19 17.69
Labor cost 14.95 15.35 15.16
Rent 21.42 20.92 21.16
Total cost per acre. 100.00 100.00 100.00
For district Bahawalpur the cost of cultivation for small, medium and large
farmers was calculated as Rs. 1607.25, 1613.85 and 1682.37 respectively. Table 6.3
depicts that in both the districts there is no major difference in the cultivation cost
of cotton production.
160
Fig 6.1: Percentage share of different cost items in Multan District
Multan District
9%
22% 5% Cultivation cost
Sowing cost
11% Fertilizer cost
Irrigation cost
Intercultur cost
15%
10% Plant protection cost
Labor cost
Rent
10%
18%
Bahawalpur Distirct
9%
21% 5% Cultivation cost
Sowing cost
12% Fertilizer cost
Irrigation cost
Intercultur cost
15%
11% Plant protection cost
Labor cost
Rent
10%
17%
161
Figure 6.3: Percentage share of different cost item in total cost of production
in Multan and Bahawalpur region.
25
21.16
20 17.69
15.16
15
11.68
10.49 9.84 Series1
10 8.95
5.03
5
0
Cultivation Sowing Fertilizer Irrigation Intercultur Plant Labor cost Rent
cost cost cost cost cost protection
cost
This was the cost item, which included the cost of seed and sowing cost.
After the seed bed preparation cotton seed was sown with the help of a cotton
sowing drill. It was a modern method of sowing. Prior to this, most of the farmers
used to sow the crop by broadcasting method. It was traditional and out dated
method of sowing. Research had proved that 10-15 percent more yield was
achieved when cotton was sown with drill sowing method (CCRI 2005). In the
study it was observed that in the cotton belt all most all the farmers were practicing
this method of sowing. The share of this input in the total cost was found 5.07
percent in the Multan district (Table 6.1) and accounted for Rs.888 for one acre
(Table 6.3). Similar to Multan the share of sowing cost in the total cost for the
district of Bahawalpur was 5 percent as well (Table 6.1).
162
Table-6.3: Cost of Production of the Seed Cotton in the Multan District
Rs.
Operations Small medium large Overall
Cultivation cost 1600.39 1645.25 1687.68 1644.44
Sowing cost 870 879.41 915.16 888.19
Fertilizer cost 1467.02 1999.75 2458.45 1975.07
Irrigation cost (canal + tubewell) 1629.07 1771.12 1833.06 1744.42
Interculture / hoeing cost 1855.42 1605.15 1621.77 1694.11
Plant protection cost 2841.99 3170.59 3557.26 3189.94
Labor cost 2412.51 2553.07 2886.8 2617.46
Rent 3750 3750 3750 3750
Total cost per acre. 16426.4 17374.3 18710.18 17503.6
Gross Income 20064 21596.3 26426.4 22695.55
Net Income Per Acre 3637.6 4221.91 7716.22 5191.95
Source: Author’s Calculation.
Data reveals that sowing cost in both the districts, from small, medium to
large farmers increase as the size of holding increases.
1
8 2
3
7 4
6 5
163
Table 6.4: Sowing cost of Multan and Bahawalpur Region under different
Farmers Categories (Rs.)
This is another important cost item. It included the cost of DAP and Urea
fertilizer used. The share of this input in the total cost in case of small farmers is
Rs.1467.02, for medium Rs.1999.75 and for large farmers Rs.2458.45 in the district
of Multan (Table-6.6). In the District of Bahawalpur fertilizer cost for small grower
is Rs.1949.39, medium Rs 2329.50 and for large farmers Rs 2625.30 (Table-6.6).
On overall basis in whole region the cost of fertilizer is Rs 2138.23 on per acre
basis (Table 6.6). The share of this input in the total cost for both the districts is 11
percent and 12 percent (Table 6.1). This input also seemed to be important input as
it is responsible for the higher yield of cotton with the large farmers.
164
Table 6.6: Fertilizer cost of Multan and Bahawalpur Region under
different farmers categories (Rs.)
This is the critical input for all crops especially for cotton. In the study area
it was observed that as the Multan and Bahawalpur Region belongs to the irrigated
areas of Punjab, almost all the farmers are using the canal water for irrigation
purpose but due to off and on canal closure, they are supplementing irrigation with
ground water. As the underground water of both districts is fit for irrigation,
growers have installed either electric or diesel tub-wells. In order to work out the
cost of irrigation, total number of canal irrigations as well as tube-well irrigations is
multiplied by prevailing respective rates. The data in tables 6.2 and 6.3 indicate that
the irrigation cost for small, medium and large farmers in the Multan district is
estimated as Rs. 1629.07 for small, 1771.12 for medium and for large growers Rs.
1833.06 respectively (Table 6.7). In the district of Bahawalpur cost of irrigation for
small farmers is Rs.1841.00 for medium Rs. 2100.00 and for large Rs. 2356.50
(Table 6.7). Its share in total cost in the Multan district is 10 percent and in
Bahawalpur district, it accounted for 11 percent of the total cost (Table-6.1).
165
Fig 6.5: Cost Comparison of the farmers in the District of Bahawalpur.
1
8 2
3
7
4
6 5
Rs.
District Small Medium Large Overall
Multan 1629.07 1771.12 1833.06 1744.42
Bahawalpur 1841.00 2100.00 2356.50 2099.17
Multan & Bahawalpur Region 1735.03 1935.56 2094.78 1921.79
166
inter cultural operations depicted that proportion of intercultural cost out of total
cost is almost similar in both the districts i.e 9 percent of total cost (Table-6.1). For
district Multan it is Rs. 1855.42, 1605.15 and Rs. 1621.77 and for district
Bahawalpur it is Rs. 1678, 1972.5 and Rs. 2074 for small, medium and large
growers respectively (Table 6.8).
In Multan and Bahawalpur region, spray for plant protection started from
the second week of July to second week of September and ended in the third week
of October in study area. The detail of the observations regarding spray in the study
area is given in Table 6.9.
167
Table 6.9: Percent Sprays Applied on Different Dates in Study Area
Number of Sprays
Week
10
ending
1 2 3 4 5 6 7 8 9 &
Above
5 Jul 0.7 - - - - - - - - -
12 Jul 5.9 0.7 0.7 - - - - - - -
19 Jul - - - - - - - - - -
26 Jul 11.8 3.0 - - - - - - - -
2 Aug 46.3 16.3 3.7 1.5 - - - - - -
9 Aug - - - - - - - - - -
16 Aug 19.9 28.9 9.6 3.0 - - - - - -
23 Aug 12.5 34.8 37.0 18.8 5.6 1.0 - - - -
30 Aug - - - - - - - - - -
6 Sep 1.5 8.9 17.8 13.5 11.2 6.1 - - - -
13 Sep 1.5 5.9 25.9 41.4 34.4 22.5 26.8 10.5 8.7 7.1
20 Sep - - - - - - - - - -
27 Sep - 0.7 2.2 10.5 20.0 12.2 10.7 29.0 4.4 7.1
4 Oct - 0.7 3.0 10.5 26.4 44.9 41.1 34.2 56.5 56.1
11 Oct - - - - - - - - - -
18 Oct - - - 0.8 1.6 8.2 14.3 18.4 17.4 21.4
25 Oct - - - - 0.8 5.1 7.2 7.9 13.0 13.0
168
6.11). Data given in table 6.11 depicts that per acre cost of plant protection is
directly related to the size of holding. As previously discussed, there is found a
positive correlation between size of holding and yield level on per acre basis. Plant
Protection cost was also found responsible for higher yields.
Rs.
Operations Small Medium Large overall
Cultivation cost 1603.82 1629.55 1685.02 1639.46
Sowing cost 855 944.71 965.58 921.76
Fertilizer cost 1708.2 2164.63 2541.88 2138.23
Irrigation cost (canal +
tubewell) 1735.03 1935.56 2094.78 1921.79
Interculture / hoeing cost 1766.71 1788.82 1847.89 1801.14
Plant protection cost 2896.13 3160.49 3659.63 3238.75
Labor cost 2543.78 2716.95 3068.31 2776.35
Rent 3875 3875 3875 3875
Total cost per acre. 16983.7 18215.7 19738.1 18312.5
Gross Income Per acre 21778.2 23790.1 28623.8 24730.7
Net Income Per Acre 4794.45 5574.40 8885.66 6418.12
8 1
2
3
7 4
6 5
169
Table 6.11: Plant Protection cost of Multan and Bahawalpur Region under
different farmers categories
Rs.
District Small Medium Large Overall
Multan 2841.99 3170.59 3557.26 3189.94
Bahawalpur 2950.28 3150.40 3762.00 3287.56
Multan & Bahawalpur Region 2896.13 3160.49 3659.63 3238.75
This is another important input which was found involved in all the
operations. First, total labor in hours is estimated and then on basis of prevailing
village Casual Hired Labour (CHL) rates, the labor cost is estimated. In both the
district, Casual Hired Labour (CHL) worked for 8 hours a day and for 8 hours they
are being paid @ Rs. 110 –120 /day. Then this rate is applied to work out the per
hour wages. Then such per hour wage rates are used to estimate the total cost of
labor. The total labor hour estimation is given at the bottom of the each table given
in the Annexure H to S. Secondly, another component of the labor cost is the
picking Cost. As discussed in the methodology, the 1/16th part of the total produce
is being paid to the picking women labor. Then this quantity is multiplied with
output price. Labor cost accounted for 14.95 percent of the total cost in case of
Multan district and 15.35 percent for Bahawalpur district (Table 6.1). The details of
these costs are given below in the Table 6.12 for Multan and Bahawalpur district
respectively.
Table 6.12: Labour cost of Multan and Bahawalpur Region under different
farmers categories (Rs.)
170
Fixed land rent for Multan, Bahawalpur and overall region is depicted in
Table 6.13 below.
Table 6.13: Land Rent of Multan and Bahawalpur Region under different
farmers categories
Rs.
District Small Medium Large Overall
Multan 3750.00 3750.00 3750.00 3750.00
Bahawalpur 4000.00 4000.00 4000.00 4000.00
Multan & Bahawalpur Region 3875.00 3875.00 3875.00 3875.00
The total cost of production of cotton crop on acre basis is estimated in the
study area. It is estimated individually for small, medium and large farmers. The
total cost structure for small farmers in the district Multan is Rs.16426.34, for
medium Rs. 17374.33 for large farmers it is estimated as Rs.18710.18 (Table 6.14).
Similarly the total cost is Rs.17541 for small, Rs. 19057.1 for medium and Rs.
20766 for the large farmers in the district of Bahawalpur is calculated (Table 6.14).
On overall basis for Multan and Bahawalpur region, the cost of production for small
farmers is Rs.16983.7, for medium Rs.18215.7 and for large farmers Rs.19738.1
(Table 6.14). The data shows that in all the cases the cost of production is highest
for large farmers than both small and medium farmers. The cost of production for
medium farmers is more than small ones.
171
6.2.9 Yield
Yield represented per acre production of cotton. Yield levels for the
different category of farmers are given in Table 6.15. Data in Table 6.15 depicts
that yield on per acre basis have an increasing trend as the size of holding increased.
This is found 21.12 mds(40kgs) for small, 22.15 mds for medium and 25.41mds for
large farmers in the district of Multan (Table 6.15). The yield performance in the
Bahawalpur district also shows the increasing trend from small to large farmers. In
Multan and Bahawalpur region yield per acre of cotton for small farmers is 22.49
mds, 23.75 mds for medium and 27.18 mds for large farmers. In the whole region
for all category of the farmers yield came out to be 24.47 mds per acre (Table 6.15).
Table 6.15: Seed cotton yield in Multan and Bahawalpur Region (40 kgs per
acre).
Result reveals that large farmers are efficient producers in both the districts.
It is due to the reasons that large farmers are more technology oriented growers than
medium and small farmers.
172
Fig. 6.7: Overall Cotton Yield Pattern in Multan & Bahawalpur Regions
30
25
Yield (40 Kgs/acre)
20
15
10
0
Small Farmers Medium Farmers Large Farmers Overall farmers
Yield per acre also shows increasing trend from small to large farmers.
The cost benefit ratio was calculated after calculating the gross income and
total cost. Cost benefit ratio is equal to gross income divided by total cost.
Mathematically CB = G1 / TC
Table 6.16: Cost-benefit ratio of cotton (per acre basis) in Multan District
173
Table 6.17: Cost-benefit ratio of cotton (per acre basis) in Bahawalpur
District
Table 6.18: Cost-benefit ratio of cotton (per acre basis) in Multan and
Bahawalpur region.
Cost benefit ratio is shown in Table 6.16. It is highest for large categories of
the farmers, then medium and small farmers. The data given in Tables 6.16, 6.17
and 6.18 shows the cost benefit ratios analysis. This analysis indicates that cotton is
more economical to the large farmers in both the districts as C.B ratio is maximum
for this category of the farmers.
From all this discussion it can be concluded that among many, variable
inputs, the input of plant protection, fertilizer and quality seed have important
174
impact on the yield of cotton. The variable of plant protection is identified as the
most important input for all the category of the farmers. Large farmers were found
best cotton producers then medium and small farmers in both the districts
individually and in whole the region as well.
30000
25000 Total cost
Amount (Rs.)
Where:
X1 =cultivations (Rs/acre)
175
X2 = Seed (Rs/acre)
X5 =Irrigations (Rs/acre)
= Constant
β = Coefficients to be estimated
All the data are on per acre basis. The Cobb Douglas production function
model was estimated for the farmer’s of Multan and Bahawalpur region. The results
of Multan district are given in Table 6.19.
6.4.1.1 Cultivation
The Cobb Douglas production function was estimated for the district of
Multan and Bahawalpur. The results for Multan district are shown as under:
6.4.1.2 Seed
176
depicts that cotton production on per acre basis can be increased by 10.3 percent by
increasing the expenditure on seed by 1 percent. The coefficient for this variable is
statistically significant at 1 percent level. The expenditure on seed means use of
good quality seed and use of the improved methods of sowing.
177
Multan the coefficient of this variable is estimated as 0.158, indicating that cotton
yield in this district is responding 15.8 percent to the 1 percent increases in the use
of urea fertilizer. This variable is statistically significant from zero at 5 percent level
of significance. The results are depicted in Table 6.19.
Cotton crop is very sensitive to pests and diseases. In order to control the
attack of pests and diseases farmers were using heavy pesticides. So the role of this
factor is also important in the cotton production. Like others factors the factor
productivity for this variable is also estimated which came out to be 0.169 showing
that cotton income on per acre basis can be increased in the district of Multan by 17
percent by increasing the expenditure on plant protection measures by one percent.
When its significance was tested, this variable was found significant at 5 percent
level. Thus it is concluded that this factor is also playing very important role in the
cotton production in the district of Multan.
In the study area, most farmers were found practicing the intercultural
practices to their crops. Most of the small farmers are doing this practice manually,
while others are doing it mechanically. It is also a realized fact that intercultural
practices plays important role in the cotton yield. This factor was also included in
the model. On analysis, results depicts that cotton yield response to this variable is
178
10 percent in the district of Multan. The coefficient for this variable is found
significant at 5 percent level of significance (Table 6.19).
6.5.1 Cultivation.
Cultivation is the operation which the farmers used to prepare the seed bed
preparation for sowing the cotton. For the seed bed preparation either bullocks or
tractors are used by the farmers. In the study area, it was found that most of the
farmers have shifted from traditional ways of cultivation that is bullock cultivation
to tractor cultivation which is the time saving technology. The Cobb Douglas
production function was estimated for the district of Bahawalpur .The function
estimates given in the Table 6.20 depicts that the value for the cultivation variable
is 0.171 indicating that income from cotton on per acre basis can be increased by 17
percent by increasing the expenditure on cultivation by 1 percent. This variable
was found significant at one percent level of significance.
6.5.2 Seed
This is the variable in which cost of sowing and seed cost are included.
Parameter for seed have positive estimate showing the positive impact on cotton
yield but this is not statistically significant. This might be due to the reason that
most of the farmers were found using home produced seed which is not certified by
government, which reduced its impact on cotton yield.
The role of chemical fertilizers in the cotton production can not be under
estimated. Among chemical fertilizers the contribution of DAP is very significant.
In order to estimate its impact on cotton production a separate variable was used in
the model. The result reveals that coefficient for this variable is 0.24 showing that it
can contribute 24 percent in the cotton yield by increasing 1 percent expenditure on
DAP cost. Statistically this variable is found highly significant showing the strong
impact on cotton yield in the district of Bahawalpur (Table 6.20).
179
Table 6.20: Cob-Douglas production function results for the farmers in
District Bahawalpur.
The use of this component of fertilizer is very common with the farmers. In
the region even a single farmer is not noted who is not using the urea fertilizer. But
doses with different farmers are different. The actual impact of any fertilizer is
harvested only when it is used and applied according to the recommendations.
There are only few farmers who are using the recommended doses. The function
results shows that the parameter estimate for this variable is 0.09, showing that the
cotton yield in the district of Bahawalpur would increase by 9 percent if the
expenditure on urea is increased by 1 percent. This variable is statistically
significant from zero at 5 percent level of significance. The results are depicted in
Table 6.20.
6.5.5 Irrigation
Irrigation is a critical input for all crops. In case of cotton only 5-6
irrigations are being applied by most of the farmers in Bahawalpur district. Cost for
irrigation is estimated on per acre basis. Then in order to see the impact of irrigation
on cotton yield, Cobb Douglas production function was estimated. The value for
this variable coefficient in the district of Bahawalpuir is estimated as 0.232.
Estimates in Table 6.20 indicate that there is the possibility of increasing the cotton
yield by 23 percent by increasing 1 percent increase in irrigation cost. This factor is
180
found highly significant showing the strong relationship between irrigation and
cotton yield in the district of Bahawalpur.
In the study area it was observed that without plant protection measures the
cotton yield is not only reduced but not possible even. There are some cases where
farmers lost all crop, because they never adopted the plant protection measures
properly. Thus plant protection measures are the dire need of cotton crop. Its impact
on cotton yield is estimated with the help of Function. Data results given in Table
6.20 indicate that coefficient for this variable is 0.198 and significant at 1 percent
level of confidence. It means that there are the chances to increase the cotton yield
by 20 percent by increasing 1 percent increase on plant protection expenditure in
the district of Bahawalpur.
6.5.7 Hoeing/inter-culture
6.6.1 Cultivation
The estimates in the Table 6.21 reveal that coefficient for the variable of
cultivation is 0.142 showing the positive association between yields i.e. dependant
variable and the number of cultivations. It shows that yield value per acre will
increase by 14.2 percent if there is increase in the cultivation cost by 1 percent. This
variable is found statistically significant at 1 percent in the whole region of cotton
belt i.e., Multan and Bahawalpur Region.
181
6.6.2 Seed
6.6.3 DAP
182
6.6.4 Urea
6.6.5 Irrigation
6.6.7 Hoeing/inter-culture
This is the variable which also plays important role in the cotton production.
The operation is mostly done after the germination of cotton. Research has proved
that intercultural operations had very important impact on the bearing of cotton.
Model results reveals that in the Multan and Bahawalpur region the coefficient for
this variable is significant at 1 percent level of significance. As the coefficient for
this variable is 0.124 indicating that cotton yield value can be increased by 12
percent by 1 percent increase in the intercultural cost (Table 6.21).
183
6.7 ECONOMIES OF SCALE
Table 6.22: The Economies of Scale in the Multan and Bahawalpur Region.
The data given in the Table 6.22 depicts the sum of coefficients obtained
through Cobb Douglas production function and the Cost-Benefit ratios obtained
through crops budgets. The sum of coefficients is indicative of returns to scale and
C-B ratio also reveals same idea. As the Sum of coefficients and C-B ratios are
greater than 1, for all the farmers in the region, indicating that all the farmers of the
region are efficient producers but relatively the farmers of Bahawalpur district are
more efficient than Multan having CB ratio as 1.40 (Table 6.22).
Thus from these estimates it is concluded that the farmers of the Bahawalpur
were efficient producers than the farmers of district Multan.
184
Pakistan shows inconclusive results. In the current section of the study objective is
to estimate the allocative efficiency in the use of different inputs used for the
production of cotton in the cotton belt of Multan and Bahawalpur region.
Y .X1b1. X b2 2 . X 3b3 . X b4 4 . X 5b 5 . X 6b 6 .X 7b 7 .u
Where
= Constant
Y = Yield (Rs/acre)
X1 =cultivations (Rs/acre)
X2 = Seed (Rs/acre)
X5 =Irrigations (Rs/acre)
µ = Error
185
By putting the actual variables and taking the natural log, the model will
attain the following form.
Ln = natural logarithm
X4= UREA (Cost of Urea used for cotton on per acre basis)
The analysis of the data was carried out separately for each District and for
the whole study area as well. The summary of function results for the both the
districts are depicted in Table 6.23.
186
Table 6.23: Cobb Douglas production function results showing the response
of per acre cotton revenue to different inputs.
Multan &
District District
Bahawalpur
Inputs Multan Bahawalpur
Region
Coefficients Coefficients
Coefficients
Cultivations 0.113*** 0.171*** 0.142***
Seed 0.103*** 0.109** 0.106**
DAP 0.191** 0.240 0.216**
Urea 0.158*** 0.092*** 0.125***
Irrigations 0.220** 0.232*** 0.226***
PP 0.169** 0.198*** 0.183***
Hoeing/interculture 0.102** 0.145*** 0.124***
Constant 0.1025 0.1458 0.1232
R2 0.79 0.88 0.81
No of observations 100 100 200
187
Where opportunity cost represents the cost of acquiring the specific input in
the respective district.
The function results associated with the district of Multan are given in the
Table 6.24. The data depicts that the ratios of MVP to opportunity cost in the
district of Multan are greater than 1 for all the inputs, showing the misallocation of
resources. These ratios indicated that all the inputs are more or less scarce in the
district of Multan. The seed, fertilizers and irrigation shows maximum scarcity in
the district.
Table 6.24: Economics efficiency for the use of critical inputs of cotton in
Cotton belt of Multan Region.
Data given in Table 6.25 depicts the results of Bahawalpur district. Like the
District of Multan major inputs were also found in scarcity as the respective ratios
for these inputs are also greater than 1. But the inputs of plant protection and
intercultural practices did not show the pattern of misallocation. It might be due to
the reason that the use of plant protection measures was very rational in the area.
Similarly labor was also properly being used there.
188
Table 6.25: Economics efficiency for the use of critical inputs of cotton in
Cotton belt of Bahawalpur District.
Table 6.26: Economics efficiency for the use of critical inputs of cotton in
Cotton belt of Multan and Bahawalpur Region.
Opp.
Mean Economics
Description Inputs Coefficient Mean Y MVP Cost
X efficiency
(Rs.)
Cultivations 0.142 24730.7 5.6 627.100 245 2.560
Seed 0.106 24730.7 6.74 388.94 107.5 3.62
DAP 0.216 24730.7 28.06 229.15 40.62 5.64
Multan and
Urea 0.125 24730.7 38.18 80.97 22.75 3.6
Bahawalpur
Region irrigations 0.226 24730.7 29.15 191.74 66 2.91
PP 0.183 24730.7 5.96 759.35 543.135 1.40
Hoeing/inter-
culture 0.124 24730.7 2.99 1025.62 608.93 1.68
Table 6.26 elaborates the results derived from the whole region of Multan
and Bahawalpur. In the whole region all the inputs are found having the ratio
greater than 1 showing the scarcity and misallocation of resources.
Thus, from this discussion it can be concluded that there is dire need to
fulfill the scarcity of the resources for cotton production. Among them the major
inputs are the quality seed, Fertilizers both DAP, Urea and irrigation water. If these
inputs are properly arranged according to the need of the farmers the cotton
production on per acre can be further raised.
189
6.10.1 PROCESSING COST, INCOME & PROFIT OF GINNERS
After calculating production cost of farmers of the study area and having analyzed
their income, net profit and cost benefit ratio, now the next important stakeholder in
the channel of cotton marketing is ginner. The yield of farmer has been taken as a
yardstick in order to calculate the profit of all stake holders in cotton marketing.
The seedcotton weighing 978.8 kgs per acre reaches ginner for processing. The cost
of raw material i.e. phutti is Rs.24967.96 (978.8 x 1020.35 per 40 kgs), ginning cost
Rs.2079.95 and sales commission Rs. 140.23 will form part of their total cost i.e.
Rs.27188.14. The lint sale Rs. 3762.58 and sale of cotton seed Rs.638.39 will be his
income i.e. Rs.40065.76. Basing on total cost and profit, CB ratio has been
calculated. The details are depicted in Table 6.27:
190
Spinners convert fibre into yarn, thus, playing important role in the value addition
of cotton. Lint weighing 324.23 kgs now reaches to the spinners. The purchase of
lint Rs.30660.6 and spinning cost Rs.1641.25 and commission paid Rs.106.74 will
form part of their total cost which is Rs. 32408.6. The production of yarn from lint
and its sale will be their income which is Rs.53846.6 and in this way their profit and
CB ratio has been calculated. The details are depicted in Table 6.28:
191
Table 6.29 Summary of cotton production, ginning and spinning cost, income, profit and cost-benefit ratio
Cultivation Cost 1639.46 Seed Cotton Kgs 978.8 Lint Purchased Kgs 324.23
Sowing Cost 921.76 @ Rs/40kg Rs 1020.35 Cost of Lint @ per 40 Kg Rs 3782.58
Fertilizer Cost 2138.23 Cost of seed Cotton Rs 24967.96 Total Lint Cost Rs 30660.6
Spinning Cost per 165
Irrigation Cost 1921.79 Ginning Cost @ per 40kg Rs 85.00 kg Rs 835.23
Inter-culture / Hoeing
Cost 1801.14 Total Ginning Cost 2079.95 Total spinning Cost Rs 1641.25
Plant Protection Cost 3238.75 Commission Paid Rs 140.23 Commission Paid Rs 106.74
Labour Cost 2776.35 Total Cost Rs 27188.14 Total Cost Rs 32408.6
Land rent 3875.00 Lint Produced Kgs 324.23 Yarn Output Kgs 285.28
Total Cost 18312.5 Cotton Seed Kgs 599.46 Yarn Sale Rate per Kg Rs 188.75
Gross Income 24730.70 Lint Sale Rate/ 40 Kg Rs 3762.58 Gross Income Rs 53846.6
Net Income 6418.2 Cotton Seed Rate/40 kg Rs 638.39 Net Income Rs 21437.96
Gross Income Rs 40065.76
Net Income Rs 12877.62
Cost Benefit Ratio 1.35 Cost Benefit Ratio 1.47 Cost Benefit Ratio 1.66
192
It is evident from the Table 6.29 that in the process of production,
processing and marketing, the profit of the grower is lesser as compared to ginner
and spinner. Spinner is earning more profit mainly because of his role in value
addition of cotton.
The farm budgets included total costs with its components i.e. fixed and
variable costs and gross margins and gross returns on per acre basis. Furthermore,
value added is estimated to evaluate resource use per unit of inputs especially for
water. All costs items were segregated according to capital and machinery.
Data given in the Table 6.30, 6.31 and 6.32 shows estimation made through
policy analysis matrix for cotton, sugarcane and rice.
193
i) Cotton
Table 6.30: PAM for cotton in the Multan and Bahawalpur region based on
export parity prices.
Production Costs
Revenue Profit Ratios
Tradable Non Tradable
Value
added/acre Rs.1383.13
inch of water
The value for Domestic Resource Cost (DRC) given in Table 6.27 shows
that export parity prices is 0.57 and the value added per acre inch of water is
Rs.1383.01. EPC and NPC are 0.83 and 0.89 respectively.
ii) Sugarcane
194
The financial and economic prices were obtained and PAM was applied on
the sugarcane crop for Multan and Bahawalpur region as shown in Table 6.31.
Table 6.31: PAM for sugarcane in the Multan and Bahawalpur region based
on export parity prices.
Production Costs
Revenue Profit Ratios
Tradable Non Tradable
Value added/
acre inch of 723.94
water
The private revenue is less than the social revenue by Rs. 2069.33 on per
acre basis. The value added / acre inch of water is Rs. 723.94 as per the result of
PAM. NPC, EPC and DRC are 0.88, 0.77 and 1.44 respectively. DRC value of
sugarcane shows obvious comparative disadvantage of this crop over the competing
crop i.e. cotton in Multan and Bahawalpur region.
iii) Rice
Beside being an important food crop, rice also serves as a major source of
foreign earning. Mainly two types of rice namely Basmatic and IRRI are cultivated.
Basmati is confined to the Punjab while IRRI and other varieties are sown in all the
provinces of Pakistan. The area, production and yield of rice in year 2004-05 were
1019 (000 ha), 5024.8 (000 ton) and 1994 (kgs / ha) respectively (Agricultural
Statistics of Pakistan 2006-07).
After calculating financial and economic prices, PAM was applied on rice
crop for Multan and Bahawalpur region as shown in Table below.
195
Table 6.32: PAM for rice in the Multan and Bahawalpur region based on
export parity prices.
Production Costs
Revenue Profit Ratios
Tradable Non Tradable
Value added/
acre inch of 892.92
water
The divergence in private and social revenue is Rs. 2747.50. The value
added / acre inch of water is Rs. 892.92. As per the PAM result, NPC, EPC and
DRC are 0.84, 0.78 and 0.65 respectively. DRC value of the rice shows obvious
comparative disadvantage of this crop over the competing crop i.e. cotton in the
study area.
The summary of PAM results for all three crops in the study area is shown
in Table 6.33 below:
Table 6.33 Summary of PAM results for Cotton, Sugarcane and Rice in the
Multan and Bahawalpur region
196
comparative advantage over the competing crops i.e. rice and sugarcane in Multan
and Bahawalpur region and can very well compete in the international market on
export parity prices.
In this section of the study effort was made to identify the various problems
which the growers were facing in the marketing of their cotton outputs. In all fifteen
different types of problems were identified with all the category of growers. Some
problems were specific to small growers, some for medium and some related to
large growers. There were only few problems which were found common to all the
category of the growers. The small growers’ problems are explained below:
197
6.12.2 Small Farmers
S. Farmers
Description Percentage
No. response
12 No storage facility 0 0
198
Table 6.36: Ranking of most critical Marketing problems for Small farmers
in the Multan District.
Farmers
S. No. Description Percentage
response
1 Rapid price fluctuations 120 100
2 Lack of cotton market 120 100
3 No premium for clean cotton 120 100
4 Small quantity unstoreable 120 100
5 spot marketing 120 100
6 Lack of bargaining power 118 98.3
7 Undue kind deduction by buyers 118 98.3
8 Restricted to sell the produce 108 90
9 Forced to accept low rates 96 80
0 10 20 30 40 50 60 70 80 90 100
Number of Respondents
The problems identified by small farmers are ranked based on the farmer’s
response. In the ranking list only 9 factors were found as important.
199
Then the factors which have more than 80 percent response are declared as
most critical factors. According to farmers perception these factors are very crucial
in the marketing of cotton. Data in Table 6.36 reveals that the rapid price
fluctuation, bound to sell the produce at spot, un-storable small quantity of the
output, lack of local cotton market, lack of bargaining power of the farmers and
kind deductions by the village dealers are the most critical problems, which are
identified in the small category growers of the region.
Farmers
S. No Description Percentage
response
1 Rapid price fluctuations 50 100.00
2 Lack of transport 20 40.00
3 Restricted to sell the produce 12 24.00
4 spot marketing 12 24.00
5 Small quantity unstoreable 0 0.00
6 Forced to accept low rates 0 0.00
7 Lack of market prices information 50 100.00
8 Lack of cotton market 0 0.00
9 No premium for clean cotton 50 100.00
10 Lack of bargaining power 0 0.00
11 Undue kind deduction by buyers 50 100.00
12 No storage facility 46 92.00
13 low price compared to international market 0 0.00
14 No cooperative marketing associations 0 0.00
15 No marketing regulatory authority 0 0.00
Similar to small farmers, rapid price fluctuations is the most critical problem
which the medium farmers identified. But other problems, which the medium
farmers responded, are the lack of market price information, no premium for clean
cotton, deduction by buyers and no storage facility at farm level. These are the
200
problems which are discouraging the medium farmers for growing and marketing of
cotton.
S. Farmers
No Description response Percentage
1 Rapid price fluctuations 50 100.00
2 Lack of market prices information 50 100.00
3 No premium for clean cotton 50 100.00
4 Undue kind deduction by buyers 50 100.00
5 No storage facility 46 92.00
No storage facility
Undue kind
deduction by buyers
No premium for
clean cotton
Lack of market
prices information
Rapid price
fluctuation
0 10 20 30 40 50 60 70 80 90 100
Number of Respondents
201
6.12.3 Large Farmers
Similar to small and medium farmers of the region the larger category of the
grower’s community were also interviewed for the identification of problems which
they are facing in the marketing of cotton in the area.
Farmers
S. No Description Percentage
response
1 Rapid price fluctuations 30 100.00
2 Lack of transport 0 0.00
3 Restricted to sell the produce 0 0.00
4 Spot marketing 0 0.00
5 Small quantity unstoreable 0 0.00
6 Forced to accept low rates 0 0.00
7 Lack of market prices information 6 20.00
9 Lack of cotton market 0 0.00
10 No premium for clean cotton 28 93.33
11 Lack of bargaining power 0 0.00
12 Undue kind deduction by buyers 30 100.00
13 No storage facility 14 46.67
14 low price compared to international market 14 46.67
15 No cooperative marketing associations 26 86.67
16 No marketing regulatory authority 2 6.67
Data in Table 6.39 gives the response of large farmers for all the problems
being faced by them. Frequency tables show that large farmers response to some
factors are more than others. There are also some factors which have no response
from any farmers. In order to identify the factors in their relative importance, they
are ranked according to their response by the farmers. The data in Table 6.40
depicts the ranking order of the marketing problems specific to large farmers of the
area.
202
Table 6.40: Ranking of marketing problems for large farmers of Multan
District.
Farmers
S. No. Description response Percentage
1 Rapid price fluctuations 30 100.00
2 Undue kind deduction by buyers 30 100.00
3 No premium for clean cotton 28 93.33
4 No cooperative marketing associations 26 86.67
5 low price compared to international market 14 46.67
0 10 20 30 40 50 60 70 80 90 100
Number of Respondents
Rapid price fluctuation is the first problem which the large farmer also
responded as critical like small and medium growers. Similarly large farmers also
told that kind deduction by the village dealers is also a common problem, which all
the farmers are facing. The other important problem specific to large farmer are
given in Table 6.39.
At the end, the effort is made to distinguish the problems which are general
for all categories, then specific to small farmers, then for medium and finally large
farmers. Table 6.41 gives the list of that problem which are common to all category
of the farmers.
203
Table 6.41:Marketing problems of all farmers in Multan and Bahawalpur
Region.
Farmers
S. No Description Percentage
response
1 Rapid price fluctuations 200.00 100.00
2 Lack of transport 114.00 57.00
3 Restricted to sell the produce 120.00 60.00
4 Spot marketing 132.00 66.00
5 Small quantity unstoreable 120.00 60.00
6 Forced to accept low rates 96.00 48.00
7 Lack of market prices information 92.00 46.00
9 Lack of cotton market 120.00 60.00
10 No premium for clean cotton 198.00 99.00
11 Lack of bargaining power 118.00 59.00
12 Undue kind deduction by buyers 198.00 99.00
13 No storage facility 60.00 30.00
14 low price compared to international market 14.00 7.00
15 No cooperative marketing associations 26.00 13.00
16 No marketing regulatory authority 2.00 1.00
These problems are the rapid price fluctuations of cotton, undue kind
deduction by buyers and no premium to clean cotton. From above discussion it is
concluded that following problems are most critical in the marketing of cotton and
all the farmers are facing them. These problems are discouraging factors for
growers to grow cotton as their profit was reduced due to these problems. Table
6.42 explains these problems.
Table 6.42: Most critical marketing problems for all the category of the
farmers in Multan and Bahawalpur Region
Rapid price fluctuations 120 100.00
Undue kind deduction by buyers 118 99.44
No premium for clean cotton 120 97.78
204
In this regard corrective measures to solve these problems are needed.
Table 6.44 and Figure 6.12 below explain that the most critical problem of
commission agent / village beopair is the demand of clean cotton by ginners from
them. On the other hand village beopari/commission agent purchase cotton from the
by the growers which resulted in the kind deduction by the ginners / spinners. Rapid
205
price fluctuation and lack of transport and storage facility are the critical problems
Mixing / contamination 27
Heavy taxes 11
Labour cost 9
0 5 10 15 20 25 30
Number of Respondents
206
6.14 MARKETING PROBLEMS OF THE GINNERS
Pakistan is a developing country with peculiar issues and problems faced by its
ginning industry. Cotton is entirely hand picked but ginning process monitoring and
control are not there. The ginners are facing number of problems which are very
cotton, 25 ginners from each district of the study area were interviewed. Table 6.45
207
Table 6.46 and Figure 6.13 below explain the most critical problems being faced by
the ginners. 100 percent ginner’s point of view was that contamination of cotton is
the most critical problem faced by them. Non availability of credit and non-
availability of trained technical staff of ginning industry were the serious problems
of ginning industry. High cost of labour was yet another critical problem of the
ginners.
Contaminated cotton
Non-availability of credit 45 50
Non-availability of technical staff 42
Moisture contents 40
High labour cost 35
Advance payment to growers 32
Electric load shedding 25
Bank pledging 21
Price fluctuation 21
No proper storage with grower 20
Heavy duty for importing sawgins 15
Heavy taxes 14
Delayed payment 11
Natural hazards 6
Role of middlemen 5
Stickiness in Phutti 2
0 5 10 15 20 25 30 35 40 45 50
Number of Respondents
208
6.15 MARKETING PROBLEMS OF SPINNERS
Spinning is the process in the chain of marketing of cotton that adds value to
the cotton by converting it into cotton yarn. The quality of entire textile industry, no
doubt depends upon the spinning industry. So spinning have a very important role
spinners from each district of the study area were interviewed. Table 6.47 below
depicts the problems being faced by the spinners. The observations are based upon
209
Table 6.48 and Figure 6.14 below shows the most critical problems being
faced by the spinners 93 percent spinners are of the view that proper grading and
classification of cotton is not being done by the ginners and growers which is a
serious threat to the spinning industry. Mixing up of different varieties of cotton and
non-standardization of weight and size of the bales were the critical problems too.
Outdated sawgins and no proper packing of the lint were the critical problems of the
28
Variety mixing 27
27
Outdated saws 25
24
Primitive machinery of spinner 22
22
Labour cost 19
16
Load shedding 14
11
Capital investment 11
7
No proper storage with ginner 5
5
Commission Agents 3
0 5 10 15 20 25 30
Number of Respondents
210
6.16 FACTORS ATTRACTING THE MARKETING OF
COTTON AT GROWER LEVEL
One of the objectives of the study was to identify the factors in the area
which attract and detract the marketing of cotton in the study area. As marketing of
cotton was carried out at different levels starting from grower to spinner, that is
why at each level of marketing channel, these factors were identified. In the
marketing of cotton first stake holder is the grower.
These factors were identified for different category i.e. small, medium and
large growers. The detail of these factors is given in Table 6.49.
Table 6.49: Factors attracting the marketing of cotton at the grower level
(Percent).
Multan &
Description of factors Small Medium Large Bahawalpur
Region
Farm gate selling 89 87 78 87
Cash Payment 82 73 74 78
Easy post harvest handling 81 72 78 78
Prestigious crop 66 80 89 73
Fulfill emergency needs 69 57 44 62
Among many, the most important factors, which seemed to be attractive for
the marketing of cotton were, farm gate selling of cotton, cash payment at the spot,
easy post harvest handling of the produce, prestigious crop and easy availability of
cash to fulfill the emergency needs.
Most of the farmers of the study area were of the view that this crop can be
sold at their farm gate. Data in Table 6.49 indicate that 89 percent of the small
211
farmers favoured this factor. This was very easy for them to sell the output at their
doorstep. Due to this easy nature of the output, the marketing of cotton was
attractive for the growers. Like small farmers, 87 percent of the medium and 78
percent of the large growers also favored the marketing of cotton being easy as their
produce can be sold at the door step. In the whole Multan and Bahawalpur region,
87 percent growers proposed farm gate selling as attractive factor in cotton
marketing.
This was another factor which encouraged the farmers to grow and market
the cotton produce in their respective areas. Most of the farmers favored that they
can get the hot cash from the sale of cotton output. In competition to cotton crop in
the study area, sugarcane crop was the second cash crop. But in Multan and
Bahawalpur region, 78 percent of the farmers favored this factor that payment for
cotton crop was quick and easy as compared to payment for the sale of sugarcane.
For the payment of sugarcane they had to wait for 1-2 months and then they had to
travel to Banks to get payment.Therefor, they were of the view that cotton
marketing is easy due to its quick payment.
This was third important factor which was favorite in the cotton marketing
in the study area. Cotton output is mostly picked by women labor, who pick and
transport the output manually at the storage place of the respective farms of the
respondents, 78 percent of the growers in the study area favored it that they like
cotton marketing due to its easy post harvesting practices (Table 6.43). The post
harvest handling of the competing crop i.e. sugarcane is very difficult as compared
to cotton. Results revealed that 81 percent small, 72 percent medium and 78 percent
of the large farmer positively responded toward this factor as attracting factors for
cotton marketing (Table 6.49).
212
6.16.4 Prestigious Crop
213
Table 6.50:Factors detracting the marketing of cotton at Grower’s level
(Percent).
Multan
Description of factors Small Medium Large
Region
More returns on sugarcane 64 72 85 69
Highly risky crop 51 59 71 56
Kind deductions by VB/CA 74 50 38 62
Lack of Transport 83 73 27 72
Lack of Market Intelligence 60 52 41 55
High cost of production/low profit margins 86 72 70 80
Cotton being highly risky crop was found another factor which discouraged
the farmers for cotton marketing / production. Data in Table 6.50 depicts that
farmer’s response towards this factor was not that severe. Only 55 percent of the
total farmers in Multan and Bahawalpur region responded that high risk of cotton
crop is the source of low involvement / investment in cotton marketing.
214
6.17.3 Kind Deduction by Village Beopari / Commission Agent
Another negative factor which was detacted in the study area was the kind
deduction by the village beopari/ commission agent. 74 percent small, 50 percent
medium and 38 percent large growers of the region were of the view that kind
deduction by village beopari/ commission agent reduced their profit. Growers are
forced to accept this routine practice of the village beopari/ commission agent. This
malpractice of the village beopari/ commission agent is a detracting factor for
cotton marketing in the study area.
Data in Table 6.50 depicts that the response towards this factor was
decreasing from small to large farmers. It was because of the power vested in large
farmers who do not let village beopari/ commission agent to do this illegal practice /
plundering with them. Therefore this is not a detracting factor in the marketing of
cotton for most of the large farmers but it was found as serious problem for small
and medium growers.
No doubt, selling the output directly in a ginning factory fetches high prices
but needs own transport facility. As most of the framers were small and resource
deficient, and do not possess transport except the large farmers. Response to this
factor from farmers was quite different. Maximum respondents who were small and
medium growers favoured this factor as detracting factor in cotton marketing.
While response of the large farmers was different (27 percent only), as they were in
possession of their own transport.
Response to this factor was not so severe as most of the farmers were found
aware of the cotton prices. 60 percent small, 52 percent medium and 41 percent
large growers positively supported this factor as detracting factor towards cotton
marketing. In Multan and Bahawalpur region 55 percent favored it as detracting
factor for the cotton marketing. Detail of the responses of the respondents in both
the districts is shown in the Table 6.50.
215
6.17.6 High Cost of Production / Low Profit Margin
When the farmers were asked about the liking and disliking of cotton
marketing, many farmers were of the view that they were not in the favor of cotton
marketing because profit margins were low in this crop. As a whole 86 percent, 72
percent and 70 percent small, medium and large growers replied that they do not
like cotton marketing due to its low profit margin (Table 6.50).
In this section, effort was made to identify the factors which were
considered to be attractive as well as detractive for the marketing of cotton, through
the application of logit model. In other words, it was assumed that marketing of
cotton was a function of certain factors, which may have some negative as well
positive impact on it.
If the respondents replied that specific factor was attractive factor for
marketing of cotton, it was coded as 1 other wise 0. It means attractive factor were
coded as 1 and detractive factors were coded as 0. Similarly the dependant variable
was the marketing of cotton. Conducting of marketing was coded as one and zero
otherwise.
The logit model was applied for analysis of qualitative data. The entire
variable in the model acquire only two values either 1 or 0. Mathematical form of
the logit model is:
Yi = α + Bxi + ui
216
the set of parameter coefficients to be estimated and α is intercept or constant.
Following hypothesis were formulated at each level of marketing channel of cotton.
Dependent Variable
Independent Variable
Variables Description
FGS: Farm gate selling. it attained the value 1 if favored, otherwise 0.
CP: Cash payment, if the respondents favored marketing due to cash
payment then coded as 1, otherwise 0.
EPHH: Easy post harvest handling. If the respondent replied that they
liked the cotton marketing due to the easiness in the post harvest
handling of cotton it was coded as 1, otherwise 0.
PC: Prestigious crop. If the farmers replied as favoring factor then
coded as 1, otherwise 0.
FEN: Fulfill the emergency needs. If the respondent replied that they
were engaged in the marketing of this crop as it fulfilled their
emergency needs then coded as 1, otherwise 0.
MRSC This was a factor showing the sugarcane as competing crop with
cotton. If the farmer replied that they like cotton marketing as
they were not getting more income from sugarcane then it was
coded as 1 otherwise 0.
KD: Kind deduction by village beopari/ commission agent. If they
replied that they do not like cotton marketing due to KD by
VB/CA then coded as 1 otherwise 0.
LMI: Lake of market intelligence about cotton prices. If they disliked it
due to this factor, then it was coded as 1 otherwise 0.
After defining the variables of the model, following hypothesis were formulated.
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6.18.1.1 Hypothesis 1
H 0: Farm gate selling of cotton output by growers was attractive factor for
marketing of cotton.
H 1: Farm gate selling of cotton output by the growers was not attractive factor
for the marketing of cotton.
6.18.1.2 Hypothesis 2
H 0: Cash payment to the growers for the cotton produced was an attractive
factor for its marketing.
H 1: Cash payment to the growers for their cotton produced was not an attractive
factor for its marketing.
6.18.1.3 Hypothesis 3
H 0: Easy post harvesting handling of cotton was an attractive factor towards its
marketing.
H 1: Easy post harvesting handling of cotton was not an attractive factor towards
its marketing.
6.18.1.4 Hypothesis 4
H 0: Prestigious ness of the cotton crop was an attractive factor for its marketing.
H 1: Prestigious ness of the cotton crop was not an attractive factor for this
marketing.
6.18.1.5 Hypothesis 5
H 0: Cotton fulfilling the emergency needs of farmer so they like its marketing
H 1: Cotton could not fulfill emergency needs of the growers so they do not like
its marketing.
218
6.18.1.6 Hypothesis 6
H 0: More returns from Sugarcane crop was a detractive factor towards the
marketing of cotton.
H 1: High returns from Sugarcane crop was not a detractive factor towards the
marketing of cotton.
6.18.1.7 Hypothesis 7
6.18.1.8 Hypothesis 8
H 0: Lake of market intelligence was detractive factor towards cotton marketing.
H 1: Lake of market intelligence was not a detractive factor towards cotton
marketing.
In order to test this hypothesis logit model was used. The results obtained from the
model analysis are shown in the Table 6.51.
Table 6.51: Logit model results showing the effect of various factors on the
Marketing of cotton at Grower level
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6.19 TESTING THE HYPOTHESIS AT COTTON GROWERS
LEVEL
6.19.1 Hypothesis 1
In this hypothesis it was tested that whether the selling of cotton by the growers at
form gate was an attractive factor for its marketing or not. Result in Table 6.51
depicts that coefficient for Farm Gate Selling (FGS) is 0.302 showing that there is
strong positive association between marketing of cotton and farm gate selling.
When its significance was checked it was found significant at 1 percent level. Thus
H0 is accepted that FGS is an attractive factor towards the marketing of cotton for
growers in the study area, so H1 is rejected.
6.19.2 Hypothesis 2
It is assumed that due to cash payment at the spot farmers liked the cotton
marketing. The data results revealed that coefficient for this hypothesis is 0.230
showing the positive impact of this factor on the dependant variable i.e. cotton
marketing. Statistically this is also significant at 1 percent level of confidence. The
H0 is accepted that cash payment is an attractive factor in cotton marketing. So, H1
(alternative hypothesis) is rejected.
6.19.3 Hypothesis 3
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6.19.4 Hypothesis 4
Cotton is estimated as prestigious crop for the growers due to which they
prefer the marketing / production of cotton. This hypothesis was also tested with the
help of logit model. Result in the Table 6.51 shows that co efficient for this variable
came out to be 0.122. The value for this variable is showing positive association
between marketing of cotton and farmer’s response towards the prestigious ness of
the crop. Statistically it is significant at 10 percent level of confidence. Thus H0 is
accepted that growers like cotton marketing, as it is a symbol of prestige for the
growers.
6.19.5 Hypothesis 5
Most of the rural masses especially small farmers belong to the resource
deficient class. They are in dire need of liquidity to fulfill their daily / emergency
needs. It was assumed that cotton is a crop, which could fulfill their daily needs.
This factor is also tested in the logit model to check whether it is an attractive factor
for cotton marketing or not. Results in Table 6.51 reveal that value for the
coefficient of this variable is 0.082 and statistically significant at 10 percent,
showing that as the cotton marketing fulfill the emergency needs of the growers so
it is an attractive factor in cotton marketing. H0 is thus accepted and H1 rejected.
6.19.6 Hypothesis 6
In the study area, sugarcane crop is a cash crop and is competing with the
cotton. So the farmers of Multan and Bahawalpur grow and market sugarcane also.
Thus, it was envisaged that sugarcane marketing may be detracting factor for cotton
marketing. The logit model results revealed that parameter estimate value for this
variable came out –0.124 showing negative impact on the independent variable
(Table 6.51). Statistically it is significant at 1 percent level of confidence. Thus H0
is accepted and alternative hypothesis is rejected, that sugarcane marketing is a
detractive factor for cotton marketing in the area.
221
6.19.7 Hypothesis 7
6.19.8 Hypothesis 8
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commission agent, they purchase phutti from 5-10 surroundings villages. In the
study area, it was observed that most of the Beoparies have developed special
relationship with ginning factories. They sometimes get some advance money from
ginners on the promise that they will sell the phutti to them only.
Most of the village beopari/commission agent in the whole region told that
they are engaged in the marketing of cotton due to the reason that they can run this
business with low revenue. Village beopari/commission agent responded that they
can buy phutti from the growers at promise for delayed payments. Then they sell it
into the ginneries and after getting their profit, return the amount to the growers.
It is the human nature that people like the things which return more with less
effort. Cotton marketing is one of it. It is a simple task, easy to handle and with
cheap availability of labor. Village beopari/commission agent favored that they are
engaged in this business because it is easy work. Perhaps due to its easy nature,
most of the village beopari/commission agents were found less educated in study
area.
6.20.3 Payment in Parts
Another factor which was found attractive for the marketing of cotton in the
Multan and Bahawalpur region, is payment in parts to the growers. Most of the
beopari/commission agent told that they have no compulsion to pay full, except in
few cases. Village beopari/commission agent replied that they pay to the growers in
223
installments. Such things made it easy for them to run this business. Thus payment
in installment to the growers was found to be an attractive factor for the cotton
marketing in the study area.
Similar to attracting factor some factors were also identified which seem to
be detracting for the marketing of cotton in the study area at village
beopari/commission agent level. These factors are explained below:
224
money from the share of VB/CA. This factor was found highly detractive factor in
the cotton marketing by VB/CA.
Again the improper and untimely picking of cotton adds moisture in the
seedcotton. The ginners ultimately deduct cotton from the share of VB/CA, so it
was found a detractive factor in cotton marketing the study area at village beopari /
commission agent level.
It was revealed by the VB/CA of the Multan and Bahawalpur region that most of
the ginners make the delayed payment to them. The ginners sell the seedcotton and
after earning profit, they make payments to the VB/CA which make this business a
detractive business for them.
225
Dependent variable
Independent variable
CBDP Can buy cotton from the growers at delayed payment. It attains
the value of 1, if favoured, otherwise 0.
EM Easy marketing of cotton. Make it an attractive factor for cotton
marketing. It attains the value of 1, if favoured as an attractive
factor, otherwise 0.
EAL Easily available labour at cheap rate is an attractive factor at
VB/CA level. If yes, then it attains the value of 1 otherwise 0.
DGVM If the varieties of cotton are mixed, the ginners deduct in kind or
amount from the share of VB/CA. If it is not detractive factor in
cotton marketing then it will attain the value of 1, otherwise 0.
LP Late payment by the ginners, if it is not a detractive factor, it will
attain the value of 1, otherwise 0.
6.22.1Hypothesis 1
H0: VB/CA can buy the cotton from the growers on the promise of making
H1: VB/CA can buy the cotton from the growers on the promise of making
6.22.2Hypothesis 2
H0: Easy marketing of cotton makes it an attractive factor for cotton marketing
at VB/CA level.
H1: Easy marketing of cotton makes do not make it attractive factor for cotton
6.22.3Hypothesis 3
H0: Easy and cheap availability of labour in the study area makes it an attractive
226
H1: Easy and cheap availability of labour in the study area does not make it an
6.22.4 Hypothesis 4
H0: Deductions by the ginners due to variety mix in Phutti is not a detractive
factor in cotton marketing.
H1: Deductions by the ginners due to variety mix in Phutti is a detractive factor
in cotton marketing.
6.22.5 Hypothesis 5
H0: Late payment by the ginners is a detractive factor in cotton marketing for
VB/CA.
H1: Late payment by the ginners is not a detractive factor in cotton marketing
for VB/CA.
After applying the logit model, following regression results were obtained.
227
6.23.1 Hypothesis 1
In this hypothesis, it was tested that the delayed payment to the growers by the
VB/CA is an attractive factor for them or otherwise. The results in the table 6.52
shows that the coefficient for this variable is 0.110. This shows a positive
relationship between marketing of cotton and delayed payment by the VB/CA.
Statistically it is significant at 5 percent level. Thus H0 is accepted that delayed
payment at promise to the growers by VB/CA is an attractive factor for VB/CA in
cotton marketing.
6.23.2 Hypothesis 2
For VB/CA, cotton marketing is an easy and simple job which they can handle
through easily available labour. When this variable was tested in the logit model,
the result shows that the coefficient is 0.290 showing a positive correlation between
easiness of the job and cotton marketing. Statistically it is significant at 1 percent
level. Thus H0 is accepted that easy marketing of cotton makes it an attractive factor
for VB/CA in cotton marketing. Thus H1 is rejected.
6.23.3 Hypothesis 3
Labour is a critical input for VB/CA also. For him, there is no requirement of
skilled labour. There is abundance of unskilled labour in the study area which
VB/CA can hire on cheap rates. When this variable was tested, the result reveals
that the coefficient for this variable is 0.308 showing a positive relationship with the
dependent variable i.e. cotton marketing. Statistically it was found significant at 1
percent level.
6.23.4 Hypothesis 4
Since there is no proper system for picking of cotton in the study area, so the
growers store / place the seedcotton at their farms without caring for its varieties.
The VB/CA are forced to purchase this variety mixture of seedcotton. The ginners
however, deduct in cash or kind from the share of VB/CA when it is sold to them.
This variable was tested and the result shows that the coefficient is -0.012 showing
a negative relationship between deduction by the ginners and cotton marketing. It
228
may be because of the reason that VB/CA are strong enough in the study area and
enjoy good relationship with the ginner. Statistically it was found not significant.
Thus we reject H0 and accept H1 that deduction by the ginner is a detractive factor
in cotton marketing.
6.23.5 Hypothesis 5
In the study area, it was observed that the ginners payment to the VB/CA is delayed
in few cases. When the variable was tested, the result shows that the coefficient for
this variable is -0.072 showing a negative relationship between dependent variable
and late payment So H0 is rejected and H1 is accepted that late payment by the
ginners to VB/CA is not a detractive factor for cotton marketing in the study area.
Statistically it was found significant at 10 percent level.
Third and yet another important segment in the marketing of cotton are
Ginners. Ginner purchase the seedcotton (phutti) either from growers, village dealer
/ commission agent or some time through specialized ginner’s agent .Then so
received phutti is processed and two-type of products are produced by the ginners.
First is the Lint and second is the cottonseed. The function of the ginner is
explained below:
Then lint is sold to the spinners through commission agents and cottonseed
to oil mills. In this section similar to producers and commission agents, the
attractive and detractive factor was identified at the ginner’s level.
Table 6.53 gives these factors and the respective response to each from
ginners.
229
Table 6.53: Factors attracting the marketing of cotton at the Ginners level
Description of factors Response Percentage
Easy to buy at factory gate 48 95
Easy handling 40 80
High profit margins due to by-products 38 75
Easy to sell the by-products 36 72
High demand of by-products 40 80
Low variable cost for processing of by-products 34 68
Source: Author’s Estimation.
When inquired from the ginners of the study area that what are the factors
which attract them the most in the marketing of cotton. Their response was that in
this business if they get the product at the factory gate, it is the most wanted
phenomena. Due to this practice, ginners save their money, time and effort for
search of product. 95 percent of the ginners of Multan and Bahawalpur region have
the opinion that due to this easy supply of the phutti, they like cotton marketing.
The second factor which is attractive for the marketing of cotton from the
ginner’s point of view is that it is easy to handle the seedcotton. Eighty percent
ginners told that the seedcotton handling and its processing is not complex as
compared to handling of sugarcane crop (Table 6.53).
Both the products are sold to different dealers .Thus ginners can earn dual
profit due to its by-product. Seventy five percent of the ginners supported this factor
as attractive factor for marketing of cotton.
230
6.24.1.4 Easy to Sell the By Products
Low cost of processing the cotton seed is yet another factor which was
found to be a source of attraction for the ginners. Sixty eight percent ginners told
that once the machinery is installed it can run for a long time period and can process
the cotton. The processing cost for sugarcane is much high, so ginners prefer cotton
processing along with processing of its by-products. The detail of these factors with
their respective responses from ginners is given in the Table 6.53.
Like attractive factors at ginners’ level, effort was made to identify the
detractive factors in the marketing of cotton at ginners level. Following factors were
identified:
Table 6.54: Factors detracting the marketing of cotton at the Ginners level
Table 6.54 explains the detail of these factors, which were identified as
detractive factor in marketing of cotton at ginner’s level.
231
6.24.2.1 Late Payment by Banks
Almost all the ginners response was that mixing up of different varieties
badly effect the quality of their out put and thus reduce their profit. Ninety eight
percent ginners told that mixing up of the varieties is discouraging / detractive
factor in marketing of cotton. They further told that there is no possible solution to
this problem as there is no such arrangement at the farmer’s level that they can store
their output variety wise. Illiteracy in farmers is further aggravating the situation
and they are not even ready to know the usefulness of storing the cotton variety
wise. The farmers try only to increase their profit at any cost.
232
6.24.2.5 High Risk of Burning
When ginners were asked about the fear of burning of their products, they
were somewhat in different toward this factor as detractive factors in marketing of
cotton. Only 54 percent favored this factor as detractive factor. It seems that they
have developed measures to manage the risk of burning and it was observed that in
maximum cases products were insured as shown in Table 6.54 above.
Dependent Variable
Independent Variable
Variable Description
EBFG = Easy to buy at factory gate. Attained the value 1 if favored,
otherwise 0.
HPM: High profit margins due to by-products, if the respondents
favored marketing due to high profit margins coded as 1,
otherwise 0.
ESBP: Easy to sell the by-products, if the respondent replied that they
like cotton marketing due to easy sale of by-products, then it was
coded as 1, otherwise 0.
HDBP: High demand of byproducts. If the farmers replied as favoring
factor then coded as 1, otherwise 0.
LPFB: Late payment from Banks. If the respondent quoted late payment
from Banks as detractive factor then it was coded as 1, otherwise
0.
MUV: Mixing up of varieties. If the respondent replied that they do not
like cotton marketing due to mixing up of varieties, it was coded
as 1 otherwise 0.
HRB: High risk of burning. If response of the respondent is that they do
not like cotton marketing due to HRB then coded as 1 otherwise
0.
HMC: High moisture contents. If they disliked it due to this factor, then
it was coded as 1 otherwise 0.
233
After defining the variables of the model, following hypothesis are formulated.
6.25.1 Hypothesis 1
H 1: Easy to buy at factory gate is not an attractive factor for cotton marketing.
6.25.2 Hypothesis 2
H 0: High profit margins due to by products are an attractive factor for cotton
marketing.
H 1: High profit margins due to by products are not an attractive factor for cotton
marketing.
6.25.3 Hypothesis 3
6.25.4 Hypothesis 4
6.25.5: Hypothesis 5
234
6.25.6 Hypothesis 6
6.25.7 Hypothesis 7
6.25.8 Hypothesis 8
In order to test these hypothesis, logit model was used. The result obtained from the
model analysis is given in the Table 6.55.
Table 6.55 Logit model results showing the effect of various factors on the
Marketing of cotton at Ginners level.
Description of factors Coefficient SE T value
Easy to buy at factory gate 0.283*** 0.054 5.217
High profit margins due to by products 0.087 0.075 1.153
Easy to sell the byproducts 0.112 0.062 1.809
High demand of byproducts 0.046* 0.022 2.123
Late payment from Banks -0.052*** 0.012 -4.244
Mixing up of varieties -0.187*** 0.032 -5.829
High risk of burning -0.012 0.045 -0.274
High moisture contents -0.175* 0.079 -2.230
Source: Authors Estimations.
*** = Significant at 1 percent level
** = Significant at 5 percent level
* = Significant at 10 percent level
235
6.26 TESTING THE HYPOTHESIS AT GINNER’S LEVEL
6.26.1 Hypothesis 1
In this hypothesis it was tested that purchasing phutti at factory gate is an attractive
factor for ginners in marketing of cotton or not. Result in Table 6.55 depicts that
coefficient for this factor (EBFG) is 0.283 showing that there is positive association
between marketing of cotton and Easy to buy at factory gate. When its significance
is checked it was found significant at 1 percent level of confidence. Thus H0 is
accepted that (EBFG) is an attractive factor in the marketing of cotton for ginners in
the study area, hence H1 is rejected.
6.26.2 Hypothesis 2
It is assumed that due to high profit margins of by- products, ginners like the
cotton marketing. The data results reveal that the value for this coefficient is 0.087
showing the positive impact of this factor on the dependant variable i.e. cotton
marketing but statistically this is not significantly different from 0. Thus H0 is not
accepted that high profit margins due to by-products are an attractive factor. Thus,
H1 the alternative hypothesis is accepted in this case.
6.26.3 Hypothesis 3
6.26.4 Hypothesis 4
236
help of logit model. Results in the Table 6.55 show that co-efficient for this variable
is 0.046. The value for this variable shows positive association between marketing
of cotton and high demand of byproducts. Statistically it is significant at 5 percent
level. Thus H0 is accepted that high demand of by-products is an attractive factor at
ginner’s level in cotton marketing. Thus H1, the alternative hypothesis is rejected.
6.26.5 Hypothesis 5
Most of the ginners who had shifted from the business of cotton marketing
to some others businesses replied that delayed payment from banks is a major factor
which discourage them to leave this business. This factor is also included in the
logit model equation. The data results given in Table 6.55 reveals that the value for
this variable is -0.052 showing that there is an inverse relationship between cotton
marketing and late payment from banks. Statistically this factor is found
significantly different from 0 at 1 percent level of confidence. Thus, null hypothesis
H0 is accepted that late payment from banks is a detractive factor for the marketing
of cotton at the ginner’s level. Hence H1 is rejected.
6.26.6 Hypothesis 6
6.26.7 Hypothesis 7
In the study area many instances were noted when the lint processed by
ginners is burnt due to multiple reasons. It is tested that the fear of burning of the
produce is discouraging factor for the ginners or not. The results in the Table 6.55
237
depicts that this factor seems to be detractive because coefficient for this variable is
-0.012 but practically it is not significantly different from zero. Thus null
hypothesis H0 is rejected and alternative hypothesis H1 is accepted. It might be due
to the reason that most of the ginner’s produce is insured. So they were having no
fear of burning.
6.26.8 Hypothesis 8
Most of the ginners reveal that they are about to abandon the business of
cotton marketing due to the high moisture contents in the produce. Results obtained
through logit model verified this concept as sign for this variable came out negative
(-0.175) and significant at 5 percent level of confidence (Table 6.55). Thus, H0 is
accepted and H1 rejected that high moisture contents of products is a detractive
factors towards cotton marketing at the ginner’s level.
Most of the spinners told that cotton marketing business is easy for them as
handling of the business is not complicated like business dealing with the products
238
from other crops. Eight four percent of the spinners favored it as attractive factor in
cotton marketing (Table 6.56).
Another peculiar factor which was identified by the spinners of the study
area was low variable cost incurred on its processing. They were of the view that no
extra inputs are needed to facilitate the processing of lint as compare to the
processing of sugarcane where many machinery / chemicals are required. Sixty five
percent of the spinners favored this factor as attractive factor for cotton marketing
(Table 6.56).
The success of any business depends upon the prevailing demand of its
products. Most of the spinners viewed that there is good demand for their quality
products. The high demands for their product encouraged them to run business of
cotton marketing. Data in Table 6.56 depicts that 72 percent of the spinners
supported high demand of cotton product as an attractive factor in marketing of
cotton.
Table 6.56 Factors attracting the marketing of cotton at the Spinners level
Description of factors Response Percentage
Easy to handle 25 84
High profit margins 21 70
Low variable cost 20 65
High demand of product (cloth) 22 72
Factory gate supply 23 76
Source: Author’s Estimation.
239
6.27.2.5 Factory Gate Supply
In the study area, it was observed that spinners have hired commission
agents who supply them the lint at their factory gate and maximum spinners were
getting lint from ginners through these commission agents. Such easy supply also
encouraged spinners to be in the business of cotton marketing. Data in Table 6.56
reveals that 76 percent of the spinners supported this factor as an attractive factor in
the marketing of cotton.
Every activity has both types of aspects i.e. positive or negative. Similar to
the ginners, at spinners level there are attractive as well as detractive factors which
were identified in the course of the study. Among many, the most critical and
detractive factors which were narrated by the spinners, are depicted in the Table
6.57.
Spinners output is known as yarn. Majority of the spinners replied that they
are bound to produce low quality yarn due to the supply of low quality lint. This
low quality lint is due to variety mix and adulterated phutti. These factors lowered
the demand for their product (yarn). Due to this low demand of the yarn, they are
fetching low prices in the market. Thus this is a discouraging and detractive factor
in the marketing of cotton. Sixty eight percent spinners agreed that low quality of
yarn is a detractive factor for them (Table 6.57).
240
6.28.3 High Rate of Markup on Investment
Most of the spinners told that they are paying heavy interest rate to the
banks against the loan which they get for their investment. Such heavy interest
lessened their profit and thus discouraged their business of marketing .Results in
Table-6.57 depicts that 70 percent of the respondents accepted it as detractive factor
for marketing of cotton.
Spinners told that many times they do not receive the payment from their
buyers in time but on the other hand they have to pay the cash to ginner’s at the spot
creating imbalance in their business. Some times, due to late payment to the ginners
their reputation is at stake. This bad reputation in the business is a detractive factor
and 60 percent spinners favored that urgent payment to the ginners is a detracting
241
6.29 HYPOTHESIS FORMULATION AT SPINNER’S LEVEL
Dependent Variable
Variable Description
HPM High profit margins. Attains the value 1 if favored, otherwise 0.
LVC Low variable cost, if the respondents favored marketing due to
low variable cost coded as 1, otherwise 0.
HDP High demand of product, if the respondent replied that they like
the cotton marketing due to high demand of product then it is
coded as 1, otherwise 0.
FGS: Factory gate supply, if the spinners reply as attractive factor then
coded as 1, otherwise 0.
LQY: Low quality of yarn, if the respondent replied that they are not
engaged in the marketing of cotton due to low quality of yarn
then it is coded as 1, otherwise 0.
HMU: High rate of mark up on investment. If the spinners replied that
they do not like cotton marketing due to high rate of mark up on
investment it was coded as 1 otherwise 0.
DCD: Daily changing demand. If they replied that they do not like
marketing due to DCD then coded as 1 otherwise 0.
UPG: Urgent payment to ginners. If they dislike this factor, then coded
as 1 otherwise 0.
6.29.1 Hypothesis 1
242
6.29.2 Hypothesis 2
6.29.3 Hypothesis 3
6.29.4 Hypothesis 4
6.29.5 Hypothesis 5
6.29.6 Hypothesis 6
6.29.7 Hypothesis 7
243
6.29.8 Hypothesis 8
In order to test this hypothesis logit model was used. The result obtained from the
model analysis are given in the Table 6.58.
Table 6.58: Logit model results showing the effect of various factors on the
Marketing of cotton at Spinners level
6.30.1 Hypothesis 1
244
indicating that null hypothesis H0 can not be accepted. Thus alternative hypothesis
H1 is accepted that high profit margin is not an attractive factor at the spinners level.
6.30.2 Hypothesis 2
6.30.3 Hypothesis 3
Every entrepreneur tries to take part in the business for which inputs are
easily available and output has good demand. As in Pakistan textile is a major
sector of economy, thus it is believed that spinner’s product i.e. yarn has good
demand due to which they are involved in this business. Logit model results in
Table 6.58 depicts that there is positive association between High Demand of
Product (HDP) and Cotton Marketing. Statistically it is significant at 1 percent
level. Thus null hypothesis H0 is accepted that high demand for the spinner’s
quality product is an attractive factor for spinners business in cotton marketing so
H1 is rejected.
6.30.4 Hypothesis 4
245
6.30.5 Hypothesis 5
Most of the spinners explained that they are facing the problem of low
quality yarn, mainly due to the reason that they are being supplied with the variety
mix lint. Thus they are bound to produce the low quality yarn. For this, they are
facing the problem of payment in market, hence getting, low prices of their
produce. This factor was added in the logit model equation to test whether it is
detractive towards cotton marketing or not. Logit model results shows that the
coefficient for this variable is negatively (-0.097) related with the dependent
variable and significant at 5 percent level of confidence. Thus null hypothesis H0 is
accepted that low quality yarn is a detractive factor towards the cotton marketing at
spinners level. So H1, the alternative hypothesis is rejected.
6.30.6 Hypothesis 6
It was observed that most of spinners in the study area started their business
through loaning from banks. In return they are paying high rates of mark ups.
Regarding this factor the response of the spinners was noted and analyzed. A
negative association was found between this variable and dependent variable (Table
6.58). Further more this factor was found significant at 5 percent level of
confidence, recommending that null hypothesis H0 should be accepted that high rate
of interest from banks is discouraging factor for the spinners. H1 i.e. alternative
hypothesis is rejected.
6.30.7 Hypothesis 7
Another discouraging factor which was revealed by the spinners is the daily
changing demands for the products. Due to these changing demands the spinners
have to reinvest time and again. Response regarding this factor from the spinners
was also noted and analyzed. Data results depict a significant and negative
relationship between dependent and independent variables (-0.212). Thus, the null
hypothesis H0 is accepted that the daily changing demand for the products is
discouraging and detractive factor for spinners in cotton marketing. Alternative
hypothesis H1 is thus rejected.
246
6.30.8 Hypothesis 8
During the course of interview, most of the spinners told that they are facing
the problem of delayed payment from banks and they had to pay cash payment to
the lint suppliers (commission agents/ginners) at the spot. Logit model results
reveal that this variable depicted negative association (-0.022) with cotton
marketing and was significantly different from 0 at 10 percent level of confidence.
Thus, the null hypothesis H0 is accepted that urgent payment to ginners is a
detractive factor towards cotton marketing at the spinner’s level and alternative
hypothesis was rejected.
6.31 CONCLUSION
The growers, ginners and spinners of Pakistan must have a more mature
marketing mechanism. The subsidy-oriented dependence on government cannot
provide them the required returns. Most of the stakeholders in the cotton marketing
spent time on crop production and processing and too little time is spent upon
marketing.
247
CHAPTER 7
COTTON PRODUCTION– A TIME SERIES
APPROACH
7.1 INTRODUCTION
One of the objectives of the study is to assess the production status of cotton in
Pakistan. In this Chapter, endeavor has been made to encompass cotton production and
its related issues and future of cotton in Pakistan. Cotton production has a fluctuating
history in the Pakistan. Sometime there was a boom in production whereas in some cases
even domestic needs could not be met. Since marketing has direct link with production so
marketing faces the same fate. There are big challenges for the policy makers and all
stakeholders involved in cotton production and marketing.
Production of cotton mainly depends on yield per hectare and area allocated for
this crop. Conceptually, this study assumes that the cotton growers follow a two-step
decision making process. The first step is that they decide which crop to be planted and
how much land to be allocated for each crop. The grower decides about the levels of
inputs for each crop, in the second step. Two separate models for yield response and
acreage were analyzed to assess the production of cotton. A diagrammatic illustration of
cotton production problems revolving around yield and area (Gillham et al, 1995) is
appended in Fig. 7.1 below.
248
Fig. 7.1 A model representing problems of cotton production
249
It is evident from Fig. 7.1 that production of cotton mainly depends upon the yield
and acreage. Keeping this concept in view, yield and acreage model will be analyzed /
discussed in the preceding section.
For both yield and acreage models, a linear functional form were selected because
it can accommodate different functional relationship between the dependent variable
(yield and acreage) and each of the explanatory variables. The linear function form can
produce direct measures of the elasticities of the dependent variable with respect to
change in the explanatory variables i.e. of the percentage changes in the yield and acreage
caused by one percent change in each of the explanatory variable. The log-linear model
specification has been widely utilized in previous studies (Ali 1990, Nara et al, 1981;
Ahmad, 1975).
All of the explanatory variables are measured simultaneously with the dependent
variables. Lag structures were also tested to find out the lagged response of the dependent
variable against the explanatory ones.
250
The most important job in regression analysis is to decide whether the classical
assumptions hold for a particular equation. The classical assumptions must be met in
order for ordinary least square (OLS) estimators to be the best available. The classical
assumptions are appended below. An error term satisfy Assumption 1 through V is called
a classical error term, and if assumptions VII is added, the error term is called a classical
normal error term.
I. The regression model is linear in the coefficients and the error term.
III. All explanatory variables are un-correlated with the error term.
IV. Observations of the error term are uncorrelated with each other (no serial
correlation)
VII. The error term is normally distributed (this assumption is optional but usually is
invoked).
The secondary data related to cotton area, yield, pesticide value, relative price of
wheat with cotton, relative price of rice with cotton and rainfall is given in Table 7.1.
251
Table 7.1 Secondary Data for Cotton (1976-2007).
Year Area Yield Pesticide Seed Wheat Basmati Rainfall Wheat Rice
(000 (kg / Value Cotton Price Rice (mm) Price Price
hectare) ha) (Mil. Rs.) Market (Rs./40kg) Price Relative Relative
Price (Rs./40 to Cotton to Cotton
(Rs. / 40 kg)
kg)
1976 1865 224 460.639 128.62 37 52 149.5 3.48 2.47
1977 1843 300 254.464 141.48 37 95 133.1 3.82 1.49
1978 1902 244 188.81 143.62 45 110 395.2 3.19 1.31
1979 2023 368 167.655 158.7 46.6 110 221.1 3.41 1.44
1980 2109 339 224.717 182.46 54.1 127.8 149.2 3.37 1.43
1981 2214 338 230.626 182.25 58 85 185.5 3.14 2.14
1982 2263 364 396.712 189.43 64 88 276.5 2.96 2.15
1983 2221 223 685.84 286.86 64 90 496 4.48 3.19
1984 2242 450 1196.624 208 70 90 101.2 2.97 2.31
1985 2364 515 1416.809 201.33 80 93 143.6 2.52 2.16
1986 2505 527 1878.039 212 80 102 233.0 2.65 2.08
1987 2568 572 1769.267 231.5 82.5 130 81.2 2.81 1.78
1988 2508 569 1382.904 244.33 85 135 130.9 2.87 1.81
1989 2599 560 1249.274 282.33 96 143.5 199.2 2.94 1.97
1990 2662 615 4581 330.2 112 143.5 73.6 2.95 2.30
1991 2836 768 5536 313.83 124 155 92.2 2.53 2.02
1992 2836 543 6554 389.2 130 175 358.2 2.99 2.22
1993 2805 488 5384 540.67 160 185 309.6 3.38 2.92
1994 2650 514 5808 831.6 160 210.9 305.4 5.20 3.94
1995 2998 601 7274 760.4 173 222 235.1 4.40 3.43
1996 3149 506 9987 848 240 255.3 135.5 3.53 3.32
1997 2960 528 9904 840.5 240 310 312.6 3.50 2.71
1998 2923 511 6960 941.67 240 330 134.9 3.92 2.85
1999 2983 641 7324 657.5 300 350 138.6 2.19 1.88
2000 2928 623 4971 873.13 300 385 89.3 2.91 2.27
2001 3116 579 7741 758.86 300 385 248.9 2.53 1.97
2002 2794 621 6790 954.8 300 385 70.2 3.18 2.48
2003 2989 571 8138 1328 350 400 170.4 3.79 3.32
2004 3192 760 12592 926.67 400 415 150.5 2.32 2.23
2005 3101 714 10379 1084.67 415 460 269.6 2.61 2.36
2006 3250 663 5906 1159.2 425 113.6 2.73 -
2007 3250 603 12290 1408.8 625 167.8 2.25 -
Source:
1. United States Department of Agriculture
2. Agricultural Statistics of Pakistan (1970-2007)
3. Central Cotton Research Institute, Multan (1976-2007)
4. Author’s Calculation (Price relative to competing crops)
The above mentioned data has been plotted graphically in Fig. 7.2.
252
Fig. 7.2 Graphical Representation of the Secondary Data
1. 4 8. 1
1. 2 8. 0
1. 0 7. 9
0. 8 7. 8
0. 6 7. 7
0. 4 7. 6
0. 2 7. 5
5 10 15 20 25 30 5 10 15 20 25 30
LCRPR LAREA
1. 8 10
1. 6
9
1. 4
8
1. 2
7
1. 0
6
0. 8
0. 6 5
5 10 15 20 25 30 5 10 15 20 25 30
LCRPW LPESTI CI DE
6. 5 6. 8
6. 6
6. 0
6. 4
5. 5 6. 2
6. 0
5. 0 5. 8
5. 6
4. 5
5. 4
4. 0 5. 2
5 10 15 20 25 30 5 10 15 20 25 30
253
7.3 SPECIFICATION OF MODELS
In the model specified for the analysis, cotton yield (Yield) and acreage (Area) are
the dependent variables whereas rice price relative to cotton (CRPR), wheat price relative
to cotton (CRPW), pesticide value (Pesticide) and rainfall (RF)) are the explanatory
variables. Both for yield and area, two models have been specified.
The functional form of the model for Yield and Area are explained as under:-
Yield Model
Model 1:
Model 2
Area Model
Model 1:
Model 2
In all the above models, C denotes constant or intercept whereas εt describes error
term. The OLS method is considered to be the ‘Best (minimum variance) Linear Un-
254
biased Estimator (BLUE)’ called regression models. Therefore, all the models are based
on regression analysis. The results of different models are presented in Table 7.2.
The results are displayed in the above table in which Log (Yield) is taken as
explanatory variable. R2 of 0.86 indicates that the model above is able to explain 86% of
the variation in the cotton yield observed in Pakistan during the years 1976 through 2007.
During this period, yield appears to be negatively influenced by rainfall and relative price
of competing crops i.e rice and wheat. However though out the period, yield seems to be
affected positively by price of pesticide and acreage. The results imply that one percent
increase in Area will lead to 1.476 % increase in yield. Similarly 1% increase in relative
price of competing crops i.e rice and wheat, will decrease the cotton yield by 0.260 and
0.137 percent respectively.
255
Table 7.3 Acreage Model 1
The results are displayed in the above Table 7.3 when Log (Area) is taken as
explanatory variable. R2 of 0.93 indicates that the model above is able to explain 93
percent of the variation in the cotton acreage observed in Pakistan during the years 1976
through 2007 .During this period, area appears to be positively influenced by yield,
rainfall, pesticide pricing, and relative price of competing crop i.e rice. However
throughout the period, area is negatively affected by competing crop i.e. wheat. The
results imply that one percent increase in relative price of competing crop, i.e wheat
would cause a moderate 0.039 percent decrease in cultivated area. At the same time, 1
percent increase in yield will increase the cultivated area by 0.174 percent.
Before applying data analysis for time series, it is important to discover if the data
series are stationary or non-stationary. A stationary series is that in which dependent
variable has a constant mean and variance over time. A non-stationary series is a time
series that exhibits some sort of upward or downward trend (a non constant variance)
over time. Based on the co-integration test, EVIEWS software was used taking variables
LArea, LYield, LCRPR, LCRPW, LPesticide, and LRF as the test variables and
Augmented Dicky Fuller Test (ADF) was used for stationary test.
256
In order to check its stationarity, a very simple way i.e. graphical representation of
the independent variables i.e. Area and Yield have been done and given below in Fig. 7.3
and 7.4.
6.8
6.6
6.4
6.2
6.0
5.8
5.6
5.4
5.2
5 10 15 20 25 30
LYIELD
It is evident from the Fig. 7.3 that the yield data series are non-stationary. The
data will be converted into stationary series before applying ARMA technique.
257
Fig. 7.4 A non-stationary trend of the dependent variable (Area)
8.1
8.0
7.9
7.8
7.7
7.6
7.5
5 10 15 20 25 30
LAREA
It is evident from the Fig. 7.4 that the Area data series are non-stationary. The
data will be converted into stationary series before applying ARMA technique.
258
The hypothesis is Ho: δ = 0 (Unit Root)
H1: δ ≠ 0
The t*> ADF critical value, then we cannot reject null hypothesis which means
unit root exists.
If t* < ADF critical value, then the null hypothesis is rejected indicating unit root
does not exist.
First, integration order of all the variables has been determined using Augmented
Dickey-Fuller test to avoid the spurious regression phenomenon in time series analysis.
This test has been performed with intercept and with trend and intercept both. The results
are displayed in table 7.4 and table 7.5. The results imply that Log (Area), Log (CRPR)
Log (Yield), Log (CRPW), and Log (Pesticide) are integrated of order one i.e. I (1) while
Log (RF) is integrated at level i.e. I (0) when checked with intercept. There is a bit
difference in results when checked with trend and intercept., Log (Area) , Log (Yield)
Log(CRPW) and Log(RF) are stationary time series at 1st difference, while Log (CRPR)
and Log (PESTICIDE ) are stationary time series at 2nd difference
259
Table 7.5: Augmented Dickey-Fuller Test with Trend and Intercept
260
In order to check the multi-collinearity in this model, the variable CRPW has been
excluded. The result indicates that by dropping this variable, the value of the R2 in both
the models remained same whereas the t-value of all the variables i.e. Area, CRPR,
Pesticide and Rainfall has increased i.e. 3.13, -2.71, 0.856 and -2.95 respectively showing
that the relative price of the competing crop i.e. wheat is a multi-collinear variable.
The multi-collinearity in this model has been checked by excluding the variable
CRPW. The result indicates that by dropping this variable, the value of the R2 (0.93) in
the model remained same whereas the t-value of yield, Pesticide and Rainfall has
increased i.e. 3.13, 4.72, and 2.07 respectively showing that the relative price of the
competing crop i.e. wheat is a multi-collinear variable. Summary of the determinants of
Log Linear Regression Results for all the models are appended below in Table 7.8.
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Table 7.8 SUMMARY OF THE DETERMINANTS OF LOG-LINEAR
REGRESSION RESULTS OF COTTON: TIME SERIES DATA
Yield Area
Variable Model-1 Model-2 Model-1 Model-2
Area 1.476 1.549 - -
(2.88)* (3.134)*
CRP (R) - 0.260 -0.345 0.036 0.013
(-1.435)* (-2.717)* (0.564)* (0.279)*
CRP (W) -0.137 - -0.039 -
(-0.669)* (-0.558)*
Pesticide 0.050 0.054 0.073 0.075
(0.778)* (0.856)* (4.449)* (4.726)*
RF -0.147 -0.154 0.040 0.397
(-2.759)* (-2.95)* (2.065)* (2.070)*
Yield - - 0.174 0.182
(2.885)* (3.134)*
Intercept -4.668 -5.329 6.012 5.925
(-1.295)* (-1.554)* (16.303)* (17.93)*
2
R 0.86 0.86 0.93 0.93
N 30 30 30 30
t statistic
Author’s calculations
Furthermore, ARMA (1,2) has been used to avoid the problem of autocorrelation.
Goodness fit of the model can be assessed by the value of F-statistic. The estimated
results of the different models are given below in Table 7.9:
262
Table 7.9 ARMA (Yield-1)
The results are displayed in the above table 7.9 when Log (AREA), Log (CRPR),
log (CRPW), Log (PESTICIDE), and Log (RF) are taken as explanatory variables. The
coefficients of area and pesticide are positively significant at 1 percent level as indicated
by t values of explanatory variables while CRPW, CRPR and RF are negatively
significant at 1 percent level. The results imply that one percent increase in Area will lead
to 0.79% increase in yield. Similarly 1% increase in Pesticide will lead to 0.098%
increase in yield. Moreover, ARMA (1, 2) has been used to remove the problem of
autocorrelation. 86% of the total variation in yield is due to Area and pesticide. Overall
model is also good fit as indicated by the 18.92 (value of F-statistics).
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Table 7.10 ARMA (Yield-2)
In model II Log (Area) and Log (Pesticide) is found to be positively related and
has also significant impact at 5% level on Log (Yield). It implies that 1 percent increase
in area will lead to 1.027% increase in yield. Moving Average process two has been used
to remove the existing problem of autocorrelation in the model. 85 percent of the total
variation in the dependent variable is due to the explanatory variables. The value of F-
264
Table 7.11 ARMA (Acreage-1)
In Acreage Model-1, Log (Yield), Log (CRPR) Log (Pesticide)) and Log (RF) are
found to be positively related and has also significant impact at 5% level on Log (Area).
Log (CRPW) is the only variable having negative relation with dependent variable. It
implies that 1 percent increase in yield will lead to 0.05 percent increase in area, 0.07
percent increase in relative price of rice, and 0.07 percent increase in value of pesticide.
Moving Average process two has been used to remove the existing problem of
autocorrelation in the model. 95 percent of the total variation in the dependent variable is
due to the explanatory variables. The value of F-statistics i.e. 58.26 indicates that model is
good fit.
265
Table 7.12 ARMA (Acreage-II)
Dependent Variable: LAREA
Sample(adjusted): 1977 2005
Variable Coefficient Std. Error t-Statistic Prob.
In Acreage model II, Log (Yield), Log (CRPR) Log (Pesticide) and Log (RF) are
found to be positively co-related and has also significant impact at 5% level on Log
(Area). It implies that 1 percent increase in yield will lead to 0.08% increase in area,
0.007 percent increase in relative price of rice, and 0.08 percent increase in value of
pesticide. Moving Average process two has been used to remove the existing problem of
autocorrelation in the model. 94 percent of the total variation in the dependent variable is
due to the explanatory variables. The value of F-statistics i.e. 63.01 indicates that model is
good fit.
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7.5 FORECASTING
Future belongs to those who plan for its best. Predictions that involved explaining
the events which will occur at some future time are called forecast. Forecasting involves
the generation of a number, set of numbers, or scenario that corresponds to a future
occurrence. It is absolutely essential to short-range and long-range planning. By
definition, a forecast is based on past data, as opposed to a prediction, which is more
subjective and based on instinct, or guess. Generally, forecasting is based on few
assumptions such as:
Time series analysis is used to predict future values of variable from their past
values. Time series data of cotton yield and acreage for 32 years collected from
secondary sources to measure the development in cotton during the study period,
compound growth rate formulae (Shah et al, 2005) was used for calculating percent
change in acreage and yield.
Compound Growth Rate = (Last year / first year) ^ (1/Number of Years)-1 x 100
Yt = Yo (1+r)t
Where
Yt = Area/Yield in year t
267
Basing on the following formulae, forecasting of area and yield has been carried out up to
the year 2015.
Increase in cotton production is required to meet the rising mill use demand. It is
expected primarily due to increase in yield per hectare. Table 7.12 reveals that yield is
projected to increase by 10 percent to the level of 714 kgs lint per hectare. Harvested area
is project to increase to the level of 3.572 million hectares (25 percent increase) over
2007-08.
Projected area and yield by the year 2015 is further explained and shown in Fig.
7.5 below.
268
Area (000 hectares)
Fig. 7.5
0
500
1000
1500
2000
2500
3000
3500
4000
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
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1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
Area
1987
1988
1989
1990
1991
1992
Yield
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
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2006
2007
Forecasting of Area & Yield using Annual Compound Growth Rate Method
2008
2009
2010
2011
2012
2013
2014
2015
0
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300
400
500
600
700
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900
Yield (Kgs/ha)
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7.6 CONCLUSION
Secondary data for cotton area, yield, pesticide value, price of cotton, price relative to
wheat, price relative to rice and rainfall was collected from the year 1976 to 2007. The
data was analyzed to observe the impact of each variable on yield and acreage of cotton
by using econometric technique with the application of EVIEWS (a statistical package).
The results indicate that yield of cotton is influenced by all the variables, however, yield
seems to be negatively influenced by relative price of the competing crop i.e. wheat. In
order to check the multi-co linearity, the variable relative price of the wheat was dropped.
The results obtained show that the value of R2 in both the models remains same whereas
the t-value of other variables has increased indicating that relative price of wheat is a
multi-colinear variable.
In order to assess the influence of all these variables on acreage of cotton, acreage model
was applied. The results obtained indicate that the area is influenced by all the variables
positively except relative price of competing crop i.e. wheat which shows negative
influence. In order to check the multi-colinearity the variable CRPW was excluded. The
results show that R2 0.95 remained the same in both the models but the t-value of the
other variables increased indicated that CRPW is a multi collinear variable.
In order to predict yield and acreage trend by the year 2015, forecasting was carried out
by using compound growth rate formulae. It is forecasted that the yield would increase by
10 percent to the level of 714 kgs lint per hectare where the acreage would increase to the
level of 3.572 million hectares showing an increase of 25 percent over the year 2007-08.
270
CHAPTER 8
Cotton is the backbone of the Pakistan's economy. Pakistan can also take pride
in being one of the world's major produces and exporters of raw cotton and yarn.
Despite this, it is surprising that it is not yet recognized as a quality conscious
producer in the international market. It has, therefore, to be realized that further
economic gains in cotton production would only come if higher production coupled
with qualitative improvements is carried out. This is important as the country is likely
to continue as area of the major exporters of raw cotton and yarn and at the same time
will endeavor to accelerate its failure exports.
It was noticed during the course of study that mixing of varieties at the farm
and the ginning level depreciates staple length of the cotton. The problem can be
controlled by increasing the area under certified seed and by ensuring strict grading
standards at the ginning stage. Another aspect observed was that there is dire need to
271
improve yield and fibre quality. Yield can be increased in two ways i.e. improving
seed cotton yield or by improving lint yield (GOT). Seed cotton yield refers to yield
of cotton before ginning. It includes both lint and seed. On the other hand, lint yield
refers to yield of fibre after ginning.
Cotton crop is attacked by severe diseases and insect pests that results in
considerable losses in yield. The genetic resistance is the cheapest and best way of
reducing such losses in yield. Bt seed cotton has shown positive results against pests.
In USA, Monsanto Seed Company has developed transgenic cotton which can be used
in Pakistan also. Early maturity of cotton is a desirable character which has several
advantages. Early maturity variety permits multiple cropping system, escape from the
late pests and reduces cost on pesticide sprays and crop management, thus resulting in
reduced cost of production. It is my feeling that heat resistance is another
characteristic that needs to be developed in local varieties because this will help in
earlier planting and earlier harvesting and higher yield.
Having produced a healthy cotton crop is just not enough unless the marketing
mechanism allows for a fair profit, the grower will look for other options. Marketing
requires predicting future prices, yield and production. It was felt that there is a need
that a grower must have the information about the domestic cotton demand at least.
To analyze this aspect, Chapter 7 was included in the study which includes the
forecasting and future estimation of acreage and yield. This will provide an insight of
the market to future researchers and growers.
Marketing cotton for the best possible return often depends upon the
marketing alternative adopted. The grower can no longer sit back and just accept the
cotton market offers at harvest or the market price when he decides to take his crop to
the market. He can sell it at harvest, can even contact for sale before planting. The
grower can sell a part of crop at harvest to meet the emergency needs and store the
remainder for later sale and he can even hedge in the future markets.
While visiting the ginning industry in the study area, it was observed that there
is a need to advance and improve efficiency of ginning by increasing its capacity
reducing energy, maintenance and labour cost, by improving fibre quality. All of
these factors mean higher profit to the ginner and better quality lint cotton for the
272
spinning units. One of the crucial factors for quality and efficiency of ginning is
moisture control. Excess moisture in seed cotton causes seed breakage and higher
power requirement. Low moisture in lint after ginning and before pressing causes
fibre damage and increases fire hazards. Accurate moisture level increase efficiency
of press. So there is a dire need to adopt a system which can measure and control the
moisture.
In the study area, it was observed that spinning industry manufactures all
counts of yarn but traditionally, the product mix is highly tilted towards low value
added yarn. About 70 percent of the Pakistan’s yarn production is coarse and medium
counts. Coarse count is the largest category produced by the Pakistan’s spinning
industry. Forty seven (47) percent of the total production fell in this category. It was
followed by medium count having 24 percent share. Fine and super fine accounts only
3 percent of total production (APTMA 2005).
There is a strong need for spinning industry to diversify its product mix and
increase the share of high value added yarns in its total production. This is important
both from the point of view of exporting more high value added yarn and providing
good quality raw material to weaving and knitting industries that can manufacture
high value added fabrics to fulfill the requirements domestically and internationally.
273
8.1 THEORETICAL IMPLICATIONS OF RESEARCH
The main thrust of the study has been to identify the problems, attractive and
detractive factors for marketing, and some allied issues in the production and
marketing of cotton. All the stakeholders in the chain of marketing of cotton were
studies in detail but the main focus was to target the cotton grower, the main
stakeholder in the chain.
Cost-benefit ratio for all the categories of farmers was calculated basing on the
cost of production on each input, being used by the growers in the study area. Net and
gross income of the growers was identified and basing on these variables, economies
of scale for the farmers in the study area was analyzed in chapter 6. The processing
cost, income, profit and CB ratio for ginners and spinners was also calculated to
present a clear picture that which stakeholder is earning more profit.
Since cotton crop is competing with many others crops in the study area such
as sugar cane and rice, Policy Analysis Matrix (PAM) model was used to identify the
comparative advantage of cotton in study area. The PAM parameters namely National
Protection Co-efficient (NPC), Effective Protection Co-efficient (EPC) and Domestic
Resource Cost (DRC) ratio which are inter related, were calculated. The calculation of
economic prices of trade-able outputs and inputs envisaged the estimation of shadow
exchange rates, import and export parity prices of trade-able outputs and inputs.
Social value of non-trade able inputs such as labour, capital, water and land were also
calculated and basing upon private, social prices and value added / acre inch of water,
export parity prices for cotton, sugarcane and rice were calculated. Based upon the
results obtained the cotton crop showed comparative advantage in the study area.
Basing on survey conducted in the study area, the marketing problems of all
the stakeholders i.e., growers (small, medium and large) village beopari/ commission
274
agents, ginners and spinners were identified. Then the most critical problems
associated with these stakeholders were also identified. Marketing of a particular
commodity such as cotton is always based upon certain factors which are attractive or
detractive. Keeping this theory in view, attractive and detractive factors for marketing
of cotton for all the stakeholders i.e. growers, village beopari/ commission agent,
ginners and spinners were identified with the help of logit model. With the application
of logit model hypothesis regarding all the stakeholders to identify the attractive and
detractive factors in cotton marketing were tested (Chapter 6).
One of the objectives of the study was to assess the production status of cotton
in Pakistan. To determine the status of production, acreage and yield models were
analyzed by using time series regression. The available data on above mentioned
variables were tested by conducting Unit Root Test for stationarity of the data. In
order to determine the integration of all variables, and to avoid spurious regression
phenomena in time series analysis, Augmented Dickey Fuller Test was calculated.
The test was performed with the intercept and with trend and intercept both. Keeping
in view the integration order of the variables, estimation process was conducted and
the results were estimated of all the models mentioned in chapter 5. In order to avoid
the problem of autocorrelation, ARMA (1,2) was used and goodness of fit of the
model was calculated by the value of F-statistics.
In order to forecast area and yield trend, secondary data from year 1976 to
2007 was used. For this purpose Compound Growth Rate was calculated and basing
on Compound Growth Rate the forecasting was calculated. Harvested area and yield
was forecasted upto 2015 (Chapter 7).
The above mentioned investigations are expected to strengthen the base for
future research. This would also facilitate future study in marketing of cotton,
evolving through policies of liberalization, the move towards more market friendly
environment and the opening up of the economy and its various sectors to become
more receptive.
275
8.2 METHODOLOGICAL IMPLICATIONS OF RESEARCH
The study seeks answers to the research questions and investigates some of the
standard hypothesis by adopting the different research methodologies. The research
design, adopted for the primary and secondary data analysis for the cotton marketing
in Multan and Bahawalpur region, proved appropriate results to generate an accurate
and comprehensive amount of information required in line with the desired research
objective. These designs were also found to be logical and productive in the sense that
there appeared to be no need for making recourse to alternative research methods for
achieving the desired goal. The research methods helped to generate a consistent and
dependable data set for the analysis. The specific methodologies also helped to
analyze the available data in a way that revealed explicit answers to the questions
formulated and hypothesis generated. Having analyzed each of the data sets, the
designs also facilitated the interpretation of results based on the constructs of extant
theories/hypothesis and substantiate their consistency with the existing theoretical
strands and statistical analysis.
First Priority
Rapid price fluctuations: 100 percent growers of all categories i.e. small,
medium and large farmers gave first priority to rapid price fluctuations as the most
critical problem in the marketing of cotton.
276
Second Priority
Third Priority
First Priority
Second Priority
Third Priority
277
8.3.3 Cotton Ginners Problems
First Priority
Second Priority
Third Priority
First Priority
Second Priority
278
Third Priority
Use of worn-out saws resulting in low efficiency, high neps, and floating
fibre: 83 percent spinners gave third priority to the use of worn-out saws resulting in
low efficiency, high neps, and floating fibre as the most critical problem in the
marketing of cotton.
In both districts it was observed that almost all the farmers except few small
farmers, were using the modern technology for cultivation. On an average the
cost of cultivation for small, medium and large farmers in the Multan and
Bahawalpur region came out to be Rs.1639.46 per acre.
The share of sowing cost in the total cost was found 5 percent in the Multan
district and accounted for Rs.888 for one acre. Similarly the share of sowing
cost in the total cost for the district of Bahawalpur was 5 percent as well. The
sowing cost in both the districts, from small, medium to large farmers found
increasing as the size of holding increased. Sowing cost in Multan and
Bahawalpur was Rs. 921.76.
In whole region the cost of fertilizer was Rs 2138.23 on per acre basis. The
share of this input in the total cost for both the districts i.e., Multan and
Bahawalpur district was 11 percent and 12 percent respectively.
The share of irrigation cost in total cost in the Multan district was 10 percent
and in Bahawalpur district it accounted for 11 percent. In Multan and
Bahawalpur region, the cost of irrigation was Rs. 1921.79.
279
The share of intercultural cost, out of total cost was almost similar in both the
districts i.e 9 percent of total cost. Rs. 1801.14 was the cost of inter-culture /
hoeing in the region.
The plant protection cost was found maximum in case of large farmers. Plant
Protection was found directly related to the size of holding. It was found that
there is a positive correlation between size of holding and yield level on per
acre basis. In overall region it was Rs. 3287.75 and its share was 17.69 percent
in total cost of complete region.
Labor cost accounted for 14.95 percent of the total cost in case of Multan
district and 15.35 percent for Bahawalpur district and in overall region its
share was 15.16 percent. In the overall region the labour cost was Rs. 2776.35.
It was concluded that in all the cases the cost of production was highest for
large farmers than both small and medium farmers. The cost of medium
farmers was more than small ones.
The yield performance in both the Districts showed the increasing trend from
small to large farmers. In the whole region for all category of the farmers yield
came out to be 24.47 mds per acre.
It was concluded that large farmers were efficient producers in both the
districts. It is due to the reasons that large farmers are more technology
oriented grower then medium farmers.
Cost benefit ratio was highest for large categories of the farmers (1.45), then
medium (1.31) and small farmers (1.28). The analysis indicated that cotton
was more economical to the large farmers in both the districts as Cost-Benefit
ratio is maximum for this category of the farmers.
It was observed that the farmers of the of district Bahawalpur are earning more
from cotton than the farmers of Multan district. CB ratio for Bahawalpur
district is 1.40.
Cost benefit ratio for growers of cotton in study area was found to be the
lowest i.e. 1.35 followed by the ginners i.e. 1.47 and the highest for spinner
i.e. 1.66.
It was concluded that farmers of the district Bahawalpur are more efficient
cotton growers and among farmers the large ones were found best cotton
producers than small and medium farmers.
280
It was concluded that among many, variable inputs, the input of plant
protection, fertilizer and quality seed have important impact on the yield of
cotton. The variable of Plant Protection was identified as the most important
input for all the category of the farmers. Large farmers were found best cotton
producers then medium and small farmers in both the districts and in whole
the region as well.
PAM and associated coefficients showed that cotton has comparative
advantage in the Multan region and can very well compete in the international
market on export parity prices. The DRC was estimated as 0.57 and value
added per acre inch of water was Rs. 1383.13 for cotton crop in study area.
Based on allocative efficiency it was concluded that there is dire need to fulfill
the scarcity of the resources for cotton production. Among them the major
inputs were the quality seed, Fertilizers both DAP, Urea and irrigation water.
The rapid price fluctuation, bound to sell the produce at spot, unstorable small
quantity of the output, lack of local cotton market, lack of bargaining power of
the farmers and kind deductions by the village dealers were the most critical
problems, for the small category growers of the region.
Rapid price fluctuations, lack of market price information, no premium for
clean cotton, deduction by buyers and no storage facility at farm level were
problems identified by medium farmers.
Rapid price fluctuations, undue kind deduction by the village beopari /
commission agents, no premium for clean cotton, no cooperative marketing
associations, were the common problems, which large farmers are facing.
Rapid price fluctuations, undue kind deduction by the village dealers are the
most critical problems being faced by all categories of farmers in Multan and
Bahawalpur region.
Among many the most important factors, which seemed to be attractive for the
marketing of cotton at growers level were, farm gate selling of cotton, cash
payment at the spot, easy post harvest handling of the produce, prestigious
crop and easily available to fulfill the emergency needs
Low Profit Margin, Lack of Transport Facility, Sugarcane as Competing Crop,
Kind Deduction by Village Beopair, High Risky Crop, Lack of Awareness of
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Cotton Prices are the factors which were concluded as detracting factors at the
growers level.
8.4.2 RECOMMENDATIONS
282
o Insect resistant varieties
o Head tolerant varieties
o Integrated nutrient management
o Weed management
o Soil health improvement
There is a need to develop a system to produce and distribute certified seed in
strict government control.
Use of delinted seed must be encouraged. One litre concentrated commercial
sulphuric acid is sufficient for delinting 10 kg fuzzy cotton seed. Seed must be
dried after delinting under the sun and not under shade. Check germination
percentage of cotton seed before planting so that seed rate may be regulated
accordingly. Delinted seed @ 6-8 kg/acre having 75 percent germination for flat
planting must be used.
The availability of irrigation water remains subject to the amount of rainfall
during monsoon and snowfall in winter. The judicious use of the available water
is, however, a management issue and, therefore, requires a well thought plan for
the maximum utility of the available quantum. Cotton crop sowing on ridges may
save the loss of water in comparison to flood irrigation practices. Therefore, the
growing community should be pursued to cultivate cotton on ridges.
Where plant growth is restricted and downward penetration of water in the soil is
slow, chiseling/ripping or deep ploughing should be done.
Water scarcity is the major issue not only in Pakistan but also in the world. The
research on drought resistance / tolerant and low water requirement varieties need
to be intensified for efficient utilization of water.
Private sector induction for hybrid cotton production seems highly desirable. As
such, the research institutes may confine their role for identifying the good
combiners where as the hybrid seed production should rest with the progressive
growers and private sector seed companies.
In the study area, the availability of fertilizers for cotton crop by and large has
remained satisfactory. However, at critical times of its application sporadic
shortage is reported some times. The Federal and Provincial authorities should,
therefore, keep close watch on the timely availability of necessary fertilizers
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during the cotton crop growth and development and keep monitoring the prices to
safeguard the interest of the growing community.
Fertigation (fertilizer solution dripping into irrigation water) of nitrogenous
fertilizer is inferior to direct soil application method because it does not ensure
even distribution of nitrogen fertilizer in the field.
Genetic potential of cotton varieties is highly influenced by the increased attack of
American bollworm (Helicoverpa armigera), Spotted bollworm (Earias vittella),
Pink bollworm (Pectinophora gossypiella), Armyworm (Spodoptera litura) and
Whitefly (Bemisia tabaci). These insects are difficult to control and develop
resistance quickly. Use of insecticides in cotton has increased to the extent that it
is not only resulting in high production cost and resurgence of secondary pests but
also cause environmental pollution and increased health hazards.
Researchers identified a gene in the soil bacteria Bacillus thuringiensis (Bt ) which
codes for an insecticidal protein. They were able to isolate and transfer that gene
into cotton so that a toxin could be produced inside the plant. This transformed
cotton (genetically engineered) with a gene resistant to lepidopteran insects
particularly Helicoverpa armigera, is Bt cotton. The area of Bt cotton is increasing
in USA, Australia, China, India and in some other cotton growing countries. In
Pakistan as well, cotton growers must be encouraged to cultivate Bt cotton.
The countries who have adopted Bt cotton, they are planting refuge crop to avoid
resistance against Bt cotton. Studies need to be conducted while introducing Bt
cotton that how much area has to be planted of non-Bt cotton (refuge) with Bt
cotton and this non-Bt cotton should have to be treated with insecticides or not.
Cotton is a heavy consumer of pesticides. Pesticides were introduced for
commercial use almost half a century ago and many government subsidized
pesticides in order to promote their use. Some of the same governments are now
sponsoring projects to eliminate/reduce the use of pesticides, particularly
insecticides. Insecticide use seems to have reached its peak and is on decline.
Pesticides were injurious to the environment when governments promoted them
and their long-term consequences were underestimated. There are many lessons
learned from the adoption of insecticides, their extensive use and from efforts to
reduce their use. Strategies include adoption of pest scouting/threshold spraying,
avoidance of pyrethroids at any early stage and mix only compatible insecticides.
284
In order to minimize heavy reliance on costly and hazardous chemical pesticides,
which in turn also result in higher cost of production and insecticides resistance,
the concept and practice of Integrated Pest Management should be encouraged.
Develop a cadre of IPM facilitators through season long training of researchers
and field staff.
Develop the capacity of farmers to implement IPM through farmer’s schools
Institute special studies on pesticides and IPM policy analysis
Develop IPM awareness program for public through mass media.
For transferring the cotton production and protection technologies as well as
issuing timely warning to the growers on account of weather and insect-pests
situation, the following approaches must be used.
o Electronic media
o Print media
o Extension programs
o Demonstrations
o Seminars / exhibitions
Agriculture credit is considered as an important instrument for achieving
production target and promotion of agriculture sector. Government policy with
regard to agricultural credit is to safeguard the interest of small farmers by
extending credit to them on easy terms and to recover the same in time as well as
to protect them in case of any natural hazards and calamity.
The policy of fixing support price for seed cotton may be continued along with the
provision of government intervention through procurement by the Trading
Corporation of Pakistan as and when the seed cotton market prices fall below the
support price level. This mechanism would be required till the local textile mills
and ginners adopt the buying and selling process based on quality parameters
instead of variety and station.
It was observed during course of study that about 100 manufacturers are
manufacturing spray machinery and components in Pakistan and there is no law
which prohibits production of in-efficient, substandard and poor quality spray
machinery and equipments. More than 90% cotton area is being protected by
Hand Sprayers by spraying pesticides by small farmers. Locally manufacturers
hand sprayer do not have essentially required components such as control flow
285
valve, tank agitation system and goose neck lance etc. Components of the spray
machine have high rate of wear-tear, non uniform spray pattern, non uniform
spray angle/swath and discharge, resulting in inadequate plant protection and
ultimately loss in yield.
Tractor Mounted Boom sprayers also lacks essentially required components such
as pressure control regulators, glycerin filled pressure gauge, anti drip system,
tank agitation system and ejector for refilling the tank. Pumps used in these
sprayers produce low pressure and are inefficient to meet the requirements of all
the nozzles installed on the boom beam. Because of low quality material, there is
high rate of wear-tear which results non-uniform spray, non-uniform spray angle,
non-uniform swath and discharge and results inefficient plant protection and
ultimately loss in yield.
According to research conducted at Central Cotton Research Institute (CCRI),
Multan and Agriculture Mechanization Research Institute (AMRI), Multan on
pesticide application in cotton crop indicated that about 50 percent of applied
pesticide is wasted due to inefficient and defective spray machinery and
inadequate application methods. There is agriculture engineering workshop, spray
machinery testing laboratories facility should be provided by these workshops and
they should focus on the aspect such as nozzle performance, pump performance
and manually operated Hydraulic/Compression Sprayer performance.
First insecticidal spray against sucking pests should be delayed as long as crop
tolerates the pests so that predators and parasites could play their role to suppress
the pests population.
Spray machines must be in perfect condition and properly caliberated. Use of
hollow cone nozzles, uniform flow rate from all the nozzles, fine mist and 1.5 to 2
feet height of the nozzle from the top of the plant ensures better coverage of the
crop which is key to the successful plant protection.
Selection of suitable pesticide, right dose and appropriate time of application with
clean water give better results. Spray in the morning or late in the afternoon. Do
not spray when the sky is cloudy and the rain is expected. If there is rain after
spray, the crop should be inspected to assess the rain effects. If the rain has
affected spray application, it should be repeated. Pest scouting should also be done
after 3-4 days of spray to assess the effectiveness of the pesticide application.
286
Mealybug is a major threat to cotton crop. It must be controlled effectively to
avoid its wide spread attack. Destruction of mealybug infested weeds and other
plants from and around the farm is the key factor for its effective management.
Avoid planting of mealybug-preferred ornamental plants and crops near the cotton
field to discourage the build up of the pest.
Left-over bolls after picking / harvesting of seed cotton, are the main source of
Pink bollworm for the next cotton crop. Therefore, the cotton field should be grazed
after picking to reduce the number of left over bolls. It is better if the cotton sticks
are shredded and incorporated into the soil which will improve the physical
condition of the soil. In case the cotton sticks are to be kept for fuel purpose, it
should be kept in bundles and top portion should be directed towards sun and should
be used by mid February.
The production of high grade and contamination free cotton is in fact inter-linked
and may be achieved by implementing the cotton standardization and grading
system and prohibiting the use of known contaminants. These two campaigns
should, therefore, be launched in an integrated manner, and not in isolation. The
tables in the Annexure provide the guidelines for the grading of cotton to compete
world over, it is must that the grading system should be adopted.
The growers need to be convinced through education for proper picking practices
and time to ensure the process of cleanliness right from the field and in turn avail
better prices. Promotional campaigns for the production of clean and
contamination free cotton may be launched in major cotton growing areas. The
Trading Corporation of Pakistan may be inducted to ensure lifting of higher grade
cotton at a premium price in such project areas.
Seed cotton on the plant is a silver fiber. Maintain its quality while picking,
storing and during transportation from the field or from store to the ginning
factories to get quality price.
Pick seed cotton when 60-70% bolls are opened. Avoid picking when the sky is
cloudy or rain is expected. After rain, pick seed cotton when it is dry.
Do not pick early in the morning when there is dew on the crop. Let the dew dry
and then start picking.
Start picking from the bottom of the plant and go upward to the top. Pick well
opened and fluffy bolls. Seed cotton should be free from weeds and crop trash.
287
Used bags of fertilizers made of synthetic fibre having white color are also a
major source of contamination. The fertilizer companies may, therefore, be
directed to use dark colored synthetic fibre for the purpose, so that it could be
picked easily prior to ginning. The market committees may direct the retail traders
to use brick flooring for keeping the seed cotton heaps.
Use of Boras (bags) for carrying seed cotton to ginneries has been found to be a
major source of contamination in the resulting lint. It, therefore, needs to be
replaced with cotton bags. However, in the meantime Pakistan Cotton Ginners
Association (PCGA) should launch campaigns to educate and motivate the ginners
to concentrate on removal of jute twines and other foreign matters manually.
The picking of cotton needs to be improved so that it has less trash, moisture and
contamination.
The moisture content and other undesirable material in the raw cotton is generally
higher than the tolerable limit. In the present system of marketing, it was found
that there is no incentive for the ginner to improve ginning for better quality and
produce graded cotton because no premium is generally ensured for better quality.
The assistance of the Pakistan Cotton Standards Institute (PCSI) should be sought
in this respect.
Steps should be taken at various levels (from picking to ginning) to keep the
produce free from excessive impurities. As almost 95 percent of Pakistani cotton
has a fiber length above 1-1/32”, it is possible to manufacture 30-40 counts yarn
from this material. But it is considered poor by international standards because of
impurity. However, it is possible for our cotton to be categorized as high medium
and fine if cotton grading programme is strictly followed.
Cost of production for the growers in the study area was high due to which the CB
ratio was the lowest for them. There is a need to reduce the cost of production for
growers by providing them the subsidies by the government, so that the
production and marketing of cotton can become attractive as well as beneficial for
them.
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8.5 RECOMMENDATIONS FOR VILLAGE BEOPARI /
COMMISSION AGENTS
Buying Cotton at Promise, Easy Marketing, Payment in Parts, Easy and Cheap
Availability of Labor, Payment in Kind were the factors which found attractive
toward the marketing of cotton at village dealers level.
Kind deduction by ginners, High moisture contents cause weight loss, late
payment by ginners, Deduction by ginners due to variety mix were the factors
which were identified as detractive at the village dealers level.
8.5.2 Recommendations
The Market Committee may direct the Village Beopari / Commission Agents to
use brick flooring for keeping the seed cotton heaps.
The storage place should be at a place where seed cotton should not get the trash
like human hairs, poultry feathers, toffee rappers, etc.
Government has to formulate new marketing policies to cope with the challenges
of new markets with special focus to streamline the role of middlemen and
introduce regulations, which bind the limits of margins. Small growers may be
included in the market committees. Government may encourage direct linkages
between growers and business houses to increase the profit margins for the
growers.
Farmers’ Unions can have a strong voice to bargain collectively other options
such as commodity exchange and commodity boards can also be tried.
Due to poor infrastructure, growers often have difficulty in taking their produce to
bigger markets and have to sell their produce at lower cost in the local markets so
the infrastructure needs immediate attention which may reduce the role of
middlemen as well.
By establishing direct linkage of the growers with factories, processors and retail
chains would take away burden of middlemen off the farmers’ shoulders. Not only
would growers benefit out of it but also the factories, processors and modern
289
retailers would greatly benefit since middlemen have been acting as a buyer and
seller between the two-ends and making more than 50 percent of the profit.
The government may play a role of watch-dog in the markets so that the forces of
demand and supply can act freely in determination of the prices.
Easy To Buy At Factory Gate, Easy Handling, High Profit Margin, Easy to Sell
the By Products, Low Cost of Processing were the factors which concluded as
attractive factors at ginners level.
Late payment from Banks, Mixing up of varieties, adulterated product, High
moisture contents of products and High risk of burning were the factors which
found detractive towards cotton marketing at ginners level.
The ginning factories were found purchasing seedcotton mostly from Commission
Agents but few were buying it from growers as well.
They place the seedcotton in open under sun for three to four days to dry it up.
There was no arrangement for artificial drying.
It was observed that, if the moisture contents are in excess of 10 percent in
seedcotton, it may cause serious problems for ginners such as use of more electric
power and weakening of the seed. Power consumption is a major cost factor in
ginning process and weakened seed breaks during the ginning process.
The majority of sawgins existing in Pakistan are of 90 saws blades while
advanced nations are using sawgins of 120+ type. Only 10 percent of the gin
factories, in the study area were found to have lint cleaners.
It was observed that no grading / classified cotton was coming to the ginning
factories.
Ginners were found using worn-out saws of reduced diameters and varying tooth
angles resulting in low efficiency, high neps and floating fibres.
They were sharpening / re-sharpening the saws on the advice of untrained
technical staff.
Ginning factories were mixing different varieties of cotton.
They were not separating yellow cotton bolls before ginning.
290
Ginned cotton was not being packed properly with cotton cloth.
It was found that the bales were of non-standard weight and size.
The cost benefit ratio for ginner was found lesser than the spinner i.e. 1.47.
8.6.2 Recommendations
Sub-standard ginning is one of the major causes for the resulting low quality lint.
For its improvement, research in ginning methods etc. is needed and the ginners
have to be trained in these techniques. For this purpose the establishment of a
Ginning Research Institute may be established in the cotton belt.
Cotton marketing and pricing should be based on its grade and staple instead of
varieties. The ginners should mark the bale as per its grade and staple.
In ginning factories, timely replacement of saws, instead of repair and sharpening
of its teeth is highly desirable to overcome the problem of increasing short fibers.
Therefore, free import of saws by the ginners be allowed until the quality saws are
manufactured locally, and are available on economic prices. This was found a
demand of the ginners in the study area as well.
Ginning saws need improved standards such as saws having curved teeth, curved
roots, self-sharpening, straight blades and free movement of saws between ribs
(Annexure-W).
Improved ginning ribs having uniform foot width, strong at ginning point,
standardized and short fitting time may be installed (Annexure-X).
Ginning spacer may be improved having uniform width of spacer and of standard
size (Annexure-Y).
Components, gauges and fixtures should be standardized (Annexure Z, AA).
Cotton of different grades and staple should not be mixed as it deteriorates the
quality and thus adversely affects the market value of lint cotton. Strict
enforcement of the Government’s approved cotton standardization and grading
programme should be followed (Annexure T). Every ginned lot should be issued a
quality certificate showing the grade and staple. This certificate should be
available for both the buyers and sellers.
No improvement or modernization in ginning industry is possible unless the
ginner can be assured of premium for improved quality of their product from
spinners.
291
Price discounting of Pakistan's raw cotton in international market is attributable to
uneven grade and staple, excessive non-lint content and contamination. Besides,
factors like strength, micronaire value, maturity and colour also play an important
role in lowering the value. Thus in order to establish and safeguard a good
reputation, and ensuring better prices for Pakistan cottons, cultivars and grades
should not be mixed. For color test, the graphs are shown in Annexures T and U.
Color of the cotton i.e. whiteness of the cotton seed gets the priority.
Enforcement of the provisions of the Pakistan Cotton Standardization Ordinance
2002 must be ensured. Under which the Pakistan Cotton Standards Institute
should concentrate on technical aspects such as preparation of grade boxes,
training of classers and graders, fibre testing facilities and the arbitration services,
etc. whereas implementation of the grading system and certification may be
carried out by the private sector inspection companies as per provisions of the
above said ordinance.
The private sector may be encouraged for developing a net work of fibre testing
laboratories for instrumental evaluation of raw cotton throughout the cotton belt.
Pakistan Cotton Standards Institute should expedite setting up of fibre testing
laboratories in major cotton growing districts.
Custom ginning may also be promoted by developing farmers’ cooperative
societies. This would in turn allow the growing community to enter into agri-
business.
Lint cleaners are installed in a number of factories. It was observed in the study
area that these are by-passed in order to avoid loss of weight of ginned cotton
whereas for producing clean cotton the use of lint cleaners is highly desirable.
Some ginners were found using wires for packing the bales instead of the iron
strips in the study area. This has been causing damages during handling and
transportation. The ginners should be advised that they should use the iron strips
for the purpose.
The Pakistan Cotton Ginners Association may consider working out and issuing
daily rates for graded seedcotton along with the premium / discount for upper /
lower grades.
The ginners were found producing bales of varying densities due to the variations
in the dimensions of the bale press. These need to be adjusted in order to produce
292
the bales of prescribed size and weight. The average bale weight is required to be
maintained at 170 kgs with the permissible variation of 3 percent.
It is recommended that sales tax on cotton lint and oil cake at the ginning stage
may be exempted. Sales Tax should be levied on spinning onwards. Sales tax on
cotton has encouraged gross mis-reporting of ginned cotton, which according to
some estimates has reached a figure of more than one million bales.
The imposition of excise duty on import of cotton lint may be waived off. Since
the proposal is to allow free import and export of cotton lint, then there should not
be any customs or excise duty.
The proposal is that lint cotton should be a commodity that can be freely traded
internationally at any time of year without any restrictions. This is in the long-
term interest of the cotton lint business in Pakistan. This will encourage the
enforcement of cotton standardization because a pull will be created for a better
quality cotton-lint, which will command a higher price. The general perception is
that imported cotton lint carries a smaller percent of contamination than the
locally ginned cotton. This will force the local ginners to improve their quality
standards and address contamination problems.
It is recommended that number of spiked rollers from 4 to 6 rolls in the inclined
cleaner may be used for modernizing the ginning industry.
Additional machinery before the sawgin Feeder Extractor Cleaner (FEC) may be
installed.
The modified sawgin machine of 100 to 110 saws on the same shaft (spacing
decreased from 17 to 14 mm) may be installed. In this way, production can be
increased from 2 to 2.25 bales per hour.
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8.7 RECOMMENDATION AT SPINNERS LEVEL
8.7.2 Recommendations
Local spinning is still in coarser group with a national average yarn count of 20s,
whereas with the available staple cotton it is possible to produce 30-40 counts
yarn. The efforts should be made in this direction with focus on competitive
advantage rather comparative advantage.
294
Export Promotion Bureau should launch campaigns to create awareness among
the exporters of value-added goods regarding stringent standards being imposed
by the importing countries.
In value-added sector, for producing quality products and, therefore, realize better
export prices, it is absolutely necessary for producers of garments, knitwears and
other value added goods to modernize their production technologies, upgrade their
quality and design and adopt modern marketing strategies. Focus should be on
joint ventures in production, marketing tie-ups, use of franchise and world
renowned brand names.
Export re-finance may be provided to yarns of 40 counts and above. This will
make the spinners looking towards manufacturing higher counts for export
purposes.
Government should provide credit for capital investment to spinning industry but
it may be linked with the export performance of manufacturers.
Pakistan spinning industry should be de-linked from local cotton by allowing free
availability of imported cotton.
Spinners should slowly and gradually shift towards man-made fibres.
========================
295
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Annexure-A
Competition of Cotton with Other Crops for Labour and Time Management
Source: Study of Cotton Production Prospects for the Next Decade, Country
Report1993.
Annexure-B
% % % %
Commodities Value % Share Value Value Value Value
Share Share Share Share
Cotton Fabrics 2090 12.31 2108 12.81 1863 12.94 1711 13.90 1345 12.05
Made-Ups (Incl. Towels) 1074 6.33 1006 6.12 986 6.85 821 6.67 733 6.57
Cotton Yarn 1996 11.76 2038 12.39 1450 10.07 1383 11.23 1329 11.91
Bed Ware 1495 8.81 1383 8.41 1057 7.34 1127 9.15 928 8.32
Hosiery 1961 11.55 1751 1064 1635 11.35 1459 11.85 1146 10.27
Ready-Made Garments 1385 8.16 1310 7.96 1088 7.56 993 8.06 1092 9.78
Rice 1126 6.63 1158 7.04 933 6.48 634 5.15 555 4.97
Synthetic Textiles 420 2.47 200 1.22 300 2.08 471 3.83 574 5.14
Leather Garments 554 3.26 723 4.39 527 3.66 414 3.36 386 3.46
Sports Goods 288 1.70 343 2.08 307 2.13 325 2.64 335 3.00
Carpets & Rugs 235 1.38 259 1.57 278 1.93 231 1.88 220 1.97
Leather 321 1.89 292 1.77 304 2.11 252 2.05 234 2.10
Fish & Fish Preprations 188 1.11 194 1.18 139 0.97 153 1.24 134 1.20
Surgical Instruments 191 1.13 163 0.99 183 1.27 133 1.08 149 1.34
Chemical & Pharm. Prod. 392 2.31 433 2.63 453 3.15 263 2.14 260 2.33
Petroleum & Products 858 5.05 826 5.01 476 3.31 294 2.39 205 1.84
Sub Total: 15,224 89.68 14,827 90.13 12,630 87.77 11,202 90.98 10,107 90.56
Other Commodities 1,752 10.32 1,624 9.87 1,761 12.23 1,111 9.02 1,053 9.44
G. TOTAL 16,976 100.00 16,451 100.00 14,391 100.00 12,.313 100.00 11,160 100.00
Table-1
transportation
Annexure-I
Table-2
Farm Budget Estimates of Cotton For medium farmers in The District of Multan.
Figure on per acre basis)
Operations Units Quantity Rate/u Cost(Rs.)
Cultivation Tractor NO. 5.45 250.00 1362.50
Cultivation Bullock NO. 0.00 200.00 0.00
Planking Tractor NO. 3.77 75.00 282.75
Planking Bullock NO. 0.00 50.00 0.00
Seed Kgs 6.79 100.00 679.41
Sowing cost Rs. 1.00 200.00 200.00
DAP Bags. 1.15 940.00 1081.00
UREA Bags. 1.75 525.00 918.75
NP Bags. 0.00 650.00 0.00
Canal irrigation NO. 2.47 350.00 864.50
T.well irrigation NO. 3.02 300.00 906.62
Hoeing NO. 1.55 1000.00 1550.00
Intercultur NO. 0.22 250.00 55.15
Spray NO. 5.76 550.00 3170.59
Management & other operations
labor* Hrs. 106.96 11.25 1203.30
Harvesting/Picking Hrs. 1.38 975.00 1349.77
Rent Rs. 0.50 7500.00 3750.00
Yield Mds. 22.15 975.00 21596.25
Total cost per acre. Rs. - - 17374.33
Net Income Per Acre Rs. - - 4221.92
transportation
Annexure-J
Table-3
Farm Budget Estimates of Cotton for large farmers in The District of Multan
Figure on per acre basis)
Operations Units Quantity Rate/u Cost(Rs.)
Cultivation Tractor NO. 5.84 250.00 1460.50
Cultivation Bullock NO. 0.04 200.00 7.02
Planking Tractor NO. 2.94 75.00 220.16
Planking Bullock NO. 0.00 50.00 0.00
Seed Kgs 7.15 100.00 715.16
Sowing cost Rs. 1.00 200.00 200.00
DAP Bags. 1.50 900.00 1350.00
UREA Bags. 1.80 515.00 927.00
NP Bags. 0.29 625.00 181.45
Canal irrigation NO. 3.95 350.00 1383.06
T.well irrigation NO. 1.50 300.00 450.00
Hoeing NO. 1.15 1000.00 1150.00
Intercultur NO. 1.89 250.00 471.77
Spray NO. 6.47 550.00 3557.26
Management & other operations
labor* Hrs. 109.79 11.25 1235.15
Harvesting/Picking Hrs. 1.59 1040.00 1651.65
Rent Rs. 0.50 7500.00 3750.00
Yield Mds. 25.41 1040.00 26426.40
Total cost per acre. Rs. - - 18710.18
Net Income Per Acre Rs. - - 7716.22
transportation
Annexure-K
Table-4
transportation
Annexure-L
Table-5
Farm Budget Estimates of Cotton for small farmers in The District of Bahawalpur
Figure on per acre basis)
transportation
Annexure-M
Table-6 Farm Budget Estimates of Cotton for medium farmers in The District of
Bahawalpur Figure on per acre basis
Operations Units Quantity Rate/u Cost(Rs.)
Cultivation Tractor NO. 5.74 240.00 1377.60
Cultivation Bullock NO. 0.00 200.00 0.00
Planking Tractor NO. 3.15 75.00 236.25
Planking Bullock NO. 0.00 50.00 0.00
Seed Kgs 6.48 125.00 810.00
Sowing cost Rs. 1.00 200.00 200.00
DAP Bags. 1.25 940.00 1175.00
UREA Bags. 1.58 525.00 829.50
NP Bags. 0.50 650.00 325.00
Canal irrigation NO. 3.54 350.00 1239.00
T.well irrigation NO. 2.87 300.00 861.00
Hoeing NO. 1.19 1000.00 1185.00
Intercultur NO. 2.25 350.00 787.50
Spray NO. 5.73 550.00 3150.40
Management & other operations
labor* Hrs. 111.72 11.25 1256.85
Harvesting/Picking Hrs. 1.58 1025.00 1623.98
Rent Rs. 0.50 8000.00 4000.00
Yield Mds. 25.35 1025.00 25983.75
Total cost per acre. Rs. - - 19057.08
Net Income Per Acre Rs. - - 6926.67
transportation
Annexure-N
Table-7
Farm Budget Estimates of Cotton for large farmers in The District of Bahawalpur
Figure on per acre basis
transportation
Annexure-O
Table-8
transportation
Annexure-P
Table-9
Budget Estimates of Cotton for small farmers in the Multan and Bahawalpur region
Figure on per acre basis
Operations Units Quantity Rate/u Cost(Rs.)
*Labor for all others operations including management except picking. and
transportation
Annexure-Q
Table-10 Budget Estimates of Cotton for medium farmers in the Multan and
Bahawalpur region.
Figure on per acre basis
* Labor for all others operations including management except picking. and
transportation
Annexure-R
Table-11 Budget Estimates of Cotton for large farmers in the Multan and Bahawalpur
region.
Figure on per acre basis
*Labor for all others operations including management except picking. and
transportation
Annexure-S
Table-12
Budget Estimates of Cotton for all farmers in the Multan and Bahawalpur region.
Figure on per acre basis
Operations Units Quantity Rate/u Cost(Rs.)
Cultivation Tractor NO. 5.60 245.00 1372.08
Cultivation Bullock NO. 0.01 200.00 2.34
Planking Tractor NO. 3.13 75.00 234.93
Planking Bullock NO. 0.62 50.00 30.75
Seed Kgs 6.74 107.50 724.29
Sowing cost Rs. 0.99 200.00 198.33
DAP Bags. 1.22 934.17 1142.62
UREA Bags. 1.66 523.33 870.30
NP Bags. 0.20 641.67 127.30
Canal irrigation NO. 3.45 350.00 1208.76
T.well irrigation NO. 2.38 300.00 713.03
Hoeing NO. 1.30 1000.00 1295.83
Intercultur NO. 1.70 283.33 480.31
Spray NO. 5.96 542.75 3235.28
Management & other operations
labor* Hrs. 109.39 11.25 1230.68
Harvesting/Picking Hrs. 1.53 1006.67 1539.57
Rent Rs. 0.50 7750.00 3875.00
Yield Mds. 24.93 1006.67 25091.17
Total cost per acre. Rs. - - 18281.43
Net Income Per Acre Rs. - - 6809.74
*Labor for all others operations including management except picking. and
transportation.