Daily Times

Every wise nation utilises its natural resources in a manner that achieves the maximum value for them when converting — or aiding in converting -an output from this resource into the highest possible value-added product for export purposes.

Value addition is the process of economically transforming a product from its original state into a more valuable and consumable state. Developed countries are making and exporting high value goods by utilizing their natural own resources, or by efficiently importing raw materials from other countries. Developing countries, like Pakistan, are mostly suppliers of raw material or semi-finished goods.

Pakistan is an agricultural country and must add value to all its commodities wherever possible. Sugar, rice and cotton are being produced since antiquity,and are also the most widely consumed agricultural commodity around the world.

The efficiency of the sugar industry depends on the input cost of cane production and its sucrose content.The sugar industry is capital intensive as well as government regulated, and it is an important part of Pakistan’s rural economy.

We should promote alternate crops such as sweet sorghum and sugar beet, having different varieties with different maturity periods, so that instead of putting up new sugar mills (which currently run for only four months a year), existing mills can run throughout the year. This will save huge capital expenditure and also ensure jobs around the year.Crops of both sugar beet and sweet sorghum are ready in 4-5 months,whereas sugarcane keeps the land occupied for around 10 months. The yield is 12-15 percent in both crops, and much less water is needed for the crops to mature.

Approximately 1,324,363tonnes of sugar from the 2016 season alone was available for export. In 2017, sugar production will go up from 70,903,000 tonnes to 7,175,383 tonnes’ worth of cane production. Pakistan’s is now 207 million: it will consume 5,634,845 tonnes of sugar in 2017, again leaving an exportable surplus of 1,540,538 tonnes.

The government is considering to allow one million tonnes export with a cash rebate of Rs six to Rs ten per kilogramme, with a base export price of $540 per tonne. The Rs eight per kilogramme rebate will be a Rs eight bill be given to sugar industrialists per kilogramme. This one million tonnes can be grown on 170,648 hectares.

Sugarcane and sugar has benefitted from the government’s generous support prices and high tariffs,due to which in the last 10 years, the support price of sugarcane has been increased from Rs. 60 to Rs 180 per 40 kilogramme; a raise of 300 percent. Given the current government’s policy and our mills’ efficiency, there is a likelihood that Pakistan will never be globally competitive in sugar prices and will always need a government subsidy to export the excess quantity.Pakistan produces around 25 million metric tonnes of wheat and 6,130 million tonnes of maize, which is sufficient for domestic consumption. However, Pakistan produces three million exportable tonnes of rice, grown on 1,208,216 hectares; produce which is available in excess of the domestic requirement. Soybean is an imperative import substitution crop. Soybean should be seriously supported by the government so that it can be cultivated locally.

Currently, cotton is the only major crop in Pakistan which is being produced at world competitive prices and also has great potential for value addition.

Given the current government’s policy — and our mills’ efficiency — there is a likelihood that Pakistan will never be globally competitive in sugar and will always need a government subsidy to export the excess quantity

If cotton is produced on 1,378 million hectares, it will grow 978,993 tonnes of cotton (5.44 million bales at 175 kilogramme). The current international price of raw cotton material yields Pakistan $1.554 billion; after converting into garments, it has an export potential of over $10 billion. Against this, we earn $540 million by exporting one million tonnes of sugar, and $829 million by exporting three million tonnes of rice.

Water is finite in the long run, and its cost and usage must be valued. 3,600 litres of water is required to produce one kilogramme seed cotton. According to the 2012 report of the Planning Commission, current water charges amount to less than one percent of the total cost of production, while 24 percent of the operations and maintenance cost of irrigation system is recovered through water charges (abiana). Therefore, the interchanging of crops, as explained above, will also save about 6.891 million acre-feet of water.

The Planning Commission should, in consultation with provinces and relevant trade associations, plan to allocate arable land for cultivation of various crops in a way that enough should be produced for local consumption, and excess land should be cultivated with crops with yield products that can compete globally, and have a potential for further value addition.

If crops are interchanged wherein area under rice and sugarcane cultivation is allocated to cotton, it will have direct advantages for the economy;first, we frequently import cotton to meet the shortfall in local spinning — by import substitution, Pakistan will save foreign exchange of approximately $830 million by not having to import approximately three million bales; second, our exports of cotton sector can increase by around $10 billion through value addition; and third; Pakistan will save about 6,891 million acre-feet of water by interchanging the crops, which we can also export to a hungry global market. The value of this water savings alone would run into billions of dollars.

The writer is a Chartered Accountant and can be reached at; maqsood@aruj.com

Published in Daily Times, September 11^th 2017.