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Photo Source: Dawn

Pakistan Reader# 170, 14 April 2021

Trade with India



Pakistan's politics spoils an economic opportunity

Yet again, in the history of India-Pakistan relations, political reasons have prompted Pakistan to overrule ECC's call on resumption of trade with India. 

Abhiruchi Chowdhury

Months after suspending trade with India, Pakistan, on 31 March 2021 decided to import cotton and sugar from India to fulfil its domestic demand for both items. Pakistan had stopped its imports from India in retaliation to the latter's unilateral decision to revoke Jammu and Kashmir's status. The newly sworn Federal Minister of Finance had hoped that although a tough decision, it would bring down the prices of sugar and provide some relief to the small and medium textile industries who were facing a shortage of raw material. But what led to the shortage of cotton and sugar that Pakistan had to take such a dire step to import the same from its adversary?

The Cotton crisis

The export-oriented textile industry of Pakistan requires 14 Million bales of raw cotton per year. Nevertheless, the production of raw cotton and the land devoted to its growth has significantly gone down over the years in Pakistan. It was as low as 5.5 Million bales in 2020-2021 and 8.8 Million bales in 2019-2020 due to multiple reasons.  

First, the farmers in Pakistan prefer to grow competing crops such as rice and sugarcane instead of cotton. This is because the cotton crop normally requires higher input cost and high investment in comparison to the competitive crops.

Second, the government has been unsuccessful in providing cotton support price to the farmers. Moreover, the prices of cotton have gone down in the International market. As a result, the cotton farmers in Pakistan found sugarcane and wheat more profitable to grow. ("Cotton cultivation down by 1.3 pc," Dawn, 15 July 2020)

Third, the cotton growers in Pakistan are unable to adapt to the new climatic realities, which do not cater to traditional sowing patterns. A shift of 33 days has been observed in how the cotton growers have been manoeuvring for the past many years and the current climatic conditions of the lands under cultivation. Other factors such as harsh weather conditions, the locust attack in cotton-growing areas of Punjab and the second spell of rains in Sindh have further aggravated farmers' uncertainties. (Pervez Ishfaq Rana, "Cotton crop suffers major losses", Dawn, 5 November 2019)

Fourth, Cotton growers in Pakistan are unable to procure newer and better-quality cotton seeds. The primitive seeds are more susceptible to climatic changes that eventually result in lower yields. They are also more prone to pest attacks. Moreover, these seeds produce inferior quality cotton, which is not much of a use to the export-oriented industries. (Syed Talat Hussain, "Cotton for long Pakistan's pride and joy, now faces a big threat," Gulf News, 9 February 2021). 

The Sugar crisis

The rise in the prices of sugar and its unavailability in the local market have added to common people's worries in Pakistan, who are already struggling with the inflation in the economy. 

Several factors have contributed to this sugar crisis. First, it has been established that particular gangs are operating in Pakistan, which deliberately hoards Sugar. This has resulted in the unavailability of Sugar in the domestic market, which has given rise to the problem of price hike. Through their unaccounted sales, the gangs earn huge profits and transfer the same into fake bank accounts for averting taxes. The gang has been receiving constant support from the mill-owners, some of them being eminent political personalities. The involvement of big names such as PML-N's Shehbaz Sharif and PTI's Jahangir Tareen in the crisis makes it more difficult for the regulatory authorities to watch on them. (Irshad Ansari, "FIA nabs gangs involved in sugar hoarding," The Express Tribune, 25 March 2021)

Second, Sugar was being exported to other countries when there was a shortage in the domestic markets. Though the exporters earned huge gains due to the falling Pakistani rupee and the export subsidy given by the government, it is the common man who had to suffer and pay the price.

Third, the prices given to sugarcane growers are substantially higher in Pakistan than in the international market. Despite that, there was no improvement in per yield produce or sucrose recovery rate, and the prices continued to soar. The average per hectare yield of Sugar in Pakistan is 60 tons, whereas in other countries such as China, Brazil, India and the US it is 65-77 tons. (Mahmood Hasan Khan, "The Sugar Crisis," The News, 30 May 2020) 

Fourth, the sugar mill owners blame farmers for the sugar crisis. The Pakistan Sugar Mill Association (PSMA) alleged that the farmers demanded more than Rs 200 per 40 kg, which is the standardized rates decided by the government that has resulted in the deadlock and rise in the prices of sugar in the market. (Haseeb Hanif, "PSMA seeks PM's intervention in sugarcane procurement," The Express Tribune, 10 January 2021)

Five reasons, why Pakistan decide not to trade

Just a few hours after ECC's press conference, Cabinet announced its decision to defer the much-anticipated move of resuming trade with India. 

Following are the probable factors that could have led to this U-turn. First, the unwillingness of Cabinet Ministers: Some of the cabinet members seemed to have strong reservations against the decision of improving relations with India by resuming bilateral trade. Members like Sheikh Rashid (Minister for Interior), Shireen Mazari(Minister of Human Rights), Shah Mehmood Qureshi(Minister of Foreign Affairs) and Asad Umar(Minister for Planning) are known for taking Anti-India stances in the past and were reportedly not on the board with the Prime Minister on this decision. Second, to gain popularity in Punjab: Many see the U-turn as a publicity stunt to gain political mileage in Punjab. The establishment in Pakistan is not happy with the performance of the current Chief Minister of Punjab, Usman Buzdar. Also, PPP has reportedly approached the top leadership of PML-N for toppling the Buzdar government. An Anti-India stance, especially in Punjab, would strengthen PTI's roots and make things more challenging for the opposition.

Third, the forthcoming "Azad Kashmir" elections: Minister for interior Sheikh Rashid, in an interview to the ARY news, claimed that they don't want to upset the Kashmiris by restoring ties with India before the "Azad J&K" elections. Although there is a trend that the successive ruling governments at the centre have been able to form governments in AJK and GB, PTI would not take things for granted, especially after its performance in Senate and By-elections.

Fourth, the faulty decision-making of PTI government: Cabinet's rejection of ECC's proposal that had the initial consent of the Prime Minister has raised important questions in the working culture of the PTI government. The U-turn is yet another example of the incoherent decision-making system of the present government. Finance Minister announcing a crucial decision by holding a press conference and then the cabinet over-turning the same clearly shows the juvenile working of this government which works without consultation with all members. The argument that the Prime Minister wears two different hats does not provide a strong justification for the U-turn.

Fifth, the China Factor: There is a strong co-relation between China-India relations and India-Pakistan relations. China would not want India-Pakistan ties to improve until it has some improvement in its relations with India. China also sent a signal of its discontent over Pakistan's attempt to mend its ties with India under the mediation of UAE and other countries by indirectly attacking Pakistan by stating like "Iran has an independent foreign policy, and it would not change by one phone call".

The resumption of trade could have been a win-win situation for both Pakistan and India, where the latter could supply its surplus sugar and raw cotton at an affordable price. To conclude, The U-turn highlights the opportunistic attitude of the PTI government, which like the previous governments in Pakistan, gave preference to domestic political gains over the difficulties faced by a common citizen in procuring essential commodities. 


About the author

Abhiruchi Chowdhury is enrolled with the NIAS certificate course on Contemporary Pakistan. He is also pursuing Masters in South Asian Studies from Pondicherry University. He is interested in exploring the Geo-politics and contemporary political happenings in West Asia.

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