Economic Analysis of Cotton Marketing Problems in Pakistan

AN ECONOMIC ANALYSIS OF 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
All acclamation and approbation is due to Allah (Subhan-u-Tahala) my Creator, my

Shaper out of naught, my Fashioner, Omnipresent, Omniscient to what I need,
cognizant of my deed, the Only ONE who is nearer to me than my jugular vein, to
whom are ascribed the traits of Absolute Perfection and Beauty. Eternal blessing and
peace be upon the beloved of Allah who has been sent as Mercy for all the worlds-
Hazrat Muhammad (PBUH), the city of knowledge, the illuminating torch and the
rescuer of humanity from going astray.
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.
I convey special acknowledgement to my beloved institution PAKISTAN ARMY for

providing me such a wonderful and special opportunity to gain and interact from the
re-known scholars of my country in general and from Bahauddin Zakariya University,
Multan in particular. It is a pleasure to pay special tribute to Lt. Gen. Sardar
Mahmood Ali Khan for his unflinching support and indulgent behaviour which
showed me the joy of intellectual pursuit. I am grateful to him in every possible way
and pray for his glorious success in time to come.
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.
Collective and individual acknowledgements are also owned to Central Cotton

Research Institute, Multan for hosting me and providing extraordinary help
throughout my research. My special thanks to Mr. Muhammad Arshad, Director,
CCRI, Multan; Dr. Zahoor Ahmad, Dr. Mahbub Ali; Dr Ibad Badar Siddiqui; Dr.
Hazoor Muhammad Sabir; Dr. A.D. Manwani and Dr. Maqbool Sial for providing me
the intellectual support. I really benefited from their outstanding work and it was
pleasure working with these scholars and they always kindly granted me time even for
answering some of my un-intelligent questions about cotton production and
marketing.
I transcend my power of narration to express how I feel obliged to my cherished and

venerated late Father for whatever I have achieved in the field of education and on the
highway of life. I will love to be extraordinary thankful to my mother, a great strength
behind me in the shape of oceans of prayers for me. I owe a special debt of gratitude
to my elder brother Dr. Asif Jahangir Khan who is a symbol of love, sacrifice and
affection. I am thankful to my younger brother Col. Kashif Alamgir Khan and my
sisters for their moral support and prayers.
A special note of thanks to my soul mate, my wife, Dr. Javaria, for her dedication,
love and immortal emotional support. Words fail me to express my appreciation for
her dedication and persistent confidence in me. I owe her for unselfishly setting aside
her passions and ambitions to support me for completing my research work. Aaiz,
Muaaz and Muawiz, thanks for being supportive, caring friends and sons.
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.

ACRONYMS
AMRI Agricultural Mechanization Research Institute
AMS Aggregate Measure of Support
APCom Agricultural Prices Commission
APTMA All Pakistan Textile Mills Association
ASEAN Association of South East Asian Nations
CA Commission Agents
CAMI
CB Ratio Cost Benefit Ratio
CCRI Central Cotton Research Institute
CEC Cotton Export Corporation
CHL Casual Hired Labour
CIF Cost Insurance Freight
CLCV Cotton Leaf Curl Virus
DAP Di-ammonium Phosphate
DRC Domestic Resource Cost
DRC Domestic Resource Cost
EPC Effective Protection Coefficient
FEC Feeder Extract Cleaner
FOB Free-on-Board
FY Financial Year
GDP Gross Domestic Product
GNI Gross National Income
GNP Gross National Product
GOT Ginning Outturn

HYV High Yielding Varieties
ICAC International Cotton Advisory Committee
IPM Integrated Pest Management
IRDP Integrated Rural Development Programme
KCA Karachi Cotton Association
LDC Least Developed Countries
MEP Minimum Export Price
MVP Marginal Value Product
NARC National Agriculture Research Council
NPC Nominal Protection Coefficient
NSP Net Social Profit
NWFP North West Frontier Province
OER Official Exchange Rate
OLS Orderly Least Square
OPEC Oil Producing and Exporting Countries
PAM Policy Analysis Matrix
PCCC Pakistan Central Cotton Committee
PCGA Pakistan Cotton Ginners Association
PSE Producer Subsidy Equivalent
SCB Social Cost Benefit
SCF Social Conversion Factor
SER Shadow Exchange Rate
SMEDA Small and Medium Enterprises Development Authority
TCP Trading Corporation of Pakistan
VB Village Beopari
WTO World Trade Organization

DECLARATION
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.

Ph.D Scholar
Department of Economics
Bahauddin Zakariya University
Multan
December 2008
LIST OF TABLES
Table Page
No.
Table 3.1 Pakistan’s Place in World Cotton and Textile 72
Table 3.2 Pakistan’s Share in World Cotton Production (2006-07) 72
Table 3.3 Percentage Change in Cultivated Area, Production and 73

Yield/ha of Cotton from (1947-48) to (2003-04)-Pakistan
Table 3.4 Zones of Cotton Production in The Punjab Province 76
Table 3.5 Yield/ha in Punjab from (1947-48) to (2004-05) 78
Table 3.6 Area, Production & Yield/ha in Sindh from (1947-48) to 79

(2007-08)
Table 3.7 Cotton and Textile Sector Growth in Pakistan 81
Table 3.8 Area, Production & Yield, Consumption and Export 82

(1947-2007)
Table 3.9 Seed Cotton Market Price Vs Support Price (Rs. per 40kgs) 96
Table 3.10 Cotton Yield Comparison in Top Cotton Producing 98

Countries (kgs/ha)
Table 3.11 Potentials to Increase Production Through Area Expansion 99
Table 4.1: Literacy Rate in Punjab 105
Table 4.2: Number of Ginning Factories and Detail of Ginning 120

Machinery in Pakistan-Province and District Wise
Table: 4.3: Summary of Ginning Factories-Pakistan 122
Table 4.4: Production Capacity of Ginning Factories-Pakistan 123
Table 5.1: Sample Distribution 130
Table 5.2: Policy Analysis Matrix (PAM) 139
Table-6.1: Percentage Share of Different Cost Items in Total Cost of 160

Production in Multan and Bahawalpur Region
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-6.5: Cost of Production of the Farmers in the Bahawalpur 164

District. (Rupees)
Table 6.6: Fertilizer Cost of Multan and Bahawalpur Region Under 165
Table 6.7: Irrigation Cost of Multan and Bahawalpur Region Under 166
Table 6.8: Inter-Culturing Cost of Multan and Bahawalpur Region 167

Under Different Farmers Categories (Rs.)
Table 6.9: Percent Sprays Applied on Different Dates in Study Area 168
Table-6.10: Cost of Production of the Farmers in the Multan & 169

Bahawalpur Region. (Rupees)
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
Table 6.13: Land Rent of Multan and Bahawalpur Region Under 171
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 6.17: Cost-Benefit Ratio of Cotton (Per Acre Basis) in 174

Bahawalpur District
Table 6.18: Cost-Benefit Ratio Of Cotton (Per Acre Basis) in Multan 174
and Bahawalpur Region.
Table 6.19: Cob-Douglas Production Function Results for the Farmers 177
In District Multan
In District Bahawalpur.
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.
Cotton in Cotton Belt of Bahawalpur District.
Cotton in Cotton Belt of Multan and Bahawalpur Region.
Table 6.27: Cost Benefit Ratio of Ginners 190
Table 6.28: Cost Benefit Ratio of Spinners 191
Table 6.29: Summary of Cotton Production, Ginning and Spinning 192

Cost, Income, Profit and Cost Benefit Ratio
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 6.34: Literacy Rate of Cotton Growers (%) 197
Table 6.35: Marketing Problems of Small Farmers in Multan District 198

Table 6.36: Ranking of Most Critical Marketing Problems for Small 199
Farmers in the Multan District.
Table 6.37: Marketing Problems of Medium Farmers in Multan District. 200
Table 6.38: Ranking of Marketing Problems for Medium Farmers in 201

Multan District.
Table 6.39: Marketing Problems of Large Farmers in Multan District 202
Table 6.40: Ranking of Marketing Problems for Large Farmers of 203

Multan District.
Table 6.41: Marketing Problems of all Farmers in Multan and 204

Bahawalpur Region.
Table 6.42: Most Critical Marketing Problems for all the Category of 204
the Farmers in Multan and Bahawalpur Region
Table 6.43: Marketing Problems of Village Beopari / Commission 205

Agents
Table 6.44: Most Critical Marketing Problems Faced By Village 206

Beopari / Commission Agents in Multan and Bahawalpur
Region
Table 6.45: Marketing Problems of Ginners 207
Table 6.46: Most Critical Marketing Problems Faced by Ginners in 208

Table 6.47: Marketing Problems of Spinners 209
Table 6.48: Most Critical Marketing Problems Faced by Spinners in 210

Table 6.49: Factors Attracting the Marketing of Cotton at the Grower 211
Level (Percent).
Table 6.50: Factors Detracting the Marketing of Cotton at Grower’s 214

Level (Percent).
Table 6.51: Logit Model Results Showing The Effect of Various 219
Factors on the Marketing of Cotton at Grower Level
Table 6.52: Testing of Hypothesis at VB/CA Level 227
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 6.56 Factors Attracting the Marketing of Cotton at Spinners 239

Level
Table 6.57: Factors Detracting the Marketing of Cotton at Spinners 241

Level.
Table 6.58: Logit Model Results Showing the Effect of Various Factors 244
on The Marketing of Cotton at Spinners Level
Table 7.1 Secondary Data for Cotton 252
Table 7.2 Yield Model-1 255
Table 7.3: Acreage Model-1 256
Table 7.4: Augmented Dickey-Fuller Test with Intercept 259
Table 7.5: Augmented Dickey-Fuller Test with Trend and Intercept 260
Table 7.6: Yield Model-2 260
Table 7.7: Acreage Model-2 261
Table 7.8: Summary of The Determinants of Log-Linear Regression 262

Results of Cotton-Time Series Data
Table 7.9: ARMA (Yield-1) 263
Table 7.10: ARMA (Yield-2) 264
Table 7.11: ARMA (Acreage-1) 265
Table 7.12: ARMA (Acreage-2) 266
Table 7.13: Forecasting for Area and Yield (2008-2015) 268

LIST OF FIGURES
Figure Page
No.
Fig. 3.1 Pakistan’s Share in World Cotton Production (2006-07) 73
Fig. 3.2 Cotton Area, Production and Yield in Pakistan 76
Fig. 3.3 Overtime Cotton Area Trend in Pakistan 84
Fig. 3.4 Overtime Cotton Production Trend in Pakistan 85
Fig. 3.5 Consumption Trend of Cotton in Pakistan 86
Fig. 3.6 Pakistan Cotton Exports Trend 87
Fig. 3.7 Comparison of Cotton Production and Consumption 87
Fig. 3.8 Comparison of Support Price and Market Price of Cotton 97
Fig. 3.9 Cotton Yield Comparison in Top Cotton Producing 98

Countries (kgs/ha)
Fig. 4.1 Map of Punjab Province 103
Fig. 4.2 Marketing Channel of Cotton in Pakistan 111
Fig. 4.3 Location of Ginning Factories in Pakistan 115
Fig. 4.4 Ginning Process of Cotton 117
Fig. 4.5 Spinning Process 124
Fig. 4.6 Spinning Units Growth in Pakistan 125
Fig. 6.1 Percentage Share of Different Cost Items in Multan 161
Fig. 6.2 Percentage Share of Different Cost Items in Bahawalpur. 161
Fig. 6.3 Percentage Share of Different Cost Items in Multan and 162
Bahawalpur. Region.
Fig. 6.4 Cost Comparison of The Farmers in Multan District 163
Fig. 6.5 Cost Comparison of The Farmers in Bahawalpur District 166

Fig. 6.6 Cost Comparison of The Farmers in Multan and 169
Bahawalpur Region
Fig. 6.7 Overall Cotton Yield Pattern in Multan and Bahawalpur 173
Region
Fig. 6.8 Total Cost of Production, Output and Profitability of 175

Category-wise Farmers
Fig. 6.9 Farmers Perception of Critical Marketing Problems (Small 199

Farmers)
Fig. 6.10 Farmers Perception of Critical Marketing Problems 201

(Medium Farmers)
Fig. 6.11 Farmers Perception of Critical Marketing Problems (Large 203

Farmers)
Fig. 6.12 Marketing Problems of Village Beopari / Commission 206

Agent
Fig. 6.13 Marketing Problems of Ginners 208
Fig. 6.14 Marketing Problems of Spinners 210
Fig. 7.1 A Model Representing Problems of Cotton Production 249
Fig. 7.2 Graphical Representation of The Secondary Data. 253
Fig. 7.3 A Non-Stationary Trend of The Dependent Variable (Yield) 257
Fig. 7.4 A Non-Stationary Trend of The Dependent Variable 258

(Acreage)
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
1.1 Statement of the Problem 6
1.2 History of Cotton Cultivation in Pakistan 8
1.3 Cotton Marketing 9
1.4 Historical Perspective of Cotton Marketing 9
1.5 Objectives of the Study 11
1.6 Organization of the Study 13
Chapter 2 Review of Literature 15
2.1 Introduction 15
2.2 Literature Review of International Studies 15
2.3 Literature Review of National Studies 33
2.4 Conclusion 55
Chapter 3 Performance of Agriculture Sector in Pakistan with 57

Special Reference to Cotton
3.1 Introduction 57
3.2 Historical Background Of Pakistan 58
3.2.1 Geography 58
3.2.2 Topography 59
3.2.3 Climate and Water Reservoirs 59
3.3 Pakistan Economy in General 60
3.4 Agriculture Sector an Overview 64
3.4.1 Review of Cotton Crop 65
3.4.2 Exports and Imports 66

3.4.3 Trade Balance 70
3.5 Competition of Cotton with Other Crops for Labor and Time of 70
Management
3.6 Cotton Production in Pakistan 71
3.6.1 An Overview of Cotton Production in Punjab 76
3.6.2 Comparative Data : Punjab and Sindh 77
3.6.3 World Cotton Area Production, Yield and Pakistan’s Position in 81

Cotton Production
3.6.4 Acreage, Production, Yield, Consumption and Export of Cotton in 82

Pakistan
3.6.5 Consumption and Exports 85
3.6.6 Problems of Cotton Marketing in Pakistan 88
3.7 Government Policies towards Cotton 93
3.7.1 Support Price and Market Price 95
3.7.2 The Yield Factor 97
3.7.3 Potentials to Increase Area under Cotton 99
3.8 Conclusion 100
Chapter 4 A Profile of Study Area With Special Reference to 101

Production and Marketing of Cotton
4.1 Introduction 101
4.2 An Overview of Punjab Province of Pakistan 101
4.2.1 Cotton Cultivation Areas 103
4.2.2 Demography and Climate of Punjab 104
4.2.3 Punjab Economy and Education 104
4.3 Multan Historical Perspective 106
4.3.1 Geography and Climate 107
4.3.2 Multan and Economy 107
4.4 Bahawalpur in Historical Perspective 108

4.4.1 Bahawalpur District 109
4.4.2 Bahawalpur’s Economy 109
4..5 Cotton Production and Marketing 110
4.5.1 Cotton Marketing Channels in Study Area 110
4.5.2 Cotton Growers / Producers 112
4.5.3 Village Beopari / Commission Agent 112
4.5.4 Ginners 112
4.5.5 Oil Mills 112
4.5.6 Spinners 114
4.6 Ginning Industry of Pakistan 114
4.7 Seed Cotton Transportation and Storage 116
4.8 The Ginning Process 118
4.8.1 Stage I Seed Cotton Conditioning and Cleaning 118
4.8.2 Stage II Ginning the Seed Cotton 118
4.8.3 Stage III Lint Cleaning 118
4.8.4 Stage IV Packing the Lint 118
4.8.5 Ginning and Pre-Ginning 119
4.8.6 Post Ginning 119
4.9 Ginning Sector Outlook in Pakistan 120
4.10 Process of Spinning 123
4.10.1 Spinning Industry in Pakistan 125
4.11 Conclusion 125
Chapter 5 Data and Methodology 127
5.2 Socio-Physical Environment 127
5.2.1 Climate 128

5.2.2 Infrastructure 128
5.3 Survey and Sampling Procedure 128
5.3.1 Collection of Data and The Choice of Analysis Techniques 128
5.4 Data Collection 130
5.5 Research Process 130
5.5.1 Questionnaire Development 130
5.5.2 Choice of Research Techniques: Interview Based Survey 131
5.5.3 Problems Encounters and .Limitations of the Study 132
5.6 Theoretical and Conceptual Framework 133
5.6.1 Cost of Production of Cotton Crop 133
5.7 Cost of Variable Inputs 134
5.7.1 Seed 134
5.7.2 Fertilizer 134
5.7.3 Farm-Yard Manure 134
5.7.4 Tractor Hiring 134
5.7.5 Irrigation Water Cost 135
5.7.6 Plant Protection 135
5.7.7 Labor Cost 135
5.7.8 Picking Cost 136
5.7.9 Land Revenue and Water Rates 136
5.8 Crops Budgets 136
5.9 Cost Benefit Ratio 136
5.10 Economies Of Scale 137
5.11 Policy Analysis Matrix (PAM) 138
5.12 Private Profitability 140
5.13 Social Profitability 140

5.13.1 Divergences/Policy Transfers 141
5.13.2 Nominal Protection Coefficient (NPC) 141
5.13.3 Effective Protection Coefficient (EPC) 142
5.13.4 Domestic Resource Cost Ratio 143
5.13.5 Components Of PAM And Data Requirement 144
5.13.6 Input / Output Technical Coefficients And Market Price 144
5.13.7 Input Categories 144
5.13.8 Input And Output World Prices 145
5.13.9 Classification/ Decomposition Of Input Cost Items 145
5.13.10 Social Valuation of Tradable Inputs And Outputs 146
5.13.11 Shadow Exchange Rate 146
5.13.12 Imports And Exports Parity Prices Of Tradable Outputs 147
5.13.13 Social Valuation Of Non-Tradable 148
5.13.14 Private And Social Budgets 148
5.14 Factors Attracting And Detracting The Cotton Marketing 148
5.14.1 Hypothesis: At Producer Level 149
5.14.2 At Village Beopari / Commission Agent Level 150
5.14.3 At Ginners Level 150
5.14.4 At Spinners Level 151
5.15 Allocative Efficiency Of The Growers 152
5.15.1 Analytical Procedure 152
5.16 Secondary Data and Research Methodology 153
5.16.1 Objectives 153
5.16.2 Generation of Hypothesis 153
5.16.3 Collection of Data and the Choice of Analysis Techniques 153
5.16.4 Examining the Data 154

5.16.5 Analysis of Data 154
5.16.6 Results and Interpretation 155
5.17 Conclusion 155
Chapter 6: Marketing Problems of Cotton : Primary Data Analysis 158
6.2 Cost of Production 159
6.2.1 Cultivation Cost 159
6.2.2 Sowing Cost s 162
6.2.3 Fertilizer Cost 164
6.2.4 Irrigation Cost 165
6.2.5 Inter-Culture/ Hoeing Cost 166
6.2.6 Plant Protection Cost 167
6..7 Labor Cost 170
6.2.8 Total Cost 171
6.2.9 Yield 172
6.3 Cost-Benefit Ratio 173
6.4 Production Function 175
6.4.1 Description Of The Results In Multan District 176
6.5 Description Of The Results in Bahawalpur District 179
6.5.1 Cultivation. 179
6.5.2 Seed 179
6.5.3 DAP (Fertilizer) 179
6.5.4 Urea (Fertilizer) 180
6.5.5 Irrigation 180
6.5.6 Plant Protection Measures 181
6.5.7 Hoeing/Inter-Culture 181

6.6 Description Of The Results In Study Area 181
6.6.1 Cultivation 181
6.6..2 Seed 182
6.6.3 DAP 182
6.6.4 Urea 183
6.6.5 Irrigation 183
6.6.6 Plant Protection Measures 183
6.6.7 Hoeing/Inter-Culture 183
6.7 Economies Of Scale 184
6.8 Allocative Efficiency Of Input Use For Cotton In The Multan And 184
Bahawalpur Region
6.9 Cobb Douglas Results 186
6.10 Ratios Of Marginal Value Products To Opportunity Costs 187
6.10.1 Processing Cost, Income and Profit of Ginners 190
6.10.2 Processing Cost, Income and Profit of Spinners 191
6.10.3 Processing Cost, Income and Profit of Village Beopari / 191

Commission Agent
6.11 Comparative Advantage Of Cotton 193
6.12 Marketing Problems Of Cotton Growers 197
6.12.1 Literacy Rate 197
6.12.2 Small Farmers 198
6.12.2 Medium Farmers 200
6.12.3 Large Farmers 202
6.13 Marketing Problems Of Village Beopari/Commission Agent 205
6.14 Marketing Problems Of The Ginners 207
6.15 Marketing Problems Of Spinners 209
6.16 Factors Attracting The Marketing Of Cotton At Grower Level 211

6.16.1 Farm Gate Selling 211
6.16.2 Cash Payment 212
6.16.3 Easy Post Harvesting Handling 212
6.16.4 Prestigious Crop 213
6.16.5 Fulfill The Emergency Needs 213
6.17 Factors Detracting The Marketing Of Cotton 213
6.17.1 More Returns from Sugarcane Crop 214
6.17.2 High Risky Crop 214
6.17.3 Kind Deduction By Village Beopair 215
6.17.4 Lack of Transport Facility 215
6.17.5 Lack of Market Intelligence 215
6.17.6 High Cost of Production / Low Profit Margin 216
6.18 Logit Model Results Pertaining to Attractive and Detractive Factors 216
in Cotton Marketing
6.18.1 Hypothesis Formulation At Grower’s Level 217
6.19 Testing The Hypothesis At Cotton Growers Level 220
6.19.1 Hypothesis 1 220
6.20 Factors Attracting The Marketing Of Cotton At Village Beopari / 222

Commission Agent Level
6.20.1 Buying Cotton At Delayed Payment 223

6.20.2 Easy Marketing 223
6.20.3 Payment In Parts 223
6.20.4 Easy And Cheap Availability Of Labor 223
6.20.5 Payment In Kind 223
6.21 Detracting Factor For Marketing Of Cotton At Village 224

Beopari/Commission Agent Level
6.21.1 Kind Deduction by the Ginners 224
6.21.2 High Moisture Contents in Seed Cotton 225
6.21.3 Late Payment by the Ginners 225
6.21.4 Deduction by Ginners due to Variety Mix 225
6.22 Hypothesis Formulated at VB/CA Level 225
6.22.2. Hypothesis 2 226
6.23 Testing of Hypothesis at VB/CA Level 227
6.24 Factors Attracting the Marketing of Cotton At Ginner’s Level 229
6.24.1 Description of The Attractive Factors 230
6.24.2 Detracting Factors at Ginner’s Level 231
6.25 Hypothesis Formulation at Ginner’s Level 233

6.26 Testing The Hypothesis at Ginner’s Level 236
6.27 Factors Attracting Cotton Marketing at Spinner’s Level 238
6.27.1 Description of Attractive Factors-Spinner’s Level 238
6.28 Detracting Factors in Cotton Marketing at Spinner’s Level 240
6.28.1 Low Quality Of Yarn 240
6.28.2 Late Payment From Buyers 240
6.28.3 High Rate Of Markup On Investment 241
6.28.4 Urgent Payment To Ginners 241
6.29 Hypothesis Formulation At Spinner’s Level 241

6.30 Testing The Hypothesis at Spinner’s Level 244
6.31 Conclusion 247
Chapter 7: Cotton Production-A Time Series Approach 248
7.2 Data and Estimation Methods 250
7.3 Specification of Models 254
7.3.1 Dependent and Explanatory Variables 254
7.3.2 Stationary Test 256
7.3.3 Augmented Dickey-Fuller Test 258
7.4 Empirical Results and Discussions 259
7.4.1 Unit Root Test 259

7.5 Forecasting 267
7.5.1 Harvested Area and Yield per Hectare 268
7.6 Conclusion 270
Chapter 8: Conclusions and Policy Implications 271
8.1 Theoretical Implications of Research 274
8.2 Methodological Implications of Research 276
8.3 Implications for Public Policy 276
8.3.1 Grower Level Problems 276
8.3.2 Village Beopari / Commission Agent Level Problems 277
8.3.3 Cotton Ginners Problems 278
8.3.4 Spinners Problems 278
8.4 Policy Recommendations for Growers 279
8.4.1 Key Issues 279
8.4.2 Recommendations 282
8.5 Recommendations for Village Beopari / Commission Agent 289
8.6 Recommendations for Ginners 290
8.7 Recommendation at Spinners Level 294
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.
KEY POLICY IMPLICATIONS
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.
b) Village Beopari / Commission Agents

 Government may 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.
 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.
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
1.1 STATEMENT OF THE PROBLEM
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.
It provides raw material to local/domestic cotton industry comprising 503 textile

mills, 1263 ginning factories and 8.1 million spindles and over 2622 oil expelling
units. It also yields 3.5 to 3.6 million tons of cotton seed, which contributes over 64
percent of the total domestic edible oil production (PCGA 2005, SMEDA, 2005).
Seed cotton (phutti) as produced by the farmers is ginned to give lint and cotton seed.
The latter is used as a feed to the livestock or crushed to obtain oil and seed cakes. A
significant part of cotton seed is also fed to the lactating animals for milk production.
Thus, cotton plays a vital role in the economic development of the country in both the
major sectors i.e. agriculture and industry. Punjab and Sindh are the major cotton
growing provinces. The respective shares of the two provinces in cotton production
are estimated at 81 and 19 percent respectively (GOP, Economic Survey 2004-2005).
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.
The distortion of market mechanisms through regulatory policies has proven to be

disastrous in the past, there is a need for deregulation and creation of market driven
pricing mechanisms with time-proven instruments for hedging against price
fluctuations and safety nets for crop failures. This market mechanism however needs
to be evolved in the medium term with the public sector support that is phased out
7
over time. The policy should provide a long-term direction for the growers and the
industry.
1.2 HISTORY OF COTTON CULTIVATION IN PAKISTAN
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.
1.3 COTTON MARKETING
Evaluation of cotton is based on grading according to staple, grade and character.

Staple refers to fiber length. Grade refers to color, brightness, and amount of foreign
matter. Character refers to the diameter, strength, body, maturity (ratio of mature to
immature fibers), uniformity, and smoothness of the fibers. Cotton seed is a valuable
by-product. The seed goes to oil mills where it is delinted of its linters. The linters are
used for padding in furniture and automobiles, for absorbent cotton swabs and for
manufacture of cellulose products such as rayon, plastics and lacquers. The bare seed
is then cracked, and the kernel is removed. The hulls or husks are used as feed for
cattle. The kernels provide cotton seed oil. The cake and meal are used for animal
feed and flour.
1.4 HISTORICAL PERSPECTIVE OF COTTON MARKETING
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.
1.5 OBJECTIVES OF THE STUDY
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.
Cotton production has a long history of production. In some years there is a

boom production and in some others even domestic needs could not be
fulfilled. Such a drastic pattern of cotton production is a challenge for the
policy makers.
Similarly the cotton producers face a great variety of problems. These

problems also affect the cotton production. There fore current study will try to
probe into the historical cotton production trends. Further more the problems
being faced by the cotton growers of Multan and Bahawalpur regions
specifically will be analyzed in detail.
2. To probe into the factors which attract and detract the marketing of
cotton in Pakistan.
Marketing of cotton is a business which pays to its stockholders. Every

business has some peculiar edge and drawbacks due to which that specific business is
liked and disliked by people. In the current study effort has been made to identify the
factors which are attractive for the marketing of cotton and the factors due to which
people avoid this business and thus these factors become the detractive factors in
cotton marketing.
3. To find out the ways to improve marketing of cotton.
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.
1.6 ORGANIZATION OF THE STUDY
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 2 presents a review of empirical literature on Cotton marketing. More

over the literature regarding the problems of cotton marketing is also supplemented in
the chapter.
Chapter 3 deals with the historical performance of agricultural sector with

special emphasis on cotton. This chapter also provides the information on
Government policies regarding cotton production and its marketing in Pakistan.
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.
Chapter 5 is devoted to the issues of methods adopted in the estimation of

Crops budgets, factors attracting, detracting the cotton marketing at different
marketing levels in cotton belt. Similarly some functions estimation has also been
described in this chapter. The techniques for estimation of PAM, Allocative
Efficiency and Secondary Data Analysis have been discussed in this chapter.
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.
Conclusion drawn from the study, suggestions and policy recommendations

basing on the study has been discussed in the Chapter 8.
14
CHAPTER 2
REVIEW OF LITERATURE
2.1 INTRODUCTION
This chapter describes the previous research work on the agricultural

marketing in the developing countries like Pakistan. Its main purpose is to provide a
background for the current study. Market efficiency of the products depends upon
number of factors including production, environment and seasonality in production;
perish-ability of the product and the farming system. The complexity of the
agriculture marketing system increases when a large number of small farmers,
dispersed all over the country have divers production practices. The distinctive
characteristics of the region also constrain the agricultural marketing system resulting;
improvement of the farmers (Anonymous 2003). The South Asian economies are
dominated by the agricultural sector where share of a sector in GDP ranges from 21
percent in Sri Lanka to 41 percent in Nepal. In South Asian countries, a well-
organized agricultural marketing system that helps to specialized in high value added
crops would go a long way to improving well-being of the people. The South Asian
region has a great potential of producing an exporting high value horticultural crops
but most of the marginal and small farmers produce traditional food grain crops
because they don’t have access to proper marketing facilities. The need of proper and
efficient marketing system is therefore, obvious.
2.2 LITERATURE REVIEW OF INTERNATIONAL STUDIES
Ravallion (1986) used the method of static price correlation to measure

agricultural market integration and illustrated it, using district-level data on rice
prices (coarse quality) for Bangladesh during 1972-1975. The results of his study
show that.
(a) Market segmentation was poor for all districts.

(b) There was weaker form of short-run market integration because short-run
market integration within one month cannot be reasonably accepted for
any districts.
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.
Appleyard (1987) studied the comparative advantage in agriculture sector in

Pakistan. Main commodities covered were wheat, cotton, basmati rice, coarse rice,
sugar cane and maize. The data on cost of production estimates for the harvesting
years i.e., 1982-83 and 1983-84 were utilized for analysis. The policy analysis matrix
(PAM) approach was used to determine the competitiveness and policy effects. The
coefficient for nominal protection and effective were calculated. Where as the
Domestic Resources Cost Ratio (DRC) was used to determine the comparative
advantage.
Fairchild and Lee (1990) evaluated that the marketing of agricultural

commodities and food products has assumed an international dimension over the past
two decades. Increased funding of export development programs by the Federal
Government and commodity organization suggests the need for improved
understanding of US exports development programs and the issues associated with
export market development and maintenance. A lesson to be learnt from the citrus
industry experience is that unless the commodity or food products being promoted can
be differentiated from other competitive products, or unless the product is priced
lower than competitive products, the long run effectiveness of export promotion page
will be limited.
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.
Ender (1992) used agricultural policies in Pakistan as an example to illustrate

the application of subsidy equivalent method. The results indicated that the taxing
effect on producers of Pakistan, trade and output price policy was partly offset by
subsidies on inputs, particularly fertilizers, and by investment in infrastructure. He
also observed that PSEs indicate the areas in which the effects of liberalization would
be felt. If the world price for its export commodities rose as a result of reduction of
support, Pakistan would reap the benefits of the liberalization.
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.
Alderman (1993) in a number of studies of markets in developing countries

analyzed the relationship of prices of a single commodity across markets. Such
studies are used to make inferences on the spatial flow of information and
commodities.
Arya (1993) analyzed various aspects of marketing, such as the extent of
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.
Blackhurst (1995) explained that the effects of WTO’s negotiations would

vary from country to country. The factors considered responsible for this are upon
tariff reduction rate, trade and production pattern, competitive market structures and
the mix of internal policies. He further stated that the agricultural producers of
developing countries in general and of Pakistan in particular have been competing
with heavily subsidized exports from industrial countries particularly from United
States and European Union. An increase in Pakistan’s export can, therefore, be
expected, as a result of the reduced Aggregate Measure of Support (AMS) in most of
the developed countries of west.
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.
Kurosaki (1996) empirically examined the spatial and inter-temporal price

relations of grains in Pakistan’s Punjab. The main objectives of this study were to
analyze market price relations and the effects of government intervention on them.
The quantity variables such as market surplus and government release were included
in the price arbitrage model to quantify the effects of government interventions. The
study on spatial price relation found that the prices of wheat were explained by
support price, and study on inter-temporal price relations found that wheat prices
increased at the rate of storage costs in the first half of a year and prices rise was
reserved by the government release in the second half of a year, whereas those of
Basmati paddy had more unexplained variation.
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.
Other challenges are for developing countries to set up institutions and

policies which will reduce the gap between experimental and on farm yields. Of most
importance in this respect is the development of property right which provide farmers
with more secure access to land and profits. All countries face the challenge of putting
in place institutions and policies which will protect the agricultural resources base. In
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.
More secure access to land, leading to greater investment in promotion soil

and water conservation, should lead to less unstable but higher production. Production
and price instability will continue and the degree of instability will be greater or
lesser, is impossible to say. Less interventionist policies in major producers such as
the European Union and the United States may mean a lessened frequency of shocks,
and even a modification of their magnitude as the importance of private stockholding
grow. However, the growing importance in world markets such as China, still with a
preoccupation with self-sufficiency policies, is a potential source of destabilization of
world food markets.
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.
These issues are likely to be of much greater significance to highly commodity

dependent developing countries that to high income countries were the main pressure
for price stabilization stems from narrow producer interests. With the private sector in
developing countries facing substantially greater commodity risk exposure following
liberalization, there is focus on the development of spot, forward and futures markets
and increasing accessibility of the sector to these markets, both domestically and
internationally.
Diaz-Bonilla, and Robinson (1998) argued that to benefit from pursuing

comparative advantage and gains from increasing specialization in agricultural
production, developing countries may overcome some of the constraints to effect
participation by collective action, for instance by creating alliances based on shared
policy concerns, like the Cairns group. This could spread the fixed cost of
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.
Patterson and Richards’ (1998) research study is related to growers and

shippers of fresh fruits and vegetables keeping in view produce marketing and retail
buying practices. The authors have found that growers and shippers of fresh fruits and
vegetables are claiming that retail produce buyers are beginning to use several
questionable business practices and that the prevalence of these practices threatens to
grown with increased retail concentration in the grocery industry. These practices
include slotting fees, pay-to-stay, promotional allowances, lease-back agreements,
failure fees, and a host of other ways in which retailers demand payment from
suppliers in order to stock a particular product, to allocate a certain amount of space
on their shelves, or to help promote a suppliers’ product. Retailers use of these
methods raises both economic and legal issues. In particular, legislators, regulators at
the Federal Trade Commission, officials in the Justice Department and industry
members need to know not only whether these practices violate the letter of the
antitrust laws as currently written, but also whether they violate their spirit of
maintaining free and open competition between rivals and between buyer and seller.
As stake is the economic viability of small shippers who play by the rules, and the
ability of U.S. consumers to obtain the best quality produce at the lowest possible
price.
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: -
a. The cotton and wheat marketing systems.

b. The supply of inputs and credit to growers
c. The interlocking of seasonal credit provision with input supply and
output marketing.
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.
Liberalization of agricultural marketing policy has, likewise, proceeded in a

piecemeal fashions. For example, liberalization of pesticide provision took place in
the mid 1980s, which claimed dramatic impacts on growth of cotton production,
followed by problems caused by lack of quality control (Faruqee 1995). By contrast,
the government still maintains a monopoly over the supply of phosphate fertilizer and
competes with private companies in the supply of nitrate fertilizers. Withdrawal of the
state has thus been more limited in some areas than in comparable countries that have
under-gone structural adjustment, yet private sector marketing services have
continued to operate in parallel to the state. Compared to other parts of Pakistan,
particularly Punjab, agricultural marketing within Sindh has been relatively little
studied. The availability of credit is a key issue in marketing in Sindh. Two
institutions, the Agricultural Development Bank of Pakistan and the Federal Bank for
Co-operatives comprise virtually the entire formal sector. Neither of them have
mobilized deposits and both rely on inter-bank borrowing. Lending is at non-
economic rates and is biased towards resource-rich farmers, wealthy traders and other
market intermediaries such as sugar mills and cotton ginners. Loan recovery and
enforcement is poor, and approximately 30percent of loans end in default. Collateral
requirements are an obstacle for small farmers, particularly tenants, yet foreclosures
on loans guaranteed by land are non-existent, the informal sector accounts for 70-
80percent of agricultural credit, but is geared to meeting demand for seasonal
production and consumption loans. Commission agents and other traders are the
major source of informal credit for small farmers.
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.
Kannapiran and Fleming (1999) stated that measures of comparative

advantage are among the most useful guides to optimal resource allocation in an open
economy where international trade is vitally important. They used two main methods:
the DRC approach and benefit cost analysis. These methods have the same foundation
but differ in their capacity to interpret the results. From the study, following the
recommendations of Asian Development Bank, authors preferred the DRC analysis.
They developed the farm models for each crop raising activity budgeting, based on
the annual data on tree crop production and export collected for the period from 1975
to 1995. The two types of budgets were prepared for each tree crop farm model i.e.
financial price model and economic price model. The Standard Conversion Factor
SCF approach was used to value or costs and benefits of domestic resources in border
prices.
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.
Smith, Khushik and Stockbridge (1999) conducted a study based on separate

surveys of the mangoes and wheat marketing systems in Sindh. In their research, they
found corruption in agricultural markets which reduces the income of the growers. In
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.
Mucavele (2000) conducted a research study to analyze the changing

agriculture comparative advantage and its implications for the enhancement of trade
and food security in Mozambique. For this country was divided in 10 regions having
different soil, climate, topography, rainfall, humidity etc. nine crops were selected and
21 representative small holders farms were involved in determining input use and
opportunity cost of land, labour and water. These farms were analyzed to determine
the coefficient of input use and to determine crop budgets for production of these
crops (Maize, Sorghum, Sunflower, Beans, Cowpea, Potatoes, Onions, Cotton and
Cassava). NPCs, DRCs, and SCBs are determined as measure of comparative
advantage. NPC, EPC, PSE and SRP were calculated and are used to determine
agriculture protection and policy distortion’s indicators for each region and each
technology. The author found that northern macro-ecological zone has a comparative
advantage in producing all crops considered in the study. The study revealed that
maize production was confronted with a dilemma, there was a great consumption of
maize in south region province but the comparative advantage in maize production
was in north region province. Transportation of maize between two zones was not
feasible depending upon poor infrastructure. It was concluded that institutional
arrangement such as legal system, weights, grades measures and enforceable contracts
should be established to improve agriculture marketing. This aspects call for an
evaluation of possible alternative for resource allocation for maize.
Sukume et al (2000) evaluated the competitiveness of different geographic

areas and farming system in producing a variety of agriculture commodities by
utilizing the domestic cost ratio approach. Policy distortions and their impact on
Zimbabwe economy were viewed by using the PAM, measuring private and social
profitability, resource cost ratios. The sensitivity (risk analysis) was also conducted by
changing world prices and yields of different crops in different farming systems, in
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.
Bogale et al (2002) examine the competitiveness of small-holder farmers in

food crops production. Policy analysis matrix (PAM) indicators such as NPC, EPC
and DRC were employed to scrutinize the incentive generated under a set of existing
agricultural policy and competitiveness of small-holders farmers for six major crop
district categories e.g. Sorghum and Maize in Alemaya, wheat and barley in Hietosa
and Teff and Sorghem in Markabet. The PAM indicators show that domestic
production of food crops enjoyed comparative advantage even in regions where
productivity was highly constrained by land degradation and also face some policy
dis-incentive.
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.
2.3 LITERATURE REVIEW OF NATIONAL STUDIES
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.
Mushtaq (1971), in a case study entitled "An Economic Appraisal of

Institutional Frame work in the Marketing of Agricultural Commodities" concluded
that marketing margin was an increasing function of a number of intermediaries. This
should apparently suggest that a decrease in marketing margin could be achieved by
eliminating some of the intermediaries from the existing marketing channels. But after
the quantification of the various services rendered by all the intermediaries, it became
clear that except for the village dealer, the profit of all other intermediaries was
justifiable under the present marketing conditions. The producer got the minimum net
price of sales to the village dealer which was mainly due to the dilution of
32
competition at the village level. This intermediary could, however, be made efficient
by creating effective competition at village level.
Qureshi (1974) attributed this prevailing view of trade as an exploitative and

anti-social activity to the historical experience, claiming general agreement among
economic historians that village markets in British India were characteristically
oligopolistic with farmers offered unfavorable prices for their produce by merchant
and moneylenders. He suggests that post partition, market segmentation and local
oligopolies were reduced by migration of the Hindu dominated merchant-
moneylender class and by government policies for investing in transportation,
communications and credit.
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.
A series of studies on fruit and vegetable marketing systems in Sindh province

of Pakistan were carried out by Siddique, (1977); Memon, (1978); Siddique, (1979)
and Abid, (1980). All these studies had almost the same objectives and adopted the
same research methodology. The main objectives of these studies were (i) to evaluate
various marketing organizations; (ii) to determine the present marketing conditions
and (iii) to assess the supply and demand of major agricultural products in internal
and external markets.
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.
In agricultural markets, several agencies are operating at various stages. The

major agencies involved in trade are assemblers, wholesalers, inter-zonal traders and
retailers. Apart from these, other agencies, which only provide services to produces
are; brokers, commission agents and transporters. These studies followed the same
methodology adopted by Toha, (1974) by estimating the gross market margins by
taking differences between prices received by the producers and prices paid by the
producers and prices paid by the consumers. Despite their stated objectives they did
not furnish any information about internal and external supply and demand of specific
agricultural products.
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.
Qureshi (1974) attributes prevailing view of trade as an exploitative and anti-

social activity to the historical experience, clamming agreement among economic
historians that village markets in British India were characteristically oligopolistic
with farmers offered unfavorable prices by merchant-moneylenders. He suggests that
post partition market segmentation and local oligopolies were reduced by migration of
the Hindu dominated merchant class and by government investment in transport and
provision of formal credit. Analyzing data from Sindh, Punjab and North West
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.
Siddiqi (1979) conducted a study on Marketing of Agricultural products in

Sindh in order to assess the complexity of marketing organizations for agricultural
products in Sindh. The study examined the infrastructure of marketing system,
estimated production cost and marketing margins, analyzed price trends and
computed per unit marketing costs and the break down of consumer spreading on
selected fruits, vegetables and pulses. A survey was carried out with 1265 samples
from assembly, central and dispersion markets. The findings with respect to
marketing organization for fruits, vegetables and pulses and the economics of storage
were set out in the report, with separate chapters on particular fruits etc.
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.
The study is based on a sample of 114 respondents in 1983. Information was

gathered on the number of sprays, the timing of sprays, the farmer’s assessment of
pest damage and the yield per acre. To capture the timing of spray as closely as
possible, the three-month spraying season was divided into 12 weeks, and farmers
were asked to identify the week of the spray and the number of the successive sprays,
i.e. whether it was the first, second, or third one during the season. During the survey,
farmers and extension agents revealed that pest attacks were most severe during the
period from the second fortnight of August to the first fortnight of September. On the
basis of this information, spray timing was split into four periods. The pre-pest attack
period was split into two sub-period. D1, which covered the entire month of July and
D2, which covered the first fortnight of August. The pest-attach period was denoted
by D3, and the last fortnight of the spraying season by D4. This procedure of
aggregation, would partially overcome problems of recall errors commonly associated
with field surveys. The author has selected those farmers who sprayed before and
during the pest attack and three times during the season. He found that the farmers
who sprayed four sprayed twice before and during the pest attack were significantly
lower.
Mohammad (1985) asserts that from 1950 to 1970, when Government

intervention was less, the marketing system accommodated increases in marketable
surplus while maintaining adequate incentives for farmers, thus facilitating adoption
of Green Revolution technology, Expansion in traders and competition enabled
producers to secure attractive prices for wheat and rice crops. Marketing margins also
declined, though this may have been the result of other factors such as public
investment in infrastructure.
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.
Ali (1992) made a quantitative analysis of government interventions in

agriculture sector during the period 1985-1990. He selected three major crops for this
purpose i.e. wheat, rice and cotton. The main objectives of study were to calculate
producer subsidy equivalent (PSE), consumer subsidy equivalent (CSE) and quantify
the effects of Pakistan’s agricultural support system on producers consumers and
taxpayers. The main policies analyzed by author price support and stat trading, input
assistance and macro economic policy (over-valuation of exchange rate). Among
these priced support and state trading policy have been seen as major sources of
transfers affecting producer and consumers. The effects of these policies are mainly
constituted by price wage between producer/consumer market prices and their parity
prices at import or export. These parity prices were further estimated from border
prices after adjusting for trade incidentals (transport, handling, storage etc.)
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.
Fahimuddin (1992) in his research attempted to resolve the controversy about

the efficiency and competitiveness of the Indian food grain markets for which he
hypothesized that if higher correlation coefficients exist between a pair of markets,
then these markets operation more efficiently in terms of prices. His results showed
that wholesale prices of wheat at five markets in western Uttar Pradesh and high level
of integration, which indicated efficient operation.
Chaudhry and Sahibzada (1994), made a critical analysis of the comparative

advantage theory to evaluate its suitability as decision making tool in policy making.
They reviewed and compared the results of many studies that used Domestic
Resource Cost (DRC) criterion to empirically estimate the international comparative
advantage of Pakistan’s major cops. They concluded that cotton was the most
profitable internationally traded commodity in all studies. Although somewhat less
pronounced, Pakistan also enjoyed comparative advantage in case of basmati rice,
wheat, coarse rice and oil seeds. Sugarcane is the only commodity where DRC co-
efficient of comparative has exceeded one in all studies. The authors concluded that
estimated co-efficient of comparative advantage varied directly with distance from
region to seaport. Sindh being closer to Karachi has lower co-efficients than those in
Punjab for all comparable crops except rice. The time period under consideration is
important determinant of the magnitude of DRC co-efficients pointing to the relative
importance of technological change, world price and weather conditions that vary
along the time line. Adoption of new high yielding varieties also affected the
comparative advantage. The differences in producers and data sources used in each of
the studies also led to variation in results.
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.
Manwani (1994) has analyzed the marketing problems of small farmers in

Pakistan. He has observed that small farmers clearly lack technical facilities which
created hindrances to the development of an efficient marketing system. Besides,
feeder roads are poor, so they do not bring their product to urban markets in time.
Secondly, they are unable to avail themselves of improved marketing facilities
because of the existence of other impediments in the agricultural system. Lastly the
traditional attitude has benefited the traders from some degree of monopoly power.
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.
Zubair et al. (1997) tested the integration of agricultural commodity markets

in southeastern Punjab, Pakistan. The analytical framework developed by Ravallion
was used to conduct tests of market integration for the three selected commodities.
Within this framework, test for short-run integration, long-run integration or complete
market segmentation was carried out. The results indicated that, generally, markets
were integrated only in the long run, with short-run integration limited to some special
cases. Moreover, the smaller markets were more likely to be isolated as compared to
the larger markets. The small markets also took longer time to fully adjust to the price
shocks originating from a more dominant central market. Finally, in the case of rice, it
was more likely that a market would be isolated if it were small. It implied that
farmers’ incentives to grow rice as a means of combating salinity may be constrained
by local demand conditions.
Chaudhry M. Ghaffar, et al (1997) reviewed Pakistan’s historical experience

in agricultural development in terms of growth, income distribution and rural poverty.
They observed a stagnating sector of the 1950s; agriculture witnessed record growth
rates during the sixties. This was followed by the lowest growth rates of early
seventies and acceleration in the second half of the seventies. The growth rates have
been low through eighties and nineties. The trends in income distribution and poverty
varied directly in relation to the agricultural growth rates especially when they were in
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.
Tahir and Riaz (1997) studied the integration of agricultural commodity

markets in southeastern Punjab, Pakistan, using weekly prices of wheat, cotton and
rice from 1993 to 1995. The analytical framework developed by Ravallion was used
to conduct tests of market integration. The results of their study for each commodity
suggested that there were no market integration for all cotton markets and in the short-
run all cotton markets were not integrated because of the periodicity of data used in
the study and the integration involved two different stages in the processing chain
(cotton lint and seed cotton). The cotton markets were also not integrated in the long-
run except Bahawalnagar. The market integration test for rice give mixed results. The
rice market of Chistian and Bahawalnagar were integrated with the Multan (reference)
market in the short-run. However, the Hasilpur and Pakpattan markets were
segmented. Some rice markets were not integrated even in the long-run. Similarly all
selected wheat markets, except Hasilpur were not integrated with the Multan market
in the long-run. None of the wheat markets were integrated in the short-run. They
concluded that markets were integrated only in the long run, with short run integration
limited to some special cases. Moreover small markets were more likely to be isolated
as compared to the larger markets. The small markets also take long to fully adjust to
the price shock originating from a more dominant central market.
Khushk (1999) in his doctoral research conducted at University of London,

UK on mango production and marketing concluded that although the share of
marketing functionaries in consumer price is relatively high than producers, but no
collusion across the traders in supply chain is found. Furthermore, the study indicated
that the price relationship across the major mango markets of Pakistan is strong and
moderate, which indicates that these markets are integrated.
Shahabuddin et al (2000) examined the comparative advantage of rice using

two indicators: net economic profitability and domestic cost ratio. The profitability
estimates and estimated domestic cost ratio suggest that Bangladesh has a
comparative advantage in rice production except for the upland crop and deep water
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.
Ghoshary et al. (2000) used co-integration analysis to investigate the shorten

dynamics of the relationship between the export prices of the EU wheat and of other
major exporters in the world wheat market. The aim of this paper is to determine
wheat long run relationships existed between EU prices and its major competitors.
Based on monthly data from 1980 and 1988, the results show that most of the prices
are co-integrated. Further more, the export prices of the major competitors were found
to be weekly exogenous to the EU price. The later result may be indication that EU
sets its export subsidies in relation to prices of competing wheat exporting countries.
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.
Khan and Ashiq (2002) conducted a study to measure the competitiveness of

seed cotton production and to determine the consistency between current policies with
existing comparative advantage. The analysis covered two major cotton producing
provinces, Punjab and Sindh due to their major share in total cotton production. The
cost of production estimates are based on the data of Agricultural Prices Commission
(APCOM) for five harvesting years i.e. 1997-98 to 2001-02. Average cost per acre is
calculated for each province by taking over into average over five harvesting years. At
national level data is obtained by taking the weighted average of provinces depending
upon their shares in production. They select policy analysis matrix (PAM) approach
to determine the comparative competitiveness of Pakistan’s cotton and policy effects
the comparative advantage was measured through Domestic Resource Cost (DRC)
ratio, and Social Benefit Cost Ratio (SBC).
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.
This is particularly important in the case of “resource-poor” growers who

generally have few alternative sources of finance. The ability to secure crops,
especially cotton, at lower cost and with greater reliability provide the incentive for
padhys (a businessmen) to lend to producers. Without this incentive, a major source
of seasonal finance for farm production would be absent. The risks and transactions
costs of lending in the agricultural sector are high, and usually only “resource-rich”
landowners, who have a degree of local political influence, are able to draw loans
from formal financial sector.
There is considerable competition in the marketing system in Sindh. There are

a large number of padhys (farmers) and factories in the area and the number have
increased in recent years. The majority of growers have more choices of padhys to
sell their cotton to as that was the case in the past. In Sindh over last few years’
favorable prices, good cotton production has encouraged new entrants. Despite
increased levels of competition between cotton buyers, interlocking involving lending
in kind and the commitment to sell output to the creditors is still very widespread.
As far as factory lending is concerned, evidence is mixed. During the

exploratory survey a ginner explained that in Mirpurkhas district lending by ginners to
padhys1 and growers had virtually ceased in 2002. As a result of the large cotton
harvest in recent years, factories in Mirpurkhas had little problem in obtaining
sufficient supply to operate at full capacity, thus reducing the need to lend. Some
growers complained that this causes financial problems.
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.
In view of various constraints, the rural market development and revitalization

approach may bring better results. The insufficient marketing facilities compel small
farmers to either sell their produce to the itinerant merchants at un-favorable prices, or
transport it to some nearby markets with high cost of packaging and transportation
and then to be exploited by the market functionaries. The price determination is based
on the open auction of the produce. The prices is mostly not-fixed, it is negotiated and
agreed between the buyer and the seller. The marketing mechanism of certain
products like wool and hair resembles with that of farm products. The products which
are storable for longer period have a wider market with higher profit margin. Its
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.
The authors have studied another way of marketing known as indirect

marketing where growers and consumers do not meet. In this regard traditional
markets have been established for many agricultural commodities. Livestock producer
can take their animals to livestock auction, grain growers can sell to local grain
elevators and sugarcane growers can sign a contract with a sugar mills. But it is not
that easy for people who grow fruits and vegetables, especially in regions where the
crops are not traditionally grown. Authors have further examined that recently eating
trend is changing, people in developed countries are eating more and more meals
away from home. In early 1990s they were spending nearly half of their food income
for meals away from home. If the trend continues it will soon be more than half.
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.
Hasan (2003) explains that the present agricultural marketing system in

Pakistan has developed over last several decades from a primitive and traditional way
of marketing produce to the characterized market with a certain degree of scientific
approach.
As such the marketing structure is both diversified and flexible in nature

depending upon the problems of different commodities and the conditions prevailing
in various parts of the country; the present marketing arrangements, therefore,
comprises of those where private enterprise is free to operate, on the one extreme, and
those which are subjected to government interventions. These measures include the
fixation of ceiling and floor prices of certain commodities, their procurement quotas
and prices, the export rules and regulations, the institutional credit control etc.
Despite efforts to streamline the marketing of agricultural produce, it is still

based on the old customs and traditions. The village traders, itinerant merchants and
commission agents, even today, occupy an important position among the market
functionaries / competitive agencies, they always have an upper hand in dictating their
own terms to the grower in the disposal of his produce.
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: -
a. Malpractice such as adulteration, deliberate short weighing, excessive

deduction for substandard produce, delayed payment, charity
deduction etc; have been eliminated to a great extent.
b. Trade practices have been regulated in accordance with the legally

prescribed standards.
c. Exploitation of growers in the hands of unscrupulous traders and

commission agents has been done away with to a great extent.
d. Specific charges are prescribed for various services such as

commission, weight, cleaning, bagging etc. These charges are much
less than those rampant in unregulated markets. He has pointed out that
the legislation on farm marketing has brought some improvement. But
it still requires a very cautions approach for further improvement.
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.
Chaudhry (2004) in his study on constraints and opportunities in Citrus

production and marketing in Pakistan concluded that the wholesale markets in the
country are efficient. He further concluded that the price differentials across
wholesale markets are due to transaction costs including transportation costs.
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.
Most of the literature review was mainly concentrating on the production

aspect of the commodities with a very less emphasis on marketing issues. In this study
an effort will be made to focus the marketing aspect with special emphasis on its
problems at each stakeholder’s level. The factors which attract or detract the
marketing will also be highlighted. Moreover an effort will be made to study the
relation in between production and marketing.
56
CHAPTER 3
PERFORMANCE OF AGRICULTURE
SECTOR IN PAKISTAN WITH SPECIAL
REFERENCE TO COTTON
3.1 INTRODUCTION
Agriculture is the largest sector of Pakistan's economy and contributes about

24 percent to national GDP. It employs 44 percent of the total labour force of the
country. It provides directly and indirectly sustenance to two-thirds of population
living in rural areas. About 50 percent of the total value of industrial production
comes from agro-based industries, including textile and sugar. More than 55 percent
of total export earnings come from export of agro-based raw and processed products
(Hayee, 2005).
Within agriculture sector, the crop sub-sector plays pivotal role. Its
contribution to agricultural GDP remained the highest over time followed by
livestock, fishing and forestry. In 2002, the composition of agricultural GDP was 51
percent from crops, 46 percent from livestock and the remaining 3 percent from
fisheries and forestry sub-sectors (GOP, 2002). Of the total export earnings of Rs.452
billion in 2001-02, the earnings from export of rice, cotton and cotton products alone
amounted to Rs.112 billion or 25 percent of the total exports. There have been some
structural changes over time resulting in shifts on account of national and
international events but this position more or less remained the same. There are
therefore, not many shifts in the traditional exports, not withstanding the fact that
future lies in diversified agricultural trade (Hayee , 2005).
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 HISTORICAL BACKGROUND OF PAKISTAN
The formal name of Pakistan is Islamic Republic of Pakistan, having four

provinces Punjab, Sindh, NWFP and Balochistan. Islamabad is the capital of Pakistan.
The major seven cities of Pakistan with a population of 1 million or more are Karachi
(9,339,023), Lahore (5,143,495), Faisalabad (2,008,861), Rawalpindi (1,409,768),
Multan (1,197,384) Hyderabad (1,166,894) and Gujranwala (1,132,509) (Library of
Congress, Federal Research Division, Country Profile: Pakistan 2005) Pakistan
proclaimed independence on 14 August 1947 from Britain.
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).
3.2.3 CLIMATE AND WATER RESERVOIRS
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).
3.3 PAKISTAN ECONOMY, IN GENERAL
In the face of adverse internal and external developments of an extraordinary

nature, Pakistan’s economy has shown great resilience against shocks of very high
intensity. Pakistan’s economy grew robustly at 5.8 percent in 2007-08, as against 6.8
percent last year and this year’s target of 7.2 percent (GOP, Economic Survey 2007-
08).
The economy has grown at an average rate of 6.6 percent per annum for the
last six years which provides a source of optimism that regaining macroeconomic
stability as well as reinvigorating the growth momentum through a combination of
adjustments and reforms is a very plausible option.
Pakistan’s real per capita income has risen at a faster pace during the last six
years (4.5 percent per annum on average in rupee terms) leading to a rise in average
income of the people. Such increases in real per capita income have led to a sharp
increase in consumer spending during the year. Relatively slower growth in
consumption in 2005-06 and 2006-07 was mainly attributed to the tight monetary
policy pursued by the State Bank of Pakistan but with rising inflation real interest rate
actually declined and thus boosted private consumption during the year 2007-08.
The past few years of sustained economic growth have made Pakistan an
attractive investment destination by an ever-wider set of investors and leading
companies of the world. The foreign direct investment which had attained new
heights at $ 6.5 billion last year has shown some signs of moderation but still FDI
inflow of $3.0 billion in 2007-08 as against $3.9 billion in the comparable period of
2006-07 well for investor confidence on Pakistan’s economy. More importantly,
almost the entire decline in Foreign Direct Investment during 2007-08 has resulted
from decline in cash investment, as reinvested earnings grew by 12.0 percent during
the same period.
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).
3.4 AGRICULTURE SECTOR, AN OVERVIEW
Notwithstanding its declining share in GDP, agriculture is still the single

largest sector, contributing 21 percent to GDP and employing 44 percent of the
workforce (Pakistan Economic Survey 2007-08). More than two-third’s of Pakistan’s
population lives in rural areas and their livelihood continues to revolve around
agriculture and allied activities. Like in other developing countries, poverty in
Pakistan is largely a rural phenomenon; therefore, development of agriculture will be
a principal vehicle for alleviating rural poverty. Empirical evidence suggests that
higher growth in agriculture on a sustained basis had a lasting impact on poverty
reduction in Asia in the 1970s and the 1980’s (Economic and Social Survey of Asia
and the Pacific 2008).
For Pakistan, the notion of food security should move beyond a relatively
static focus on food availability. Higher agricultural growth, particularly emanating
from the crop sector, will provide food security by increasing supply, stabilizing
prices, and raising incomes of poorfarm households. To benefit from the current
global food crises, Pakistan needs to change its policy-orientation from the current
practice of focusing exclusively on price and move towards yield enhancement and
address, structural issues such as poor crop management skills of farmers; use of
cheaper seeds; lack of agricultural infrastructure and higher post-harvest losses;
limited research as well as the gap between available research and practical
applications; and inadequate funding for research and development. Agriculture will
continue to acquire the highest priority from the government for its role in poverty
reduction as well as from a food security point of view.
The growth performance of agriculture over the last six years has been of a
volatile nature – ranging from 1.5 percent to 6.5 percent. The volatility in agricultural
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).
3.4.1 REVIEW OF COTTON CROP
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).
3.4.2 EXPORTS AND IMPORTS
Domestic and external environment play an important role in shaping the

country’s trade with rest of the world. Pakistan’s export performance has been
impressive in years (2002-03 to 2005-06) with exports registering an average growth
of 16 percent per annum on the back of strong macroeconomic policies pursued at
home and international trading environment remaining hospitable. Pakistan’s export
performance was dismal in 2006-07 as it witnessed abrupt and sharp deceleration to
less than 4 percent.
3.4.2.1 EXPORTS
Overall exports recorded a growth of 10.2 percent during the year 2007-08
against a growth of 3.6 percent in the same period last year. In absolute terms, exports
have increased from $ 13847.3 million to $ 15255.5 million. However, exports of
$15255.5 million imply that the target of $19 billion exports is likely to be achieved.
Broad categories of exports suggest that with the exception of textile manufactures,
all other categories of exports registered stellar growth. For example, exports of food
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.
3.6 COTTON PRODUCTION IN PAKISTAN
At the time of independence, Pakistan had few significant natural resources

and little modern industry. Basically, it is an agricultural country, so preference was
given to develop the irrigation system. Moreover, its climate is suitable for several
crops including cotton. This crop has come to play a significant role in the economic
development of Pakistan. It is cultivated on an area of approximately 3.19 million
hectares (Agricultural Statistics of Pakistan 2005). The two provinces out of four,
namely Punjab and Sindh provinces are rich in agricultural areas. Approximate 77
percent of all Pakistan cotton is produced in Punjab and the remaining 23 percent in
other provinces (GOP, Economic Survey 2005-2006). About 7 million people are
involved in the production of raw cotton. Cotton is widely cultivated and this involves
intensive use of inputs including pesticides, chemical fertilizers, and irrigation.
Fluctuations in the cotton yield affect the economy as a whole.
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.
Table 3.1 Pakistan’s Place in World Cotton and Textiles

Percent Rank
Production 9.5 4th
Consumption 10.0 3rd
Yarn Production 9.0 3rd
Yarn Export 26.0 2nd
Cloth Production 7.0 3rd
Cloth Export 14.0 3rd
Source: International Cotton Advisory Committee, Washington D.C., USA.
The purpose of this section of the Chapter is to examine the importance of

cotton for the Pakistan economy. Her competitiveness depends on the domestic
production and the availability of cotton, and domestic and international price
behavior. It seems necessary to consider the performance of raw cotton in the country
because it is the main source of raw material. This chapter discusses Pakistan's record
of cotton production, growth of cotton acreage between 1947 - 2004-2005, and the
yield.
Table 3.2 Pakistan’s share in World Cotton Production (2006-07)
Country China India USA Pakistan Uzbekistan Others
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
Source: ICAC World Cotton Statistics 2006
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
1947-48 1237 - 1106 - 362 -
1948-49 1051 -14.99 964 -12.84 371 2.49
1949-50 1110 5.62 1239 28.53 452 21.83
1950-51 1221 9.91 1406 13.48 466 3.10
1951-52 1343 10.01 1397 -0.64 421 -9.66
1952-53 1385 3.13 1784 27.70 521 23.75
1953-54 1161 -16.13 1425 -20.12 497 -4.61
1954-55 1269 9.27 1583 11.09 505 1.61
1955-56 1407 10.87 1678 6.00 483 -4.36
1956-57 1439 2.24 1711 1.97 481 -0.41
1957-58 1453 0.98 1708 -0.18 476 -1.04
1958-59 1325 -8.83 1587 -7.08 485 1.89
1959-60 1343 1.37 1639 3.28 494 1.86
73
1960-61 1293 -3.71 1691 3.17 247 -50.00
1961-62 1396 7.95 1823 7.81 247 0.00
1962-63 1374 -1.57 2060 13.00 287 16.19
1963-64 1471 7.04 2354 14.27 306 6.62
1964-65 1467 -0.28 2124 -9.77 277 -9.48
1965-66 1561 6.46 2331 9.75 287 3.61
1966-67 1620 3.76 2605 11.75 306 6.62

1967-68 1785 10.19 2911 11.75 306 0.00
1968-69 1745 -2.22 2967 1.92 326 6.54
1969-70 1756 0.58 3012 1.52 326 0.00
1970-71 1733 -60.05 542 -82.01 314 -3.68
1971-72 1958 12.98 707 30.44 360 14.65
1972-73 2010 2.66 702 -0.71 350 -2.78
1973-74 1845 -8.21 659 -6.13 360 2.86
1974-75 2031 10.08 634 -3.79 314 -12.78
1975-76 1852 -8.81 514 -18.93 277 -11.78
1976-77 1865 0.70 435 -15.37 233 -15.88
1977-78 1843 -1.18 575 32.18 312 33.91
1978-79 1891 2.60 473 -17.74 250 -19.87
1979-80 2081 10.05 728 53.91 350 40.00
1980-81 2109 1.35 4201 477.06 339 -3.14
1981-82 2214 4.98 4398 4.69 338 -0.29
1982-83 2263 2.21 4844 10.14 364 7.69
1983-84 2221 -1.86 2908 -39.97 223 -38.74
1984-85 2242 0.95 5930 103.92 450 101.79
1985-86 2364 5.44 7155 20.66 515 14.44
1986-87 2505 5.96 7760 8.46 527 2.33
1987-88 2568 2.51 8633 11.25 572 8.54
1988-89 2619 1.99 8385 -2.87 544 -4.90
74
1989-90 2599 -0.76 8560 2.09 560 2.94
1990-91 2,662 2.42 9,628 14.82 615 9.82
1991-92 2,836 6.53 12,822 33.17 769 25.04
1992-93 2,836 0 9,054 -29.38 543 -29.38
1993-94 2,805 -1.93 8,041 -11.18 488 -10.12
1994-95 2,653 -5.41 8,697 8.15 557 14.13
1995-96 2,997 12.96 10,595 21.82 602 8.07
1996-97 3,149 5.07 9,374 -11.52 507 -15.78
1997-98 2,960 -6 9,183 -2.37 528 4.14
1998-99 2,922 -1.83 8,789 -4.29 511 -3.21
1999-00 2,983 2.08 11,240 27.88 641 25.44
2000-01 2,927 -1.87 10,613 -5.57 624 -6.52
2001-02 3,116 6.45 10,613 0 579 -8.65
2002-03 2,794 -10.33 10,211 -3.79 622 7.43
2003-04 2,989 6.98 10,048 -1.6 572 -8.04
TOTAL 40,629 15.12 1,38,908 36.14 8,158 12.37
Average 2,902 1.08 9,922 2.58 582.7 0.88

Sources: GOP, Economic Survey 2004-05, Statistical Appendix, pp. 24.25.
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.
Cotton area production and yield is further explained in Fig.3.4 below:
75
Fig. 3.2: Cotton Area, Production & Yield in Pakistan
15.00 Area in Hectare 1000
AREA, PROD. (million)

13.50 Production in Bales 900
12.00 Lint Yield 800
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
3.6.1 An Overview of Cotton Production in Punjab
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.
Table 3.4 Zones of Cotton Production in the Punjab Province
Areas Districts Contribution in

the Production
Core Areas Multan, Khanewal, Vehari, Lodhran, 91.0%
Bahawalnagar, Bahawalpur, D.G. Khan, Rajanpur,
Muzafargarh, R.Y. Khan
Non-Core Faisalabad, T.T. Singh, Jhang, Sahiwal, Okara, 8.50 %
Areas Pakpattan
Marginal Bhakkar, Mianwali, Khushab, Sargodha, Gujrat, 0.78 %
Areas Sialkot, Jhelum, Qasur
Source: Pakistan Central Cotton Committee, Karachi
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.
3.6.2 COMPARATIVE DATA: PUNJAB AND SINDH
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
AREA % PROD % Lint Yield %

YEAR (000 ha) Change (000 bales) Change Kgs/ha Change
1947-48 897 - 735 - 139 -
1950-51 854 -4.79 909 23.67 181 30.22
1955-56 979 14.64 1120 23.21 194 7.18
1960-61 879 -10.21 1125 0.45 218 12.37
1965-66 1159 31.85 1604 42.58 235 7.80
1970-71 1308 12.86 2229 38.97 290 23.40
1975-76 1384 5.81 1937 -13.10 238 -17.93
1980-81 1506 8.82 2789 43.99 315 32.35
1981-82 1573 4.45 2844 1.97 307 -2.54
1982-83 1613 2.54 3255 14.45 343 11.73
1983-84 1562 -3.16 1694 -47.96 184 -46.36
1984-85 1568 0.38 4450 162.69 482 161.96
1985-86 1746 11.35 5701 28.11 555 15.15
1986-87 1864 6.76 6451 13.16 588 5.95
1987-88 1936 3.86 7255 12.46 637 8.33
1988-89 2053 6.04 7275 0.28 602 -5.49
1989-90 2036 -0.83 7454 2.46 622 3.32
1990-91 2125 4.37 8501 14.05 680 9.32
1991-92 2287 7.62 11417 34.30 849 24.85
1992-93 2438 6.60 8237 -27.85 574 -32.39
1993-94 2249 -7.75 6523 -20.81 493 -14.11
1994-95 2244 -0.22 7410 13.60 561 13.79
1995-96 2464 9.80 8720 17.68 602 7.31
1996-97 2540 3.08 7103 -18.54 475 -21.10
1997-98 2348 -7.56 6817 -4.03 494 4.00
1998-99 2283 -2.77 6628 -2.77 494 0.00
1999-2k 2329 2.01 8804 32.83 643 30.16
2000-01 2386 2.45 8600 -2.32 613 -4.67
2001-02 2561 7.33 8400 -2.33 558 -8.97
2002-03 2156 -15.81 7600 -9.52 599 7.35
2003-04 2387 10.71 7702 1.34 549 -8.35
2004-05 2550 6.83 11500 49.31 767 39.71
2005-06 2430 -4.71 10250 -10.87 717 -6.52
Source: (i) Pakistan Central Cotton Committee (2005) Cotistics, Karachi,
pp.2-6, Vol:34.
(ii) Government of Pakistan, (2004) Agriculture Statistics of Pakistan
2004-2005, Islamabad pp.29-30
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: Area, Production and Yield/hectare in Sindh from 1947/48-2007/2008
YEAR AREA % PROD. % YIELD %

(000 ha) Change (000 bales) Change Kgs/ha Change
1947-48 337 - 368 - 186 -
1950-51 364 8.01 496 34.78 232 24.73
1955-56 424 16.48 555 11.90 223 -3.88
1960-61 411 -3.07 565 1.80 234 4.93
1965-66 399 -2.92 725 28.32 309 32.05
1970-71 423 6.02 820 13.10 330 6.80
1975-76 465 9.93 949 15.73 347 5.15
1980-81 599 28.82 1407 48.26 399 14.99
1981-82 638 6.51 1550 10.16 413 3.51
1982-83 647 1.41 1585 2.26 416 0.73
1983-84 656 1.39 1210 -23.66 314 -24.52
1984-85 671 2.29 1476 21.98 374 19.11
1985-86 615 -8.35 1449 -1.83 401 7.22
1986-87 638 3.74 1305 -9.94 348 -13.22
1987-88 629 -1.41 1374 5.29 371 6.61
1988-89 564 -10.33 1108 -19.36 334 -9.97
1989-90 561 -0.53 1104 -0.36 335 0.30
1990-91 537 -4.28 1125 1.90 356 6.27
1991-92 548 2.05 1404 24.80 436 22.47
1992-93 397 -27.55 816 -41.88 349 -19.95
1993-94 555 39.80 1517 85.91 465 33.24
1994-95 406 -26.85 1282 -15.49 537 15.48
1995-96 529 30.30 1862 45.24 598 11.36
1996-97 601 13.61 2250 20.84 636 6.35
1997-98 600 -0.17 2335 3.78 662 4.09
1998-99 630 5.00 2134 -8.61 576 -12.99
1999-2k 634 0.63 2370 11.06 635 10.24
2000-01 523 -17.51 2200 -7.17 715 12.60
2001-02 523 0.00 2400 9.09 780 9.09
2002-03 542 3.63 2400 0.00 753 -3.46
2003-04 561 3.51 2243 -6.54 680 -9.69
2004-05 610 8.73 3000 33.75 836 22.94
2005-06 620 1.64 2650 -11.67 727 -13.04
2006-07 570 -8.06 2400 -9.43 716 -1.51
2007-08* 640 12.28 3000 25.00 797 11.31
Source: (i) Pakistan Central Cotton Committee and APTMA, 1997, Karachi
(ii) Government of Pakistan (2004), Agricultural Statistics of Pakistan
2004/2005, Islamabad, pp.29-30
(iii) Pakistan Central Cotton Committee (2003) Cotistics, Karachi pp. 2-6,
Vol: 34.
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.
Cotton is an important cash crop and a main source of foreign exchange

earnings for the country. In addition, it provides raw material to the local textile
industry, the lint cotton is also a major export item. It contributes 2.9 percent to GDP
(Economic Survey 2003-04).
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
According to the ICAC Report of 2006, a total of approximately 35.76 million

hectares was allocated to cotton between 1980-81 to 2004/2005. Out of the 82
countries in which cotton was grown in 2004-05, 63 are developing countries
including the Central Asian Republics, of which the UN classifies 25 as "LDCs".
Cotton is produced in 34 African and 21 Asian and 18 Latin American countries. In
terms of land use cotton production is quite intensive in that it takes only a relatively
small percentage of total available land. In global terms, cotton accounts for only
about 2.5% of land utilization in developing countries, about 3% in Latin America
and 4% in Asia and in Africa less than 1%. However, in several countries there are
few alternative crops. In Africa and India cotton production is still well below its
assessed potential (Julian, 2005). In countries such as the Central Asian Republic,
cotton is still mono- culture despite government concern, and there is little
competition for production. But elsewhere in developing countries there is a real
choice between cash crops such as cotton on the one hand, and food crops, such as
wheat and rice on the other.
The progress made in the cotton sector growth over the past 60 years can be
summarized in Table 3.7 below:
Table 3.7 Cotton and Textile Sector Growth in Pakistan

1947-48 2004-05
Area (ml. ha) 1.23 3.2
Production (ml. bales) 1.1 14.6
Yield (kg/ha) 160 769
Ginneries 31 1200
Textile Mills 2 458
Mill Consumption (ml. bales) 0.04 12.4
Yarn Production (ml. kg) 6.2 1939*
Cloth Production (ml. sq. mtr) 29.5 683*
* Figures relate to 2003-04
Source: Pakistan Central Cotton Committee, Karachi
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.
Table 3.8 Area, Production, Yield, Consumption & Export (1947-2007)

Area (000 Production Yield Consumption Exports
Year ha) (000 bales) (Kg/ha) (000 bales) (000 bales)
1947-48 1,237 1,106 152 75 1169.076
1948-49 1,051 964 156 10 642.117
1949-50 1,110 1,239 190 145 1076.121
1950-51 1,221 1,406 196 150 1306.042
1951-52 1,343 1,397 176 180 1214.682
1952-53 1,385 1,784 218 230 1600.656
1953-54 1,161 1,425 209 496 1010.569
1954-55 1,269 1,583 212 650 870.534
1955-56 1,407 1,678 203 800 903.862
1956-57 1,439 1,711 202 845 669.551
1957-58 1,453 1,708 200 1,111 576.132
1958-59 1,325 1,587 204 1,101 585.862
1959-60 1,343 1,639 208 1,342 566.415
1960-61 1,293 1,692 222 1,402 246.879
1961-62 1,396 1,823 222 1,405 397.700
1962-63 1,374 2,060 255 1,292 845.200
1963-64 1,471 2,354 272 1,486 869.605
1964-65 1,467 2,124 246 1,586 564.055
1965-66 1,561 2,331 254 1,755 579.649
1966-67 1,620 2,605 273 1,800 713.399
1967-68 1,785 2,911 277 1,900 1081.706
1968-69 1,745 2,967 289 2,163 710.366
1969-70 1,756 3,012 292 2,584 495.690
1970-71 1,733 3,050 299 2,419 598.906
1971-72 1,958 3,979 346 2,397 1460.108
1972-73 2,010 3,947 334 2,727 1015.396
1973-74 1,845 3,704 341 2,799 318.550
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
ii) Pakistan Central Cotton Committee 2008
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.
Figure 3.3: Over time cotton area trend in Pakistan.
Over time cotton area trend in Pakistan
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.
Fig.3.4 Over time cotton production trend in Pakistan.
Over time Production in Pakistan

16000
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
3.6.5 Consumption and Exports
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.
Fig. 3.5 Consumption trend of cotton in Pakistan.
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.
Fig. 3.7 Comparison of Cotton Production and Consumption
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
Cotton markets in Pakistan have suffered from ambivalence and uncertainty

ever since the trade was regulated in 1993-94 (SMEDA, 2005). From the mid-
seventies, the CEC virtually dictated cotton trade and prices through direct
intervention and export control mechanisms. Following the removal of the Bench
Mark system or Export Duty structure in 1993-94, the cotton trade was abandoned to
a fragile system that is subject to violent price fluctuations on the basis of the supply
situation (SMEDA, 2005). Due to the concurrent withdrawal of export duty (through
the Bench Mark system) and a drop in production due to the 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, both in order to meet the domestic shortfall and also to
have access to higher quality cotton (especially in terms of being contamination free),
to meet its need for shifting to higher quality products. In 1998-99, over a million
bales of cotton were imported in anticipation of continuous low domestic production.
But in 1999.2000, contrary to expectations, there was a sudden turn around in
domestic production and a large crop came in (SMEDA, 2005).
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:
Staple-wise cotton classification
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
Source: Pakistan Central Cotton Committee, 2006.
ii) Fine-ness of the fibre
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.
Maturity (%) Classification

84 & greater Very mature
77 – 84 Mature
68 – 76 Average
60 – 67 Immature
Les than 60 Very immature
Maturity is important for strength of fibre. Maturity is known to be one

character varying the most from year to year, and all cottons do not behave the same
way in this respect. It has also been found that lower fibre maturity is more common
in long staple cottons (Ali , 2007).
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).
Tensile strength classification is as follows:

I (147.92) II (73)
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).
U.R. (%) Classification

Grater than 80 Uniform
76 – 80 Average
71 – 75 Slightly irregular
70 or below Irregular
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.
The Government has been compelled to re-introduce public sector

interventions through TCP since last year as an urgent but interim step with no
permanent solution in sight. The situation is fraught with the possibility that TCP will
get permanently entangled in the cotton trade, thereby negating the reasons for which
the CEC was dissolved. With this backdrop, the problems of the cotton market can be
summed up as:
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.
f. With a large number of small and uneducated growers, it is difficult to manage

quality since many intermediary marketing agents are involved from the farm
to the ginning factory. This factor exaggerates quality deterioration in the
absence of strict regulations and price sensitivity to quality.
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.
The institution of a permanent public sector agency to regulate prices and

stocks is inconceivable under the new economic order developing in Pakistan and
globally. Therefore, a phased approach needs to be developed that can create stability
in the short term through TCP and enable long-term development of stable market
conditions. This can be brought about through the establishment of two missing links:
one, hedge markets for cotton and yarn, and two, intermediary markets through the
evolutionary development of commodity warehousing businesses. The two links have
a symbiotic relationship; one can not exist without the other.
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.
3.7 GOVERNMENT POLICIES TOWARDS COTTON
In production, Pakistan enjoys fourth position in the world. This distinction it

has achieved due to government’s efforts and massive support to the grower to
increase production and due to government’s support price policy successfully
implemented by the TCP (Akhtar , 2005).
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).
3.7.1 SUPPORT PRICE AND MARKET PRICE
The Agriculture Prices Commission (APCom) started functioning in 1981 on

national level (Niaz 1995). Before the set up of APCom, the main criteria used to
determine the support price was per unit cost of production of crops and very little
consideration was given to other factors like export and import parity prices. During
the course of function of APCom, they came to the conclusion that a number of
criteria such as cost of production, export and import parity prices, world demand,
supply and trade, domestic and international prices, risk factors and likely impact on
the cost of living must be considered to determine the support price for a particular
crop.
The main purpose of price intervention of the government in the shape of

support price is to promote agriculture production, productivity, price stabilization
and to improve marketing efficiency to ensure better returns to growers and reducing
the cost to the consumers.
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.
Fig. 3.8 Comparison of Support Price and Market Price of cotton
Market Price Support Price

1600
1400
(Rs. per 40 kg)
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.
3.7.2 THE YIELD FACTOR
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.
Table 3.10 Cotton Yield Comparison in Top Cotton Producing Countries

(kg/ha)
Year China India USA Pakistan Uzbekistan
1995-96 879 318 602 601 837
1996-97 890 330 792 506 714
1997-98 1023 302 762 528 768
1998-99 1059 302 702 511 647
1999-00 1028 304 680 641 752
2000-01 1093 278 708 624 676
2001-02 1107 308 790 580 727
2002-03 1175 302 746 621 719
2003-04 954 389 818 571 641
2004-05 1111 470 958 769 800
Source: ICAC World Cotton Statistics 2006.
India is the lowest of five countries tabulated but it should be noted that
India’s 60% growing area is rain-fed (SMEDA-2005).
Fig. 3.9: Cotton Yield Comparison in Top Cotton Producing Countries

(kg/ha)
China India USA Pakistan Uzbekistan
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
Pakistan is close to the world average but there is immense potential to

increase the average yield/hec. The lower per hectare yield in the country may be
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.
3.7.3 Potential to Increase Area under Cotton
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.
In Punjab and Sind some areas may be encouraged to convert to growing

cotton. The Table 3.11 shows a potential increase in area in Punjab and Sind as
168,000 and 64,000 acres respectively. This additional area in Sind with a yield of 14
maunds per acre can produce an additional 211,000 bales. For Punjab the additional
168,000 acres if yielding an average of 17 maunds per acre will produce 672,000
bales. All these additional areas in the four provinces combined can produce 2.17
million additional bales, which is about 20% of the crop in 1999-2000.
Table 3.11 Potential to Increase Production through Area Expansion
Source: (1) Textile Vision 2005, Pakistan.

(2) All Pakistan Textile Mills Association, Pakistan 2005.
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.
In the last three decades of 20th century, Pakistan witnessed an unprecedented

technological and economic transformation. It was able to achieve food self-
sufficiency, triple its agricultural exports, reduce poverty, increase income levels, and
improve quality of life for its people. The transformation started in the late sixties
with the advent of green revolution. The key elements in improving food production
during this period were the combination of a technology package (high yielding
varieties of rice and wheat – water – fertilizer); improved policy environment,
incentive structure in the form of input subsidies, and investment in agriculture
infrastructure, including irrigation, research and extension. As a result, by the end of
20th century, almost all of the irrigated wheat and rice area in Pakistan was cultivated
under high yielding varieties irrespective of farm size. Similarly, there was tripling of
cotton and doubling of sugar production. Cereal production more than doubled on the
same area under wheat and rice as in 1970. In other words, had cereal yields stayed at
the 1970 levels, it would have now taken twice the area to produce the same amount.
The need of the hour is that agriculture production should be increased more so that
the living standard of rural population can also be enhanced for the better and bright
future of Pakistan.
100
CHAPTER 4
A PROFILE OF STUDY AREAS WITH SPECIAL

REFERENCE TO PRODUCTION AND
MARKETING OF COTTON
4.1 INTRODUCTION
This chapter encompasses the profile of Punjab, the province of Pakistan in

which the study area is situated. In overview of the Punjab, the focus will be on
demography, climate, economy and education of Punjab followed by the profile of
study area i.e. Multan and Bahawalpur districts. The historical prospective,
demography, climate etc will be the point of emphasis in these sections of the study.
In the next section of the chapter, the point of emphasis will be the production and
marketing aspect of cotton in the study area. Marketing channel of cotton will be
elaborated along with the role of major players in the channel. Ginning and spinning
industries play a pivotal role in the marketing of cotton. An overview of these
industries in the study area and the process of ginning and spinning will be explained
in few sections. Price of commodities plays a major role in the market. In the last
section of the chapter, market price and the role of support price will be elaborated.
4.2 AN OVERVIEW OF PUNJAB PROVINCE OFAKISTAN
Punjab is Pakistan's second largest province at 205,344 km² (79,284 square

miles) and is located at the northwestern edge of the geologic Indian plate in South
Asia. The provincial level-capital and main city of the Punjab is Lahore which has
been the historical capital of the region (Fig. 4.1). Other important cities include
Multan, Faisalabad, Sialkot, Gujrat and Rawalpindi. The province is home to six
rivers: the Indus, Beas, Sutlej, Chenab, Jhelum, Ravi. Nearly 60% of Pakistan's
population lives in the Punjab. It is the nation's only province that touches
Balochistan, North-West Frontier Province, Sindh and Azad Kashmir, and contains
the federal enclave of the national capital city at Islamabad. This geographical
position and a large multi-ethnic population strongly influence Punjab's outlook on
101
National affairs and induces in Punjab a keen awareness of the problems of the
Pakistan's other important provinces and territories.
In acronym P-A-K-I-S-T-A-N, the P is for PUNJAB. Punjab is the main

cotton growing province of the country contributing around 85 percept of the total
produce. The study area Multan and Bahawapur Districts are located in the province
of Punjab Punjab is Pakistan's second largest province at 205,344 km² (79,284 square
miles). The provincial capital and main city of the Punjab is Lahore. Other important
cities include Multan, Bahawalpur, Faisalabad, Sialkot, and Rawalpindi. The Indus,
Beas, Sutlej, Chenab, Jhelum, Ravi are the six rivers located in Punjab. 60 percent of
Pakistan's population lives in the Punjab (Wikipidia Encylopadia).
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
4.2.1 COTTON CULTIVATING AREAS
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).
4.2.2 DEMOGRAPHY AND CLIMATE OF PUNJAB
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).
4.2.3 PUNJAB ECONOMY AND EDUCATION
Punjab is the most industrialized province of Pakistan; its manufacturing

industries produce textiles, sports goods, machinery, electrical appliances, surgical
instruments, metals, bicycles and rickshaws, floor coverings, and processed foods.
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.
Punjab contributes about 68 percent to annual food grain production in the

country. 51 million acres (210,000 km²) is cultivated and another 9.05 million acres
(36,600 km²) are lying as cultivable waste in different parts of the province. (Wikipdia
Encycloepdia)
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.
Table 4.1: Literacy Rate in Punjab
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 a city in the Punjab Province of Pakistan and capital of Multan

District. It is located in the southern part of the province. It has a population of over
3.8 million (Government of Pakistan, Census 1998), making it the sixth largest city of
Pakistan. It is built just east of the Chenab River, more or less in the geographic center
of the country and about 966 km from Karachi. Multan comprises of three tehsils
(Administrative Sub. Div.) namely Multan, Sujah Abad and Jalal Pur Pirwala.
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).
Upon Pakistan's independence in 1947, Multan became part of the Punjab

province. The old city continues to be in a dilapidated state, and many monuments
wear the effects of the warfare that has visited the city. (Stephen, Helders-World
Gazetteer)
4.3.1 GEOGRAPHY AND CLIMATE
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.
4.3.2 MULTAN’S ECONOMY
Multan is a commercial and industrial center; it is connected with the rest of

the country through rail and air including the other industrials hubs such as Lahore,
Karachi, Quetta & Faisalabad. Industries include fertilizer, cosmetics, glass
manufacturing, cotton production and processing, large textile units, flour mills, sugar
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).
4.4 BAHAWALPUR IN HISTORICAL PERSPECTIVE
Bahawalpur is a city having population of 403,408 persons located in southern

part of Punjab province of Pakistan. Bahawalpur is located south of the Sutlej River
and it lies in the Cholistan region. It is situated 90 km from Multan, 420 km from
Lahore and about 700 km from the national capital Islamabad. It was the capital of the
former princely state of Bahawalpur (Helders 2006 & GOP, Population Census 1998).
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).
The Royal House of Bahawalpur is said to be of Arabic origin and claim

descent from Abbas, progenitor of the Abbasid Caliphs of Baghdad and Cairo. Sultan
Ahmad II, son of Shah Muzammil of Egypt left that country and arrived in Sind with
a large following of Arabs in 1370. He married a daughter of Raja Rai Dhorang Sahta,
receiving a third of the country as dowry. Amir Fathu'llah Khan Abbasi, is the
recognized ancestor of the dynasty. He conquered the bhangar territory from Raja
Dallu, of Alor and Bahmanabad, renaming it Qahir Bela. Amir Muhammad Chani
Khan Abbasi entered the imperial service and gained appointment as a Panchhazari in
1583. At his death, the leadership of the tribe was contested between two branches of
the family, the Daudputras and the Kalhoras. Amir Bahadur Khan Abbasi abandoned
Tarai and settled near Bhakkar, founding the town of Shikarpur in 1690. Daud Khan,
the first of his family to rule Bahawalpur, originated from Sind where he had opposed
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).
4.4.1 BAHAWALPUR DISTRICT
Bahawalpur district covers 24,830 km² and comprises five tehsils

(Administrator sub-division) Ahmadpur East, Bahawalpur, Hasilpur, Khairpur
Tamewali and Yazman with a total population of about 2.5 million. Approximately
two-thirds of the district (16,000 km²) is covered by the Cholistan Desert, which
extends into the Thar Desert of India. The district is a major producer of cotton.
(Buyer 2005)
Sindh Province of Pakistan is on the west of Bahawalpur and is a fertile

alluvial tract in the Sutlej River valley that is irrigated by floodwaters, planted with
groves of date palms, and thickly populated. The chief crops are wheat, gram, cotton,
sugarcane, and dates. Sheep and cattle are raised for export of wool and hides
(Helders 2005).
Bahawalpur is also an important agricultural training and educational center.

Soapmaking and cotton ginning are important enterprises; cotton, silk, embroidery,
carpets, and extraordinarily delicate pottery are produced. In 1970’s Factories
producing cottonseed oil and cottonseed cake were built. It is an important marketing
centre for the surrounding areas.
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)
4.4.2 BAHAWALPUR’S ECONOMY
Bahawalpur is mostly agricultural city, which allows agricultrual exports to

many parts of the world. There is also a large market town for mangoes, dates, wheat,
sugarcane, and cotton that bring in continuous demand all year round. In addition, it
109
has soap making and cotton spinning factories, as well as enterprises producing silk
and cotton textiles, carpets, and pottery (Buyer and Royal websites).
4.5 COTTON PRODUCTION AND MARKETING
Having discussed, the profile of study areas, now we will concentrate on

production and marketing of cotton. Cotton marketing chain including all the players
will be discussed in detail, followed by the ginning and spinning industry in the
country and the study areas. Last section of the chapter will deal with the support and
market price of cotton.
4.5.1 COTTON MARKETING CHANNELS IN STUDY AREA
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).
Detailed marketing channel in Pakistan for marketing of cotton is given in Fig.

4.2.
110
Fig 4.2 Marketing Channel of Cotton in Pakistan
Transport charges to be paid by sellers

Growers
(Zamindar)
Commission agents collect

cotton from producers and
delivered it to ginners
Beopari / Road side purchaser /

Commission agent village beopari
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
Spinning Exporters Oil Mill Exporters Growers
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.
4.5.2 COTTON GROWERS / PRODUCERS
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.
4.5.3 VILLAGE 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
received or some time a loss is beared by these dealers.
4.5.4 GINNERS
This is third important component in the marketing channel of seed cotton.
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
risk on the other hand.
4.5.5 OIL MILLS
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.
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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
are dependent upon this process.
4.6 GINNING INDUSTRY OF PAKISTAN
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.
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Figure 4.3: Location of Ginning Factories in Pakistan
Source: Pakistan Cotton Ginners Association 2007
The ginning industry mushroomed in the cotton growing areas of Pakistan

after independence in 1947. Most of the industry is in the hands of local traders who
have upgraded their enterprise from commission agent operations or cotton
intermediary trading by installing saw gins. By the nature of ginning activity, it is
more entrepreneurial trading than a processing activity, since the ginner has to play
with the market risks of lint and cotton seed prices. (SMEDA,2005)
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).
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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.
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Figure 4.4: Ginning Process of Cotton
Seed Cotton (Phutti)

Mixing

Pneumatic Conveyor

Opener / Pre-Cleaner

Saw Gin  Cotton Seed

Cotton Lint

Lint Cleaner

Pre-Bale Press

Bale Press  Cotton Bales
Source:SMEDA, 2005
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4.8 THE GINNING PROCESS
The ginning process consists of three stages:
4.8.1 Stage I: Seed Cotton Conditioning and Cleaning
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.
4.8.2 Stage II: Ginning the Seed Cotton
The seed cotton is now ready for ginning. Cotton is conveyed to the roller gin,
for separation of seed and fiber.
4.8.3 Stage III: Lint Cleaning
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.
4.8.4 Stage IV: Packaging the Lint
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
When seed cotton is brought in factory yard, it possesses high moisture

content, and contamination in the form of leaves, brackets, sticks, stones etc. which
requires cleaning prior to ginning. Different machines are used for pre-ginning
operations.
After the pre-cleaning, cotton is conveyed to gin stands where revolving

circular saws pull the lint through closely-spaced ribs that prevent the seed itself from
passing through it. High capacity Pakistani-made gins, having 6 numbers gin stands of
120 saw gin blades, can gin up to 3,953 kg of lint as compared to foreign high-
capacity gins available, which can turn out 13,500 kg of cotton lint in one hour
(SMEDA, 2005).
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).
4.8.6 Post Ginning
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
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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.
4.9 GINNING SECTOR OUTLOOK IN PAKISTAN
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.
Table 4.2 Number of ginning factories and detail of ginning machinery

Pakistan – province and district wise
PUNJAB
Sr. District No. of Number of Sawgins Number of
No. Factories 80 90 100 120 Press FEC Opnr Lt Clr SR DR Exp
1. Multan 72 12 246 85 25 76 21 41 18 17 70 237
2. Lodhran 65 15 131 110 12 66 7 11 5 5 0 82
3. Khanewal 74 17 207 93 16 82 2 5 1 30 1 119
4. Muzafargarh 78 3 129 239 8 84 4 3 5 71 15 135
5. DG Khan 59 0 104 148 0 60 0 0 0 4 8 101
6. Rajanpur 49 0 127 82 4 49 9 0 0 0 0 28
7. Vehari 131 47 451 92 12 145 38 26 12 7 42 270
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
18. RY Khan 128 0 302 268 3 134 13 150 16 0 1 394
19. Bahawalpur 128 5 416 238 4 138 21 89 43 6 0 557
20. Bahawalnagr 64 11 120 140 0 67 0 34 7 6 6 248
Total Punjab 1063 136 2758 1842 96 1123 120 361 108 146 143 2432
SINDH AND BALOCHISTAN

1. Hyderabad 22 9 86 14 0 22 12 18 4 0 0 36
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
Total 200 22 856 35 0 204 33 146 22 96 99 190
Source: Pakistan Cotton Ginners Association 2005.

Note
Press : Pressley
FEC : Feeder Extractor Cleaner
Opnr : Opener
Lt Clr : Light Controller
SR : Single Roller
DR : Double Roller
Exp : Expelling Unit
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Table 4.3: Summary of ginning factories – Pakistan
Sr. District No. of Number of Sawgins Number of

No. Factories
80 90 100 120 Press FEC Opnr Lt Clr SR DR Exp
1. Punjab 1063 136 2758 1842 96 1123 120 361 108 146 143 2432
2. Sindh & 200 22 856 35 0 204 33 146 22 96 99 190

Balochistan
Total 1263 158 3614 1877 96 1327 153 507 130 242 242 2622
Source: Pakistan Cotton Ginners Association 2005
Production Capacity of Ginning Factories In Pakistan is explained below:
1. One Sawging stand of 80 Saws produce 12.5 bales in 8 hours

(Total Sawgin stand in Pakistan 158 Sawgins of 80 Saws)
158 x 12.5 = 1,975 Bales in 8 hours (Single Shift)

1975 x 2 = 3,950 Bales in 16 hours (Two Shift)
1975 x 3 = 5,925 Bales in 24 hours (Three Shift)
2. One Sawgin stand of 90 Saws produce 16.5 Bales in 8 hours

(Total Sawging stand in Pakistan 3614 Sawgins of 90 Saws)

3. One Sawgin stand of 100 Saws produce 22.5 Bales in 8 hours


4. One Sawgin stand of 120 Saws produce 31 Bales in 8 hours

96 x 31 = 2,976 Bales in 8 hours (Single Shift)

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Summary of above mentioned production capacity of ginning factories are explained
in Table 4.4 below:
Table 4.4: Production capacity of ginning factories – Pakistan

Single Shift Two Shift Three Shift
80’s Saws 1,975 3,950 5,925
90’s Saws 59,631 119,262 178,893
100’s Saws 42,233 84,465 126,698
120’s Saws 2,976 5,952 8,928
Total 106,815 213,629 320,444
106815 x 120 (days) 213629 x 120 (days) 320444 x 120 (days)
= 12,817,800 bales = 25,635,480 bales = 38,453,280 bales
(12.817 million bales (25.635 million bales (38.453 million bales
per season on single per season on per season on three
shift) double shift) shift)
Source: Pakistan Cotton Ginners Association
4.10 PROCESS OF SPINNING
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.
Figure 4.5 below explains the spinning process.
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Figure 4.5: Spinning Process
Source: SMEDA, 2005.
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4.10.1 Spinning Industry in Pakistan
At the time of independence in 1947, many of the industries were non-existent

in the country but spinning industry did exist. Total number of spindles in the country
was 78,000 (Fig. 4.6). This number grew to 2.4 million till 1970. During this time,
major growth took place during the period 1952-56. (SMEDA, 2005)
Figure 4.6: Spinning Units Growth 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
Source: SMEDA, 2005.
The growth of Pakistan's Spinning industry during the period 1970-99 is

shown in Figure 4.6. Number of units has grown from 107 in 1970 to 442 in 1999.
This represents an average growth rate of 5.3 percent. The growth was steady till 1993
after which a sharp increase can be seen with number of units growing from 334 to
471 during the period 1993-94 (SMEDA, 2005).
4.11 CONCLUSION
Pakistan encompasses Himalaya, Hindu Kush and Karakoram mountains,

beside the fertile plains of the Punjab province. Punjab is the main cotton growing
areas of the country contributing about 81 percent of the total produce of cotton.
Multan and Bahawalpur (the study areas) are located in the Punjab province and are
called core-areas for production of cotton, contributing 91 percent in the total produce
of the Punjab province. Cotton related industries comprising of ginning, spinning and
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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
DATA AND METHODOLOGY
5.1 INTRODUCTION
For accomplishment of a research task and to achieve the desired objectives,

choice of an appropriate methodology is of great value. Methodological choices are
dependent upon the nature of inquiry, objectives of research and the intended nature
of analysis, leading to the use of appropriate research methods. In some cases, the
required information can only be acquired through the use of a specific methodology.
Therefore, the choice of an appropriate methodology is critical in conducting a
meaningful research. It is also important for a researcher to be logical and systematic
in the research process and adhere to a single research methodology for a particular
research question. Each phase of the research process needs to be dealt with in a way
that contributes towards the achievement of desired results in a more generalized
form. Once the data has been collected, errors and inconsistencies in the data set need
to be overcome. Choice of data analysis techniques need to be made in light of the
data availability and the broader objectives of research. Once the analysis is complete,
findings of the study need to be interpreted carefully and their strength validated by
existing empirical analysis or by appropriate statistical techniques. The aim of present
chapter is to deal with the methodological issues emerging from the contents of
present research. Keeping in view the objectives of this study, use of primary as well
as secondary data analysis was carried out.
5.2 SOCIO PHYSICAL ENVIRONMENT
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.
127
5.2.1 Climate
Multan and Bahawalpur districts experience a bimodal rainfall pattern; one

peak of rain in February-March and the other in the months of July & August.
Summers are very hot. These two districts are canal-irrigated. The underground water
is good and fit for irrigation in the whole region.
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.
5.3 SURVEY AND SAMPLING PROCEDURE
5.3.1 Collection of Data and the Choice of Analysis Technique
To generate information on cotton marketing, cotton marketing channels,

problems being faced by farmers, different segments of the marketing channel, farm
management practices and income pattern of the farmers, a detailed survey was
conducted in the Multan and Bahawalpur districts. Multan district is having three
tehsils i.e., Multan, Shujabad and Jalalpur Pirwala. At random two tehsils of Multan
i.e., Shujabad and Multan were selected as study area. From each tehsil, five union
councils and from each union council ten villages were selected at random.
Bahawalpur district is having six tehsils i.e., Bahawalpur, Yazman Mandi, Khairpur
Tamewali, Ahmad Pur Sharqia and Hasil Pur. Two tehsils of Bahawalpur i.e.,
Yazman and Bahawalpur were selected at random and from each tehsils five union
councils and from each union council ten villages were selected at random. Three
different types of questionnaires specific to growers, village Beoparis / commission
agents, ginners and spinners were developed. Individual surveys were conducted.
Multan and Bahawapur districts were selected as study area since majority of the
cotton producers are living here. Similarly majority of the cotton ginning and spinning
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.
The random sampling was used at the following three stages.
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
Multan Bahawalpur Multan & Bahawalpur

Farmers
(No.) (No.) Region (No.)
Small 60 60 120
Medium 25 25 50
Large 15 15 30
Village Beopari /
15 15 30
Commission Agent
Ginners 25 25 50
Spinners 15 15 30
Total 155 155 310
Source: Author’s calculations.
5.4 DATA COLLECTION

Well structured questionnaires (Annexure D, E, F, G) as discussed earlier
specific to different respondents were used to collect the data from the relevant study
components.
5.5 RESEARCH PROCESS

5.5.1 Questionnaire Development
The following considerations were taken into account while designing

questionnaire for survey as suggested by literature on research methodology (Gill et al
1997, Sekaran 1992, Zikmund 1994 and Ghauri et al. 1995).
 To develop an explicit and simple questionnaire that can be administered through

personal interviews.
 To avoid asking overtly sensitive questions in order to assure a higher response
rate.
 To use polite, straightforward and soft language in the questionnaire.
 To avoid a lengthy questionnaire by restricting only to the relevant questions.
 In order to get a quick answer by saving time of the respondents, most of the
questions were designed in a closed form with fixed-alternative choices. However,
flexibility was also provided in the questionnaire to get an opinion of the
respondents in cases where necessary.
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.
The process of questionnaire development involved the following stages.

Firstly, a thorough review of existing literature was made to explore the various fronts
determined in light of objectives of the study. Secondly, ordinal measures were used
on a scale of 1 (very important) to 5 (indifferent) wherever required. Thirdly, the
questionnaire was reviewed by some of the academics familiar with the literature on
cotton marketing. Contents of the questionnaire were revised based on their feedback.
Fourthly, the questionnaire used for the survey was also improved after a pilot test,
through personal discussion with Director, Ex-Directors of Central Cotton Research
Institute Multan, Pakistan and Vice President, Pakistan Central Cotton Committee
Karachi Pakistan. After all these improvements, the questionnaire, as an information-
seeking device was finalized to carry out the survey in Multan and Bahawalpur
districts of Pakistan. Wherever necessary, the questions were translated in national
and regional / local language of the country i.e. Urdu / Siraiki respectively.
5.5.2 Choice of the Research Technique: Interview-Based Survey
Keeping in view the knowledge garnered through existing literature, nature of

information being sought, length of the questionnaire and geography of the survey,
there were two possible and viable options for collecting the primary data. These
included personal interviews or the telephonic interviews.
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.
However, there are also certain disadvantages as recognized by the literature

(Nachmias et al, 1976, Sekaran 1992, Zikmund 1994, and Ghauri et al. 1995)
associated with such a mode of collecting data. These include the following:
 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.
5.5.3 Problems Encountered and Limitations of the Study
5.5.3.1 Problems Encountered
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.
Firstly, there appeared to be a problem with cotton growers regarding cost

benefit information in extricating information from the growers as majority of the
growers were illiterate. They were very conscious to discuss their cost and incomes.
Ginners and Spinners were very conscious and were reluctant to disclose requisite
information related to income and cost accounts. Availability of required statistics and
documented information regarding incomes, price and costs of all the components
was not possible to collect so the analyzed data of these three components of the study
is based on whatever information was provided by them.
5.5.3.2 Limitations
The present research is a blend of primary as well as secondary data analysis

of problems of cotton marketing in Pakistan. It provides a broad coverage of the
issues related to activities of the marketing in Pakistan through a survey of the
growers, village dealers/beoparies, ginners and spinners. Given the fact that the study
incorporates both primary and secondary elements of analysis, it would be difficult to
assert that the study is complete in all respects. It does, however, serve as a starting
point for further research in the domain problems of cotton marketing in Pakistan.
Certain issues remain unexplored mainly due to resources constraints and non
cooperative behaviour of the ginners and spinners. These might be considered as
limitations of the present study and the potential areas for future research.
5.6 THEORETICAL AND CONCEPTUAL FRAMEWORK
5.6.1 COST OF PRODUCTION OF COTTON CROP
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 COST OF VARIABLE INPUTS
The variable input cost included the following items:
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.
5.7.3 Farm- Yard-Manure
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.
5.7.4 Tractor Hiring
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.
5.7.6 Plant Protection
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
where wi is the ith spray ,
xi is the price of ith spray
and ∑wi sum of all sprays.
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.
5.7.7 Labor Cost
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
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Farm Management Handbook (1993) were used to work out the total labor hours
required for the production of cotton prior to picking of cotton.
5.7.8 Picking Cost
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.
5.7.9 Land Revenue and Water Rates
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.
5.8 CROPS BUDGETS
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.
5.9 COST BENEFIT RATIO
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.
C-B ratio = GI/TC
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Where GI is the Gross Income per acre of cotton and
TC represents the Total Cost of production for one acre of cotton.
5.10 ECONOMIES OF SCALE

As discussed earlier, different three categories of producers were identified in
the study area i.e small, medium and large farmers. Efforts were made to estimate the
production economies of scale. For this purpose different production functions can be
used. Production function is a table, equation or graph, which shows the technical
relationship between independent and dependant variables. In research, different types
of production functions are applied according to the type and objective of the study.
However the most suitable function which can be used for the determination of
economies of scale is the Cobb-Douglas production function. Basically Cobb Douglas
production function is the log linear form of multiple regression model. The sum of
all the coefficients for all the variables included in the model and estimated by the
model give the idea of economies of scale.
A sum of coefficients greater than one, reflects increasing returns to scale.
A sum of coefficients less than one, exhibits decreasing returns to scale .
A sum of coefficients equal to one, shows constant returns to scale.
For all the categories of farmers these were estimated by using the Cobb
Douglas production Function in the following form.
Mathematical form of the model
LnY     1LnX 1   2 LnX 2   3 Ln X 3   4 Ln X 4   5 Ln X 5   6 LnX 6  
Where, Y = is the dependent variable representing value of Yield in Rs./acre.
X1 =representing the cost of cultivations (Rs/acre)
X2 = cost of Seed and sowing (Rs/acre)
X3 = variable for DAP cost (Rs/ acre)
X4= variable for the cost of Urea (Rs/ acre)
X5 =cost of Irrigations (Rs/acre)
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X6 = variable representing Plant protection cost (Rs/ acre)
 = Constant
β= the coefficients to be estimated
µ = random disturbance term,
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.
5.11 POLICY ANALYSIS MATRIX (PAM)
The Policy Analysis Matrix (PAM) is a computational framework developed

by Monk et al (1989) and augmented by Masters et al (1995) for measuring input use
efficiency in production, comparative advantage and the degree of government
interventions. It includes all the data needed to calculate the Producer's Subsidy
Equivalent (PSE), Net Social Profit (NSP), Social Cost Benefit (SCB) and domestic
Resource cost (DRC). The PAM addresses three principal issues:
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.
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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 private profitability calculations show the competitiveness of the

agricultural system, given current technologies, output values, input costs, and policy
transfers. The cost of capital that owners of the capital require to maintain their
investment in the system is included in the domestic costs (C); profits (D) are excess
profits above normal returns to the operators of activity. If private profit are negative
(D<0), operators are earning a subnormal rate of return and thus can be expected to
exit from this activity unless something changes to increase profits to at least a normal
level (D=0). Alternatively, Positive private profits (D>0) are an indication of
supernormal returns and should lead to future expansion of the system, unless the
farming area cannot be expanded or substitute crops are more privately profitable.
5.13 SOCIAL PROFITABILITY
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.
The social profit is the measure of comparative advantage and efficiency

because outputs, E and inputs, F+G, are valued in prices that reflect scarcity values
(social opportunity costs). A positive social profit (H>0) indicates that the country
uses scarce resources efficiently and has a static comparative advantage in the
production of that commodity at the margin. The negative social profit (H<0) suggests
that the sector is wasting resources that could have been utilized more efficiently in
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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.
5.13.1 Divergences/Policy Transfers
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 PAM parameters namely Nominal Protection Coefficient (NPC),

Effective Protection coefficient (EPC) and Domestic Resource Cost (DRC) ratio are
inter related. These ratios are derived as follows:
5.13.2 Nominal Protection Coefficient (NPC)
Nominal Protection Coefficient (NPC), a simplest indicator of policy effects,

is defined as the ratio of domestic price of commodity to its border price. The border
price is defined as the price in the international market converted into local currency
using an exchange rate. The simple forms of these ratios are:
Nominal Protection Coefficient on tradable outputs (NPCP) = A/E
Nominal Protection Coefficient on tradable inputs (NPCI) = B/F
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
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inefficiency of a country in producing that particular commodity and that the price is
heavily affected by the government policies or other factors.
5.13.3 Effective Protection Coefficient (EPC)
EPC=A-B/E-F
The Effective Protection Coefficient (EPC) can be defined as the ratio of

distorted tradable value added at market prices to its un-distorted value at border
prices. The EPC combine the two NPC's to assess the overall effect of implicit tax and
subsidy through both outputs and inputs. Thus it is an alternative indicator to NPC
that captures the net effects of all policies on value added of agricultural production
systems and not on just input or output prices.
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:
i) Value added in domestic prices is negative; or,
ii) Value added in border prices is negative.
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.
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5.13.4 Domestic Resource Cost Ratio
Competitiveness in domestic production of a commodity is measured by the

Domestic Resource Cost (DRC). This is a measure of relative efficiency of domestic
production by comparing the opportunity cost of domestic production to the value
generated by the product (Tsakok, 1990). The DRC was first developed independently
by Michael Bruno in Israel and Anne Krueger in the United States (Masters and
Nelson, 1995). This ratio can be used to compare different economic activities in
terms of social costs of domestic resources. The measure is calculated as the ratio of
the cost of domestic resources and non-traded inputs (valued at this shadow prices) of
producing the commodity to the net foreign exchange earning or saved by the
producing the goods domestically.
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:
at = units for tradable inputs
ant= units of non tradable inputs
Vnt= shadow price of non-tradable inputs domestic resources.
Pob= border price of tradable output
ptb= border price of tradable inputs
Similar to calculation of other coefficients, the denominator was expressed in

foreign rather than border prices. Alternative exchange rates were used to convert
foreign into border prices, and the numerical values obtained emphasize the key
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importance of exchange rate policy in contributing to comparative advantage. An
alternative formulation is
DRC = ∑ant Vnt /Pof-∑atptf (Sabir, 2004)
Where: Pof = foreign price of output
ptf= foreign price of tradable inputs
at = units of tradable inputs
ant= units of non tradable inputs
Vnt= shadow price of non tradable inputs/domestic resources
The relationship between DRC and comparative advantage is straightforward:

a country has a comparative advantage in an activity if DRC ratio is less than unity;
conversely, a DRC ratio greater than unity indicates comparative disadvantage of the
country in producing that particular commodity. DRC provides the comparative
advantage of crops in production at static level.
5.13.5 Components of PAM and Data Requirement
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.
5.13.6 Input / Output technical coefficients and market price
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.
5.13.7 Input Categories
Inputs are classified into two categories:
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i) Tradable/purchased Inputs: The purchase inputs include seeds, fertilizers,
manure, chemicals, and machinery etc.
ii) Non-tradable inputs/Domestic resources. The domestic resources include labor,

land and irrigation water.
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.
5.13.8 Input and Output World Prices
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.
5.13.9 Classification/ Decomposition of Input Cost Items
The cost of production is separated into tradable and non-tradable

components; every item is divided into two parts. Some items had greater proportion
of tradable element than others. For example labor and land are regarded as 100 per
cent non-tradable. Material inputs such as machinery and fertilizers had significant
proportion of tradable elements. For all other inputs, (material and operations) the
proportions of these two different components are estimated on adhoc basis, by
consulting some relevant studies and discussions with field experts.
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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.
5.13.11 Shadow Exchange Rate
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
SCF = M+X/M (l+TM) + X (l-Tx)
Where
M = CIF value of imports;
X = FOB value of exports
TM = Average tax rate on imports
Tx = Average tax rate on exports
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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:
i) The commodities are exactly comparable in physical terms;
ii) The commodities are compared at the same location.
To fulfill the second condition a precise accounting of transport, handling and

marketing costs is made. Following are the two equations for the calculation of export
parity price (EPP) and import parity prices (IFP).
Export Parity Price=(FOB*SER)-(HCB)-(TCBM+MCBM)-(TCMF+MCMF)
FOB = Free on board price at border;
CIF = Cost insurance freight
SER = Shadow exchange rate;
HCB = Handling costs at border
TCBM = Transport costs from border to market;
MCBM = Marketing cost from border to market;
TCMF = Transport costs from market to farm;
MCMF = Marketing cost from market to farm.
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5.13.13 Social Valuation of Non-Tradable
The term "Non-tradable inputs" refers to domestic factors non-traded

internationally, meaning that there are no international prices for these factors. The
social prices of domestic factors such as land, water, capital, and labor are determined
in the domestic currency of the country. Alternative approaches are applied to
estimate the social prices of each factor. Estimation of shadow prices for domestic
factors envisaged the estimation of shadow wage of labor, social interest rate for
capital and opportunity costs of water and land. These are already discussed in
section.
5.13.14 Private and Social Budgets
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.
5.14 FACTORS ATTRACTING AND DETRACTING THE

COTTON MARKETING.
As discussed earlier the marketing of cotton is carried out by different agents.

As it is one of the main objectives of the study to identify the attracting and detracting
factors for the marketing of cotton. Thus, these factors are identified at each level of
the marketing agents. For this, frequency distribution analysis technique is used.
Frequency tables give the total response as well as percentage distribution of each
agent regarding their perception toward the marketing of cotton.
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.
Mathematically this model may be written in the following form.
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Yi = α + Xi + Ui
Where
Yi = underlying dependent variable which is marketing of cotton
Xi = set of independent variables;
Ui = stochastic error term
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
5.14.1 At Producer Level
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
for cotton marketing.
iv) Ho: Cotton was a prestigious crop for farmers thus an attractive factor for
cotton marketing.
v) Ho: Cotton marketing may fulfill emergency needs.
vi) Ho: Sugarcane crop returns more than cotton.
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
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marketing.
5.14.2 At Village Beopari / Commission Agent Level
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.
v) H0: Late payment by the ginners is a detractive factor in cotton marketing

for VB/CA.
5.14.3 At Ginners Level
i) Ho: To buy at factory gate, an attractive factor for 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.
v) Ho: Mixing up of cotton varieties a detractive factor for cotton marketing.
vi) Ho: Kind deduction by ginners is a discouraging factor for the cotton
marketing
vii) Ho: Adulterated product is a detracting factor in cotton marketing.
viii) Ho: High moisture contents detract the cotton marketing.
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5.14.4 At Spinners Level
i) Ho: Easy handling the process attract the cotton marketing.
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
factor for cotton marketing.
vii) Ho: Urgent payment to commission agents /ginners is a discouraging
factor for the cotton marketing
viii) Ho: High rate of interest on investment, detract cotton marketing.
All types of the respondents were interviewed and response for the factor was
recorded in 'Yes/No' form.
If a factor is attractive for the cotton marketing, according to the respondent's

perception, it is coded as "1" otherwise "0". Similarly others factors are also specified
in the same way. Given the dependent variable that a respondent may be classified as
cotton marketer or non cotton marketer, Consider that a respondent is a cotton
marketer then (Y = 1) if not then (Y=O). Following GREENE (1993) and assuming
that the cumulative distribution of ui is Logistic, a logistic model is applied. In this
case, the probability of being marketer is given as:
Prob(Yi = 1) = exp( XiP)
= 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
= aX'i [1 + exp(X 'ip ] 2 P
5.15 ALLOCATIVE EFFICIENCY OF THE GROWERS
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.
5.15.1 ANALYTICAL PROCEDURE
For the analysis of economics of production, cost of cultivation and return

were computed. The net returns were worked out over various cost concepts viz., Cost
of cultivation, sowing, di ammonium phosphate (DAP), Urea, irrigation and plant
protection etc.
The profitability level in farming business is largely determined by the

efficiency with which the farmers are able to allocate and utilize the resources at their
command. The resource use efficiency in cotton production is estimated by the
following Cobb-Douglas model of production function, discussed in the previous
section.
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
Marginal Physical Product of X1 = ∆Y/∆Xi
Which is = bi*Y/Xi
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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 SECONDARY DATA AND RESEARCH METHODOLOGY
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.
5.16.2 Generation of Hypothesis
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.
5.16.3 Collection of Data and the Choice of Analysis Techniques
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.
5.16.4 Examining the Data
Prior to the application of multivariate technique, examination of the data is of

immense value. Knowledge about the data is considered to be helpful in specification
and refinement of the multivariate model as well as providing a reasoned perspective
for the interpretation of the results (Hair et al. 1995, p 35). Hence, the data were
examined to find out if the individual variables (both dependent and independent)
meet the assumptions of linearity, homoscedasticity and normality as suggested by
Hair et al. (1995). Graphical and descriptive statistical measures were used to detect
any violation of Classical Assumptions. Appropriate measures, as suggested by the
literature on regression analysis, were taken to ensure that such assumptions are not
disregarded.
5.16.5 Analysis of the Data
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:
Yt = Yo (1+r)t ( Shah et al., 2005)
Where,
Yt = area, and yield in year t
Yo = base year for area and yield
r = Compound growth rate
Forecasting for area and yield was calculated using following formulae:
Yt + 1 = Yt + (Yt*r)/100 ( Shah et al, 2005).
5.16.6 Results and Interpretation
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:
The functional form of the model for Yield is explained as under:-
Model 1:
L(Yield)t = C + β1 (Area)t + β2 (CRPR)t + β3 (CRPW)t + β4 (Pesticide)t + β5 (RF)t + εt
Model 2
L(Yield)t = C + β1 (Area)t + β2 (Pesticide)t β3 (CRPR)t + β4 (RF)t + εt
The functional form of the model for Area is explained as under:-
Model 1:
L(Area)t = C + β1 (Yield)t + β2 (CRPR)t + β3 (CRPW)t + β4 (Pesticide)t + β5 (RF)t + εt
Model 2
L(Area)t = C + β1 (Yield)t + β2 (CRPR)t + β3 (RF)t + β4 (Pesticide)t + εt
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
Evaluation of cotton is based on grading according to staple, grade and

character. Staple refers to fibre length, grade refers to colour, brightness and
amount of foreign matter. Character refers to the diameter, strength, body, maturity,
uniformity and smoothness of the fibres. Cottonseed is a valuable by-product. The
seed goes to oil mills where it is delinted of its linters. The linters are used for
padding in furniture and automobiles, for absorbent cotton swabs, and for
manufacture of cellulose products such as rayon, plastics and lacquers.
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.
Marketing problems being faced by the farmers (all categories), village

beopari / commission agents, ginners and spinners are elaborated in the preceding
sections. Logit model was used to identify the attractive and detractive factors in the
marketing of cotton in the study area.
6.2 COST OF PRODUCTION
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.
As discussed in methodology in order to make comparison among different

categories of the farmers, the monetary value of all the input are taken to calculate
the cost. All the variables are divided in to following major groups.
6.2.1 Cultivation Cost
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.
Table 6.1: Percentage share of different cost items in Total Cost of

production in the Multan and Bahawalpur region (Rupees)
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
Source: Author’s calculation
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%
Fig. 6.2: Percentage share of different cost items in Bahawalpur District
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
Table 6.2: Cultivation cost of Multan and Bahawalpur Region under

different farmers categories (Rs.)
District Small Medium Large Overall
Multan 1600.39 1645.25 1687.68 1644.44
Bahawalpur 1607.25 1613.85 1682.37 1634.49
Multan & Bahawalpur Region 1603.82 1629.55 1685.02 1639.46
Source: Author’s Calculation.
6.2.2 Sowing 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
Data reveals that sowing cost in both the districts, from small, medium to
large farmers increase as the size of holding increases.
Figure 6.4: Cost comparison of farmers in the Multan district
1-Cultivation cost 2-Sowing cost 3-Fertilizer cost 4-

Irrigation cost 5-Intercultur cost 6-Plant protection
cost 7-Labor cost 8-Rent
1
8 2
3
7 4
6 5
163
Table 6.4: Sowing cost of Multan and Bahawalpur Region under different
Farmers Categories (Rs.)

Multan 870.00 879.41 915.16 888.19
Bahawalpur 840.00 1010.00 1016.00 955.33
Source: Author’s Estimation
6.2.3 Fertilizer Cost
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.
Table-6.5: Cost of production of the farmers in the Bahawalpur District.

(Rupees)
Operations Small Medium Large Overall

Sowing cost 840 1010 1016 955.33
Fertilizer cost 1949.39 2329.5 2625.3 2301.4
Irrigation cost (canal + tubewell) 1841 2100 2356.5 2099.17
Interculture / hoeing cost 1678 1972.5 2074 1908.17
Plant protection cost 2950.28 3150.4 3762 3287.56
Labor cost 2675.05 2880.83 3249.83 2935.24
Rent 4000 4000 4000 4000
Total cost per acre. 17541 19057.1 20766 19121.4
Gross Income 23492.3 25983.8 30821.1 26765.7
Source: Author’s Calculation
164
Table 6.6: Fertilizer cost of Multan and Bahawalpur Region under

Multan 1467.02 1999.75 2458.45 1975.07
Bahawalpur 1949.39 2329.50 2625.30 2301.40
6.2.4 Irrigation Cost
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
Table 6.7: Irrigation cost of Multan and Bahawalpur Region under

different farmers categories
Rs.
Multan 1629.07 1771.12 1833.06 1744.42
Bahawalpur 1841.00 2100.00 2356.50 2099.17
6.2.5 Inter-Culture/ Hoeing Cost
It is another variable input which plays very important role in cotton

production. Two different methods of operations were found in study area. First
was the manual, which was slow process as done by men personally. It was only
feasible on small scale and mostly done by small farmers who have planted small
area under cotton and have surplus family labor. Second is the interculture done by
power either by tractors or by bullock. But in the study area most of the
intercultural operations are found to be done through tractors. Cost estimates of
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).
Table 6.8: Inter-culturing cost of Multan and Bahawalpur Region under


Multan 1855.42 1605.15 1621.77 1694.11
Bahawalpur 1678.00 1972.50 2074.00 1908.17
6.2.6 Plant Protection Cost
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
Source: Author’s observation.
Among others, plant protection operation is very important in cotton

production. This involved heavy spraying of different pesticides. It normally started
after about 45 days of the germination of crop. Initial pesticides are normally less
costly while at later stage pesticides are more costly. The cost of this input is
highest among the variable inputs. It counts about 18 percent of the total cost in the
district of Multan and 17 percent in the district of Bahawalpur (Table 6.1). In the
whole region, this covered 17 percent of the total cost of production. This cost item
also showed an increasing trend from small to large farmers in both the districts.
This input has a crucial impact on the yield of cotton production. Thus it is major
cost item. Perhaps due to this, most of the farmers felt moving from cotton to
sugarcane/rice crop which needed less plant protection measures. The plant
protection cost is maximum in case of large farmers. On per acre basis it is Rs.3557
for large farmers and Rs.3189 for overall farmers in the district of Multan (Table
6.11). In case of Bahawalpur Rs.3287 cost is estimated on overall basis (Table
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.
Table-6.10: Cost of production of the farmers in the Multan & Bahawalpur

region
Rs.
Operations Small Medium Large overall
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
Fig-6.6: Cost Comparison of the farmers in the Multan and Bahawalpur

region.

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.
Multan 2841.99 3170.59 3557.26 3189.94
Bahawalpur 2950.28 3150.40 3762.00 3287.56
6.2.7 Labor Cost
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.)

Multan 2412.51 2553.07 2886.80 2617.46
Bahawalpur 2675.05 2880.83 3249.83 2935.24
Source: Author’s Calculations.
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.
Multan 3750.00 3750.00 3750.00 3750.00
Bahawalpur 4000.00 4000.00 4000.00 4000.00
6.2.8 Total Cost
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.
Table 6.14: Total Cost of Production in Multan and Bahawalpur Region

under different farmers categories (Rs. Per Acre)

Multan 16426.39 17374.33 18710.18 17503.64
Bahawalpur 17540.97 19057.08 20765.99 19121.35
Multan & Bahawalpur Region (Avg) 16983.68 18215.71 19738.09 18312.49
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).
Description Multan Bahawalpur Cotton belt

Small Farmers 21.12 23.85 22.49
Medium Farmers 22.15 25.35 23.75
Large Farmers 25.41 28.94 27.18
Overall farmers 22.89 26.05 24.47
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
Cotton Yield Pattern
Multan Bahawalpur Cotton belt

35
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.
6.3 Cost-Benefit Ratio
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.
Cost Benefit Ratio = Gross Income / Total Cost
Mathematically CB = G1 / TC
Table 6.16: Cost-benefit ratio of cotton (per acre basis) in Multan District
Gross Total cost Net Income Cost benefit

Description
income Rs. Rs. Rs. ratio
Small Farmers 20064.00 16426.39 3637.61 1.22
Medium Farmers 21596.3 17374.33 4221.92 1.24
Large Farmers 26426.40 18710.18 7716.22 1.41
Overall farmers 22695.55 17503.6 5191.95 1.30
173
Table 6.17: Cost-benefit ratio of cotton (per acre basis) in Bahawalpur
District
Gross Total cost Net Income Cost benefit

Description
income Rs. Rs. Rs. ratio
Small Farmers 23492.3 17541 5951.28 1.34
Medium Farmers 25983.8 19057.1 6926.67 1.36
Large Farmers 30821.1 20766 10055.1 1.48
Overall farmers 26765.70 19121.40 7644.35 1.40
Table 6.18: Cost-benefit ratio of cotton (per acre basis) in Multan and
Bahawalpur region.
Gross Cost benefit

Description Total Cost Net Income
Income ratio
Small Farmers 21778.2 16983.7 4794.5 1.28
Medium Farmers 23790.1 18215.7 8885.6 1.31
Large Farmers 28623.8 19738.1 5574.4 1.45
Overall farmers 24730.7 18312.5 6418.2 1.35
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.
When farmers belonging to Multan and Bahawalpur districts are compared

on the cost benefit ratio basis, it was observed that the farmers of district
Bahawalpur are earning more from cotton than the farmers of Multan district.
From the discussion it was concluded that farmers of the district

Bahawalpur are more efficient cotton growers and among farmers the large ones are
found best cotton producers than small and medium farmers. The detail is shown in
Tables 6.16, 6.17 and 6.18.
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.
Fig. 6.8: Total Cost of Production, Output and Profitability-Category-

wise Farmers
Cost of Production & Profitability
30000
25000 Total cost
Amount (Rs.)
20000 per acre.

Gross Income
15000
10000
Net Income
5000 Per Acre
0
Small medium large overall
6.4 PRODUCTION FUNCTION
Production function is a table, equation or graph, which shows the technical

relationship between independent and dependant variable. In research different
types of production function are applied according to the type and objective of the
study. In this study Cobb Douglas production function was applied. Basically Cobb
Douglass production function is the log linear form of multiple regression model.
Cobb-Douglas production faction is widely used function in the economic data
analysis. Mathematical form of the model is:
LnY     1LnX 1   2 LnX 2   3 Ln X 3   4 Ln X 4   5 Ln X 5   6 LnX 6  
Where:
LnY = Yield (Rs/acre)
X1 =cultivations (Rs/acre)
175
X2 = Seed (Rs/acre)
X3 = DAP (Rs/ acre)
X4= Urea (Rs/ acre)
X5 =Irrigations (Rs/acre)
X6 = Plant protection (Rs/ acre)
 = Constant
β = Coefficients to be estimated
µ = random disturbance term,
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 Description of the Results in Multan District
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:
Its function estimates gives the response in percent of dependent variable to

independent variable. The function estimates given in the Table 6.19 for the district
of Multan shows that coefficient for the variable of cultivation is 0.113 showing the
positive association between yield i.e. dependant variable and the number of
cultivations. It shows that yield value per acre would increase by 11.3 percent if we
increase the cultivation cost by 1 percent. This variable is found highly significant
indicating the strong impact on cotton yield.
6.4.1.2 Seed
The importance of seed in the cotton production is widely accepted. It has

been proved through various studies that the role of seed in the cotton production is
very significant. The data results for the district of Multan given in Table 6.19
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.
6.4.1.3 DAP (Fertilizer)
This is one of the important components of fertilizer. This component is

mostly being used by the cultivators prior to germination of crop. DAP fertilizer is
playing very important role in the cotton yield as it has been realized that it
provides the support to the fruit of the plant. The dependent variable response to
this variable is estimated as 0.191 showing that the cotton yield in rupees will be
increased by 19 percent if there will be increase in the use of 1 percent expenditure
on DAP fertilizer. Statistically this variable is found highly significant showing the
strong impact on cotton yield in the district of Multan (Table 6.19).
Table 6.19: Cob-Douglas production function results for the farmers in

District Multan
Description of factors Coefficient SE T value

Cultivations 0.113*** 0.014 7.796
Seed 0.103*** 0.026 3.962
DAP (Fertilizer) 0.191* 0.084 2.273
Urea (Fertilizer) 0.158** 0.052 3.034
Irrigations 0.220* 0.087 2.514
Plant Protection (PP) 0.169* 0.065 2.588
Hoeing/interculture 0.102* 0.048 2.154
Source: Authors Estimations.
*** = Significant at 1 percent level

** = Significant at 5 percent level
* = Significant at 10 percent level
6.4.1.4 Urea (Fertilizer)
This is the second important component of fertilizer. It is the nitrogenous

fertilizer and was found responsible for the vegetative growth of the plant. Farmers
are found using this component after the germination of plant. In the district of
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.
6.4.1.5 Irrigation Cost
Irrigation means to apply water to the crop through different sources.

Keeping in view the importance of this factor, farmers are found using different
sources of irrigation. By increasing the one percent expenditure on irrigation on per
acre basis in the district of Multan, function results reveals that cotton yield will
respond by 22 percent. Statistically it is found significant at 5 percent level of
significance. As the coefficient for this variable is maximum as compared to others
variables showing the relative importance of this factor so this is most important
factor in the cotton production (Table 6.19).
6.4.1.6 Plant Protection Cost
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.
6.4.1.7 Hoeing/Inter-culture Cost
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 Description of the Results in Bahawalpur District
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.
6.5.3 DAP (Fertilizer)
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
District Bahawalpur.

Cultivations 0.171*** 0.041 4.138
Seed 0.109 0.059 1.857
DAP 0.240*** 0.056 4.269
Urea 0.092** 0.025 3.632
Irrigations 0.232*** 0.029 8.071
Plant Protection (PP) 0.198*** 0.041 4.801
Hoeing/interculture 0.045*** 0.015 9.834

6.5.4 Urea (Fertilizer)
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
This is the variable which includes the post germination operations. It is

adopted to control the weeds in the cotton crop. In study area it is being done
manually on small scale but on large scale it was conducted mechanically. The
productivity enhancement effect of this factor is estimated with the help of OLS.
Parameter estimates depicted that the coefficient for this variable in the district of
Bahawalpur is 0.145, showing 14 percent impact on cotton yield by one percent
increase on its expenditure. The coefficient for this variable is found significant at 1
percent level of significance (Table6.20).
6.6 Description of the Results in Study Area
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
It is the second independent variable affecting the yield level. The

coefficient for the seed is 0.106 and statistically significant at 5 level. This value
shows that cotton yield value can be increased by 10.6 percent when by increasing
the sowing cost by 1 percent (Table 6.21).
6.6.3 DAP
This is the variable showing the application of phosphoric fertilizers. This

factor plays very important role in the yield of cotton crop and many studies have
proved it (Sabir, 2004). The coefficient for this variable is 0.216 and statistically
significant, showing the positive relationship that cotton yield per acre will increase
by 21.6 percent by one percent increasing DAP cost and is significant at five
percent level (Table 6.21).

Multan and Bahawalpur region.

Cultivations 0.142*** 0.028 5.967
Seed 0.106** 0.042 2.910
DAP 0.216** 0.090 2.902
Urea 0.125*** 0.039 3.333
Irrigations 0.226*** 0.058 5.293
Plant Protection 0.183*** 0.053 3.694
Hoeing/interculture 0.124*** 0.031 5.994
182
6.6.4 Urea
This is another nitrogenous fertilizer. It plays very important role in the

production of cotton. Model results reveal that coefficient value for the variable is
0.125, showing 12.5 percent increase in yield by 1 percent increase in urea cost and
are significant at 5 percent level (Table 6.21).
6.6.5 Irrigation
This is the critical factor in the production of agricultural crops. This

variable indicates the total cost of irrigation on per acre basis applied to cotton crop
in Multan and Bahawalpur region. Analysis results given in Table 6.21 show that
the value of coefficient for this variable is 0.226 and significantly different from 0
at 1 percent level of significance. The value indicates that cotton yield value can be
improved by 22 percent by increasing the cost of irrigation by 1 percent (Table
6.21).
Plant protection measures means, use of pesticides to control attack of pests

on cotton. In the region on average 5-8 numbers of sprays were found to be applied
by growers on per acre basis with different time intervals. Data analysis shows that
the parameter estimates for this variable is 0.183 showing that in the Multan and
Bahawalpur region the cotton yield on per acre basis in rupees can be increased by
18 percent by increasing the expenditure on plant protection measures by 1 percent.
Statistically this factor is significant at 1 percent level of confidence (Table 6.21).
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
After estimating the Cobb Douglas production function estimates for

individual variables, effort was also made to see the production efficiencies of the
farmers in districts of Multan and Bahawalpur and region as a whole.
Table 6.22: The Economies of Scale in the Multan and Bahawalpur Region.
Description of District Sum of Coefficients C-B ratio

Multan 1.05 1.30
Bahawalpur 1.087 1.40
Multan & Bahawalpur Region 1.122 1.35
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.
6.8 ALLOCATIVE EFFICIENCY OF INPUT USE FOR

COTTON IN THE MULTAN AND BAHAWALPUR
REGION
The empirical literature on farmer’s efficiency is mixed. Schultz 1978

showed that Indian small farmers were rational and efficient in the sixties. Lau and
Yotopoulos, 1971 also estimated that small farmers were economically efficient as
compared to large farmers.
In the late seventies Khan et al (1979) presented mixed results from a

survey of Sindh province (Indus Basin). The recent evidence both from India and
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.
There it seemed imperative to identify the critical inputs used in the

production of cotton. It order to work out the marginal productivity of the inputs,
instead of linear, log linear and quadric function, a cobb douglass production
function approach given in the previous section, was applied.
Because of its parsimony in parameters, ease of interpretation,

computational simplicity, the Cobb Douglas production function is the most widely
used form for fitting to economic data (Ahmad et al., 2003-04; Bukhsh et al., 2005).
The Cob Douglas function is the linear in logarithms and can be conventionally
analyzed with standards linear regression. The functional form of the model is
given below:
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)
X3 = DAP (Rs/ acre)
X4= Urea (Rs/ acre)
X5 =Irrigations (Rs/acre)
X6 = Plant protection (Rs/ acre)
µ = Error
185
By putting the actual variables and taking the natural log, the model will
attain the following form.
Ln Y= Ln a+b1Lncult+b2Lnseed+b3Ln.DAP+b4Ln UREA+b5Ln irri+b6LnPP +

b7Lninterc+e
Ln = natural logarithm
Y = Total revenue in rupees per acre of cotton in the respective district,
X1= Cult (cost of cultivation per acre in rupees)
X2= Seed (Cost of sowing per acre of cotton i.e. seed+sowing)
X3= DAP (Cost of DAP fertilizer applied to one acre of cotton)
X4= UREA (Cost of Urea used for cotton on per acre basis)
X5= Irri (Cost of irrigation)
X6= PP (cost of plant protection measures for cotton)
X7= Interc (cost intercultural practices).
b1 , b2 ,b3 ,b4 ,b5 ,b6 , b7 are the parameters to be estimated
e is the disturbance term
6.9 COBB DOUGLAS RESULTS
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
Source: Author’s estimation.
* indicates that the coefficient is statistically significantly different from zero

at 10 percent probability level.
** indicates that the coefficient is statistically significantly different from zero
at 05 percent probability level.
*** indicates that the coefficient is statistically significantly different from zero
at 01percent probability level.
6.10 RATIOS OF MARGINAL VALUE PRODUCTS TO

OPPORTUNITY COSTS
In order to estimate the allocation efficiency of the inputs, Marginal Value

Product (MVP) was estimated. MVP is the value added by that specific variable. If
we denote the farm revenue by Y and Xi represent the level of the resource and bi is
the coefficient of Cobb-Douglas model, it can be shown as (Heady et al 1969).
Marginal value product (MVP) of Xi= bi* Y / XI
Y, is the mean value of output value and
X, is the mean of respective Inputs cost.
Thus Allocative efficiency of Xi = MVPxi / Opportunity Costs of XI
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.
Mean Opp cost Economic

Description Inputs Coefficient Mean Y MVP
X (Rs.) efficiency
Cultivations 0.113 22695.55 5.47 468.8477 250
1.88
Seed 0.103 22695.55 6.88 339.7735 100
3.40
DAP 0.191 22695.55 25.76 168.28 40.29
4.18
Urea 0.158 22695.55 38.64 92.80 22.68
District Multan 4.092
Irrigations 0.220 22695.55 26.39 189.20 66
2.87
Plant
0.169 22695.55 5.87 653.42 543.43 1.20
Protection
Hoeing/inter-
0.102 22695.55 2.58 897.27 656.63 1.37
culture
Source: Author’s Estimation.
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
Cotton belt of Bahawalpur District.
Mean Opp cost Economics

Description Inputs Coefficient Mean Y MVP
X (Rs.) efficiency
Cultivations 0.171*** 26765.70 5.73 798.77 240
3.328
Seed 0.109*** 26765.70 6.59 442.71 115
3.85
DAP 0.240 26765.70 30.36 211.59 41
2.660
District Urea 0.092*** 26765.70 37.72 65.28 22.86
2.848
Bahawalpur irrigations 0.232** 26765.70 31.75 195.58 66
2.956
Plant
0.198** 26765.70 6.05 875.97 542.84 0.797
Protection
Hoeing/inter-
0.045* 26765.70 3.40 354.25 561.23 0.630
culture
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:
Table 6.27 Cost Benefit Ratio of Ginning
Operation Unit Rs./kgs

Seed Cotton Kgs 978.8
@ Rs/40kg Rs 1020.35
Cost of seed Cotton Rs 24967.96
Ginning Cost @ per 40kg Rs 85.00
Total Ginning Cost Rs 2079.95
Commission Paid Rs 140.23
Total Cost 27188.14
Lint Produced Kgs 324.23
Cotton Seed Kgs 599.46
Lint Sale Rate/ 40 Kg Rs 3762.58
Cotton Seed Rate/40 kg Rs 638.39
Gross Income Rs 40065.76
Net Income Rs 12877.62
Cost Benefit Ratio 1.47
Source: Author’s calculations
6.10.2 PROCESSING COST, INCOME & PROFIT OF SPINNERS
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:
Table 6.28 Cost Benefit Ratio of Spinning
Lint Purchased Kgs 324.23

Cost of Lint @ per 40 Kg Rs 3782.58
Total Lint Cost Rs 30660.6
Spinning Cost per 165 kg Rs 835.23
Total spinning Cost Rs 1641.25
Commission Paid Rs 106.745
Total Cost Rs 32408.6
Yarn Output Kgs 285.28
Yarn Sale Rate per Kg Rs 188.75
Cost Benefit Ratio 1.66
6.10.3 PROCESSING COST, INCOME & PROFIT OF VILLAGE

BEOPARI/ COMMISSION AGENTS
No technical operation like production and processing is being performed by

Village Beopari / Commission Agent. So his role is limited to only purchase and
sale of cotton related items and earns his commission. The commission is of course
added to the purchasing cost of concerned stakeholders.
Summary of cotton production, ginning and spinning cost, income, net

profit and cost benefit ratio in the channel of cotton marketing is explained below in
Table 6.29.
191
Table 6.29 Summary of cotton production, ginning and spinning cost, income, profit and cost-benefit ratio
PRODUCTION GINNING SPINNING

(Rs per Acre)
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
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.
6.11 COMPARATIVE ADVANTAGE OF COTTON
Study of comparative advantage of a particular agriculture crop in the

current international economy is important. It has become more important in the
wake of World Trade Organization (WTO) scenario and globalization. Multan and
Bahawalpur are agriculturally advanced regions where cotton, wheat, and rice are
the major crops. This region is the core area for the cultivation of cotton crop. So
cotton is the most prominent, prestigious and predominant crop. The study is
dealing with farmers of Multan and Bahawalpur region and agrarian structure is
characterized by small, medium and large growers. In the present WTO
negotiations, sustainability of farmers and their food security is the big issue which
is left out at the inception stage of WTO. Thus, the study of comparative advantage
for different crops needed special attention. Although farmers in this region grew
major crops, but cotton is the most important crop of the area, as high value crops
for the farmers. In this analysis, thus, the focus is on cotton. Farm budgets for
cotton, rice and sugarcane crops are estimated both in financial and economic
prices.
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
PAM for cotton is estimated as under:
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
Private prices 25091.17 8705.24 9476.06 6909.87 NPC=0.89
Social Prices 28241.27 8531.63 11176.32 8533.32 EPC=0.83
Divergence -3150.10 173.62 -1700.26 -1623.45 DRC=0.57
Value added Rs.19709.64
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
Sugarcane is an important cash crop in Pakistan and in many countries of

the world also. Besides sugar production, sugarcane produces numerous valuable
byproducts like alcohol used by the pharmaceutical industry, ethanol used as a fuel,
bio-gases used for paper, and chipboard manufacturing and press mud used as a rich
source of organic matter and nutrients for crop production. Pakistan occupies an
important position in cane producing countries of the world. It ranks at the fifth
position in cane acreage and production and 15th position in sugar production (FAO,
1998). The area, production and yield per hectare in the year 2006-07 was 1028.800
(000 ha), 54741.6 (000 tons) and 53.2 (tons per ha) (Agricultural Statistics of
Pakistan 2006-07).
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

Divergence -2069.33 292.13 -669.31 1692.15 DRC=1.14
Value added 10222.1
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
Production Costs

Divergence -2747.50 60.13 92.38 -2900.01 DRC=0.65
Value added 12608.2
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
Ratios Cotton Sugarcane Rice

NPC 0.89 0.88 0.84
EPC 0.83 0.77 0.78
DRC 0.57 1.14 0.65
DRC estimates the comparative advantage of different crops. It measures

that how much domestic resources are being used to either save or earn one unit of
foreign exchange. PAM and associated coefficient shows that cotton has
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
6.12 MARKETING PROBLEMS OF COTTON GROWERS
6.12.1 Literacy Rate

In the surveyed area, 35.97 percent growers were illiterate, 10.62 percent
were able to read and write only, 33.85 percent had schooling upto middle level,
15.25 percent had education upto Matric, 1.30 percent were F.A./F.Sc., 1.50 percent
were graduate and 1.50 percent had education upto master’s degree. However, it
was found that cotton growers from Multan have better education and crop
understanding.
Table 6.34: Literacy Rate of cotton growers (%)
District Illiterate Can Middle Matric F.A. / B.A. / M.A. /

Read & F.Sc. B.Sc. M.Sc.
Write
Multan 35.25 10.00 34.00 16.25 1.10 1.70 1.70
Bahawalpur 36.70 11.25 33.70 14.25 1.50 1.30 1.30
Overall 35.97 10.62 33.85 15.25 1.30 1.50 1.50
Source: Government of Pakistan, Census 1998.
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
Table 6.35: Marketing problems of Small farmers in Multan District
S. Farmers
Description Percentage
No. response
1 Rapid price fluctuations 120 100
2 Lack of transport 94 78.3
3 Restricted to sell the produce 108 90
4 spot marketing 120 100
5 Small quantity unstoreable 120 100
6 Forced to accept low rates 96 80
7 Lack of market prices information 36 30
8 Lack of cotton market 120 100
9 No premium for clean cotton 120 100
10 Lack of bargaining power 118 98.3
11 Undue kind deduction by buyers 118 98.3
12 No storage facility 0 0
13 Low price compared to international market 0 0
14 No cooperative marketing associations 0 0
15 No marketing regulatory authority 0 0
Table 6.35 gives the description of problems, farmer’s response to each

problem and finally response in percentage to each problem.
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
8 Restricted to sell the produce 108 90
9 Forced to accept low rates 96 80
Figure 6.9: Farmers Perceptions of Critical Marketing Problems (Small

Farmers)
Forced to accept low rates

Restricted to sell the produce
Undue kind deduction by buyers
Lack of bargaining power

spot marketing
Small quantity unstoreable
No premium for clean cotton
Lack of cotton market
Rapid price fluctuation
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.
6.12.2 Medium Farmers

Medium farmers of the region are also facing some problems in the
marketing of their output. Response to each problem being faced by medium
farmers is also recorded.
Priority of the problem, which the medium farmers are facing, is different
than small farmer. These problems in their ranking order are given in Table 6.37.
Table 6.37: Marketing problems of Medium farmers in Multan District.
Farmers
S. No Description Percentage
response
1 Rapid price fluctuations 50 100.00
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
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.
Table 6.38: Ranking of marketing problems for Medium farmers in Multan

District.
S. Farmers
No Description response Percentage
Figure 6.10: Farmers Perceptions of Critical Marketing Problems (Medium

Farmers)
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
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.
Table 6.39: Marketing problems of large farmers in Multan District
Farmers
response
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
9 Lack of cotton market 0 0.00
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
Figure 6.11: Farmers Perceptions of Critical Marketing Problems (Large

Farmers)
low price compared to international market
No cooperative marketing associations
No premium for clean cotton
Undue kind deduction by buyers
Rapid price fluctuation
0 10 20 30 40 50 60 70 80 90 100
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
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.
Thus to solve the problems the necessary suggestions and recommendations

will be made in the respective chapter of study.
6.13 MARKETING PROBLEMS OF VILLAGE BEOPARI/

COMMISSION AGENT
Village Beopari/ commission agent are another important stakeholders in

the chain of cotton marketing. Keeping in view the importance of village
beopair/commission agent, 15 commission agent/village beopari from each districts
of study area were interviewed. The problems of village beopari/commission agent
are highlighted below in Table 6.43 which is based on the interviews conducted in
the study area.
Table 6.43: Marketing Problems of Village Beopari / Commission Agents
Number of Village Beopari / Commission Agents surveyed = 30
Problems No. Percent

1. Demand of clean cotton by the ginners 27 90
2. Mixing up of varieties / contamination of cotton 27 90
3. Rapid fluctuation of markets 26 87
4. Undue kind deduction by ginners / spinners 26 87
5. Lack of storage facility / transport 25 83
6. Risk of loosing investment 21 70
7. Credit demands by the growers 18 60
8. Heavy taxes 11 37
9. Heavy utility bills 9 30
10. High rate of seasonal hired labour 9 30
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
growers which is contaminated. Second critical problem was mixing up of varieties
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
of commission agent/village beopari as well.
Figure 6.12: Marketing Problems of Village Beopari / Commission Agents
Demand of clean cotton 27
Mixing / contamination 27
Rapid market fluctuatiojn 26
Kind deduction by ginner / spinner 26
Lack of storage / transport 25
Risk of loosing investment 21
Credit demand by growers 18
Heavy taxes 11
Heavy utility bills 9
Labour cost 9
0 5 10 15 20 25 30
Table 6.44: Most critical marketing problems faced by Village Beopari /

Commission Agents in Multan and Bahawalpur Region
Sr. No. of
No. Description Respondents Percentage
1. Demand of clean cotton by the ginners 27 90
2. Mixing up of varieties / contamination of cotton 27 90
3. Rapid fluctuation of markets 26 87
4. Undue kind deduction by ginners / spinners 26 87
5. Lack of storage facility / transport 25 83
206
6.14 MARKETING PROBLEMS OF THE GINNERS
The first mechanical process involved in the processing of cotton is ginning.
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
important. Keeping in view the importance of ginners in marketing channels of
cotton, 25 ginners from each district of the study area were interviewed. Table 6.45
below explains the problem of ginners based on these interviews.
Table 6.45: Marketing Problems of Ginners
Total number of ginners surveyed = 50
Problems No. Percent

1. Contaminated seed cotton 50 100
2. Non-availability of credit from banks 45 90
3. Non-availability of technical staff 42 84
4. Moisture contents 40 80
5. High labour cost 35 70
6. Advance payment to growers 32 64
7. Electric load shedding 25 50
8. Bank pledging 21 42
9. Price fluctuations 21 42
10. No proper storage facility with the growers 20 40
11. Heavy duty / taxes for importing sawgins 15 30
13. Delayed payments 11 22
14. Natural hazards 6 12
15. Role of middlemen 5 10
16. Stickiness in phutti 2 4
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.
Figure 6.13: Marketing Problems of 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
Table 6.46: Most critical marketing problems faced by Ginners in Multan

and Bahawalpur Region
Sr. Description No. of Percentage
No. Respondents
1. Contaminated seed cotton 50 100
2. Non-availability of credit from banks 45 90
3. Non-availability of technical staff 42 84
4. Moisture contents 40 80
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
to play in the chain of cotton marketing. Keeping in view its importance, 15
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
the interviews conducted in the study area.
Table 6.47: Marketing Problems of Spinners
Number of spinners surveyed = 30

Problem No. Percent
1. Grading / classification not being done by the ginners 28 93
2. Mixing of different varieties by the ginners 27 90
3. Bales are of no standard weight and size 27 90
4. Use of worn-out saws resulting in low efficiency, high 25 83
neps, and floating fibre
5. No proper packing of the lint 24 80
6. Primitive machinery of spinners 22 73
7. High duty / taxes on import of new machinery 22 73
10. Electric load shedding 14 47
11. Lack of expert / trained ginners 11 37
12. Capital investment on machinery 11 37
13. No arrangement for artificial drying 7 23
14. No proper place for storage at the ginners end 5 17
15. Delayed payments 5 17
16. Involvement of commission agents 3 10
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
spinners as narrated by 83 and 80 percent of spinners of the study area respectively.
Figure 6.14: Marketing Problems of Spinners
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
Table 6.48: Most critical marketing problems faced by Spinners in Multan

and Bahawalpur Region
Sr. Description No. of Percentage
No. Respondents
1. No proper grading / classification by the 28 93
ginners
2. Mixing of different varieties by the ginners 27 90
3. Bales are of no standard weight and size 27 90
4. Outdated sawgins 25 83
5. No proper packing of the lint 24 80
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.
Therefore, this section will elaborate the factors which seemed to be

attractive as well as detractive in the marketing of cotton at grower level.
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.
6.16.1 Farm Gate Selling
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.
6.16.2 Cash Payment
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.
6.16.3 Easy Post-Harvest Handling
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
In the study area, cotton seemed to be a symbol of prestige. When the

growers were asked that why they liked the cotton marketing, 73 percent responded
that good cotton crop is a symbol of prestige for them. When a huge quantity of
output is sold from their farms, fellow farmers pay them respect. Especially large
farmers considered it as a source of honour for them. That is why an increasing
response from small to large farmers was noted. Small farmer’s response was 66
percent, medium 80 percent and large farmers 89 percent. 73 percent growers in the
study area favored that prestigious-ness of this crop is an attracting factor for the
marketing of cotton (Table 6.49).
6.16.5 Fulfill the Emergency Needs
Usually small farmers’ community is considered to be resource deficient as

they do not have liquidity available at their disposal to fulfill the daily needs. For
this purpose they need a source which can fulfill their requirements easily. When
the growers of study areas were asked that why they like the cotton marketing? 69
percent small farmers, 57 percent medium and 44 percent large growers responded
that cotton marketing can fulfill their emergency needs. Data results in Table 6.43
shows that in Multan and Bahawalpur region 62 percent of the total farmers were in
the favor of this factor.
6.17 FACTORS DETRACTING THE MARKETING OF

COTTON
Similar to the factors which were considered as attractive for cotton

marketing, effort was also made to identify the factors which detract the marketing
of cotton in Multan and Bahawalpur region. Among many the most important
factors which were identified in all categories of the farmers in the study area are
shown in the Table.6.50.
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
Data in Tables 6.50 shows that 83 percent, 73 percent, and 27 percent of

small, medium and large farmer respectively favored it as detracting factor in cotton
marketing. As a whole 72 percent farmers believe that lack of transport facility is a
detracting factor in cotton marketing.
6.17.1 More Returns from Sugarcane Crop
Farmers believe that marketing of sugarcane, no doubt is difficult than

cotton marketing but its returns are more than cotton marketing. 64 percent small,
72 percent medium and 85 percent large growers favored this factor as detracting
factor for cotton marketing. On the whole in Multan and Bahawalpur region, 62
percent respondents were in the favor of this factor.
6.17.2 Highly Risky Crop
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.
6.17.4 Lack of Transport Facility
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.
6.17.5 Lack of Market Intelligence
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 Multan and Bahawalpur region, 80 percent growers were in this favor

that low profit margin of the cotton crop is a detractive factor for cotton marketing.
6.18 LOGIT MODEL RESULTS PERTAINING TO

ATTRACTIVE AND DETRACTIVE FACTOR IN
COTTON MARKETING
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
Where Y is the underlying latent variable that represent the marketing of

cotton. Xi is the set of independent variables and u= is the stochastic error and Bi is
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.
6.18.1 Hypothesis Formulation at Grower’s Level
Dependent Variable
CM = Cotton marketing having the value of one if marketing, zero otherwise.
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.
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.
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.
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.
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.
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H 0: More returns from Sugarcane crop was a detractive factor towards the
H 1: High returns from Sugarcane crop was not a detractive factor towards the
H 0: Kind Deduction by village beopari/ commission agent was a detractive

factor for cotton marketing
H 1: Kind Deduction by village beopari/ commission agent was not a detractive

factor for cotton marketing
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

1 Farm gate selling 0.302*** 0.082 3.706
2 Cash Payment 0.230*** 0.053 4.309
3 Easy post harvest handling 0.215*** 0.063 3.391
4 Prestigious crop 0.122* 0.057 2.142
5 Fulfill emergency needs 0.082* 0.041 1.992
6 More returns from Sugarcane -0.124*** 0.035 -3.599
7 Kind deductions by VB/CA -0.022 0.015 -1.396
8 Lack of market intelligence -0.025*** 0.006 -3.971
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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
Another factor that seemed attractive factor towards marketing of cotton at

growers level was easy post harvest handling of cotton. The model result given in
the Table 6.51 shows that the coefficient for this variable is 0.215 and statistically
significant at 1 percent level of confidence. Thus H0 is accepted that easy post
harvest handling is an attractive factor for cotton marketing. In this case H1 is
rejected.
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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.
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6.19.7 Hypothesis 7
Kind deduction is a major issue in the marketing of cotton. Whether it was

an attractive or detractive factor for growers, it was also tested with the help of logit
model. Data in Table 6.51 depicts that coefficient for this variable is–0.022,
showing inverse association between marketing of cotton and kind deduction.
Statistically it was not significant. Thus under these circumstances, H0 can not be
accepted and alternative hypothesis H1 is accepted, that kind deduction is detractive
factor for cotton marketing at grower level.
6.19.8 Hypothesis 8
Market intelligence plays a very important role in the profitability of cotton

output and its marketing. In order to test the effect of this factor, whether it was
detractive or attractive factor for cotton marketing at grower level, it was tested in
logit model equation. Result in Table 6.51 reveals that coefficient for this variable
is –0.025 indicating that this factor has negative impact on the cotton marketing.
Statistically it was significant at 5 percent level. Thus H0 is accepted and H1 is
rejected that lake of dissemination of cotton prices is detractive factor for cotton
growers.

COTTON AT VILLAGE BEOPARI / COMMISSION
AGENT LEVEL
As stated earlier in the main marketing channel of cotton, after grower,

important stakeholder in the cotton marketing channel are the village beopari/
commission agent. There are different names given to these agents in different
localities. In some areas they are named as Village Beoparies, in some areas
Padhyas, in some areas as aryatis but most commonly used in the cotton marketing
is Village Beopari/ Commission Agent. They are playing a very important role in
the marketing of cotton. They bought phutti (local world for seedcotton) from
growers, sometimes stored it and some times shift it immediately to the ginning
factories of the locality. Depending upon the business level of the village beopari/
222
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.
As it is the main objective of the study to identify the attracting and

detracting factors in the marketing of cotton. Thus a sample of 30 village beopari/
commission agent of the region i.e., 15 from Bahawalpur District and 15 from
Multan District were selected. Detail information with the help of a questionnaire
and personnel interviews was collected. Data was analyzed and results showing the
factors attracting and detracting for the marketing of cotton at village beopari/
commission agent level is depicted in the preceding sections.
6.20.1 Buying Cotton at Delayed Payment
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.
6.20.2 Easy Marketing
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
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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.
6.20.4 Easy and Cheap Availability of Labor
To run any activity labor is a critical input. If required labor is easily

available, it can be run smoothly otherwise it can not be run for long time, Cotton
marketing is not a complex business, so it does not need skilled labour. Therefore
unskilled labor for this business is easily available to the dealers. Village dealers
explained that they are engaged in this job because easy and cheap labor is available
to them for the execution of this activity.
6.20.5 Payment in Kind
Another factor which the village beopari/commission agent identified as an

attracting factor was the payment in kind to the growers. They are of the view that
they can pay the growers in kind in exchange of cotton price. In this way they get
two way profits for exchange of products and from cotton marketing. Village
beopari/commission agent explained that payment in kind is the attracting factor for
the marketing of cotton for them in the study area.
6.21 DETRACTING FACTOR FOR MARKETING OF

COTTON AT VILLAGE BEOPARI/COMMISSION
AGENT LEVEL
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:
6.21.1 Kind deduction by the ginners
Due to improper picking practices and wrong storage / transportation of

seedcotton by the growers and the village beopari / commission agents, seedcotton
in the study area was found to be highly contaminated. When this contaminated
cotton is sold to the ginners by VB/CA, they deduct the cotton in shape of kind or
224
money from the share of VB/CA. This factor was found highly detractive factor in
the cotton marketing by VB/CA.
6.21.2 High Moisture Contents in Seedcotton
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.
6.21.3 Late payment by the ginners
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.
6.21.4 Deduction by Ginners Due to Variety Mix
It is a normal practice for village beopari/commission agent that they get

mixed varieties. In the study area, it was observed that there is no practice to pick
and store the cotton varieties separately. Due to this village beopari/commission
agent are forced to purchase the variety mix. But when they sell it to the ginner,
they demand the seed cotton variety wise, which is a short coming at village dealer
level. Due to this, ginners deduct some percentage of the total quantity being sold to
the ginner. This is a discouraging factor for village beopari/commission agent and a
detractive factor for cotton marketing at village dealer level.
6.22 Hypothesis formulated at VB/CA Level
Following hypothesis were formulated at VB/CA level.
225
Dependent variable
CM = Cotton marketing having the value of 1 if marketing, 0 otherwise.
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
delayed payment is an attractive factor in cotton marketing.
H1: VB/CA can buy the cotton from the growers on the promise of making
delayed payment is not an attractive factor in cotton marketing.
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
marketing at VB/CA level.
6.22.3Hypothesis 3
H0: Easy and cheap availability of labour in the study area makes it an attractive
factor for cotton marketing for VB/CA.
226
H1: Easy and cheap availability of labour in the study area does not make it an
attractive factor for cotton marketing for VB/CA
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.
6.23 Testing of Hypothesis at Village Beopari/Commission Agent

level
After applying the logit model, following regression results were obtained.
Table 6.52: Testing of Hypothesis at VB/CA level

1. Can buy cotton at delayed payment 0.110* 0.048 2.021
from the growers.
2. Easy marketing of cotton. 0.290*** 0.033 4.101
3. Easy and cheap availability of labour. 0.308*** 0.072 3.608
4. Deduction by the ginners on variety -0.012 0.023 -1.251
mix.
5. Late payment of by the ginners. -0.72* 0.04 -1.282
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.

COTTON AT GINNERS 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:
Grower’s phutti Lint spinners

Ginner
Village Dealers phutti cottonseed oil mills
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
6.24.1 Description of the Attractive Factors
6.24.1.1 Easy To Buy At Factory Gate
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.
6.24.1.2 Easy in Handling
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).
6.24.1.3 High Profit Margin
As discussed earlier, at ginners level two types of by-products are produced

from seed cotton i.e., lint and cotton seed.
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
Another attractive factor which was identified by 72 percent of the ginners

in the study area was the easy selling of the by products. They opined that the by-
products have good demand in the market and it is easy to sell. Thus it encouraged
them to be associated with the marketing of cotton (Table 6.53).
6.24.1.5 Low Cost of Processing
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.
6.24.2 Detracting Factors at Ginners Level
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

Late payment from Banks 42 84
Mixing up of varieties 49 98
Contamination in cotton 45 90
High moisture contents in products 36 71
High risk of burning 27 54
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
Delayed payment by banks is yet another detractive factor in marketing of

cotton from ginners point of view. Due to late payment from banks, their marketing
process is interrupted. Eighty four percent ginners verified this factor as detractive
in marketing of cotton.
6.24.2.2 Mixing up of Varieties
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.
6.24.2.3 Contamination in Cotton
Another discouraging factor at the ginner level is the supply of

contaminated cotton by the growers. Contamination means the mixing up of waste
material like plant leaves, sticks and grass etc. in the seedcotton (phutti). Such
adulterated product lowers the quality of out put and ultimately reduces the ginners’
profit. 90 percent ginners’ point of view is that the contaminated cotton is a
detractive factor in the business of cotton (Table 6.54).
6.24.2.4 High Moisture Contents in Phutti
High moisture contents in phutti is a detractive factor in cotton marketing as

identified by 72 percent ginners of the study area i.e. Multan and Bahawalpur
region (Table 6.54). As discussed at the village beopari/commission agent level,
they had to pay kind deduction in lieu of moisture contents. In order to cover this
loss village beopari/commission agent adds water intentionally in the seedcotton.
Such moisture content is a great threat for the ginners and discouraged them to run
their business smoothly.
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.
6.25 HYPOTHESIS FORMULATION AT GINNER’S LEVEL
Dependent Variable
CM = Cotton marketing attaining the value of 1 if doing market, 0 otherwise.
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
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 0: Easy to buy at factory gate is an attractive factor for cotton marketing.
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
H 0: Easy to sell the byproducts is an attractive factor in marketing of cotton.
H 1: Easy to sell the byproducts is not an attractive factor in marketing of cotton.
6.25.4 Hypothesis 4
H 0: High demand of byproducts is an attractive factor for cotton marketing.
H 1: High demand of byproducts is not an attractive factor for cotton marketing.
6.25.5: Hypothesis 5
H 0: Late payment from Banks is a detractive factor in marketing of cotton.
H 1: Late payment from Banks is not a detractive factor in marketing of cotton.
234
6.25.6 Hypothesis 6
H 0: Mixing up of varieties is a detractive factor in cotton marketing.
H 1: Mixing up of varieties is not a detractive factor in cotton marketing.
6.25.7 Hypothesis 7
H 0: High risk of burning is a detractive factor for cotton marketing.
H 1: High risk of burning is not a detractive factor for cotton marketing.
6.25.8 Hypothesis 8
H 0: High moisture contents in Phutti is a detractive factor in cotton marketing.
H 1: High moisture contents in Phutti is not a detractive factor in cotton

marketing
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.
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
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
Another factor that seemed attractive factor towards marketing of cotton at

ginner’s level is easy to sell the byproducts. The model result in the Table 6.55
shows that the value of coefficient for this variable is positive 0.112 but statistically
not significant. This means that it has positive impact but due to some
misconceptions in the data management it is not significant. Thus H0 is not accepted
that easy to sell the byproduct is an attractive factor for cotton marketing. In this
case H1 is accepted.
6.26.4 Hypothesis 4
High demand of byproducts is esteemed to be an attractive factor for the

marketing of cotton at the ginner’s level. This hypothesis was also tested with the
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
In the marketing of cotton a common problem of mixing up of varieties is

being faced by all stakeholders from growers to spinners. Due to mixing up of
varieties quality products can not be produced. Ultimately the producers at each
level are bearing some losses. This factor is found to be a discouraging factor at
each level in the cotton marketing. At ginners level this factor is also found as its
coefficient is -0.187 and negatively significant at one percent level. Under these
circumstances the null hypothesis H0 is accepted that mixing up of varieties at
ginners’ level is a discouraging factor to continue the business of cotton marketing.
H1 as alternative hypothesis is rejected.
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.
6.27 FACTOR ATTRACTING COTTON MARKETING AT

SPINNER’S LEVEL
As discussed in the marketing channel of cotton, spinners are important

stakeholder in the chain of marketing who get lint from ginners. In the study area, it
was observed that almost all the spinners hired some resource person called special
commission agents. Commission agents get the lint from ginners and supply it to
the spinners. The spinners process it and prepare the cotton yarn. As the objective
of the study is to identify the attractive and detractive factors of cotton marketing
throughout the channel, therefore at the spinner’s level factors are also identified.
The factors, which are identified as attractive in cotton marketing at the spinners
level are given in Table 6.56.
6.27.1 DESCRIPTION OF THE ATTRACTIVE FACTORS –

SPINNERS LEVEL
6.27.1.1 Easy to Handle
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).
6.27.2.2 High Profit Margin
Ultimate objective of any business activity is to earn profit. Some businesses

have more profit margins but very risky at the same time. But in this case, 70
percent of the spinners replied that they can get reasonable profit from the
marketing of cotton without putting much at risk. Thus assured returns make it
attractive for spinners as shown in Table 6.56.
6.27.2.3 Low Variable Cost
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).
6.27.2.4 High Demand of Product
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
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
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.
6.28 DETRACTING FACTORS IN COTTON MARKETING AT

SPINNERS LEVEL
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.
6.28.1 Low Quality of Yarn due to Low Quality Lint
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).
6.28.2 Late Payment from Buyers
Another detractive factor identified by the spinners is the late / delayed

payment from buyers. Such late payment disturb their business 70 percent spinners
favored that delayed payment is a detractive factor in cotton marketing (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.
Table 6.57:Factors detracting the marketing of cotton at the Spinners level.
Low quality of yarn 20 68
Late payment by buyers 21 70
High rate of mark up on investment 21 70
Daily changing demand 25 83
Urgent payment to ginners 18 60
6.28.4 Urgent Payment to Ginners
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
factor in the marketing of cotton (Table 6.57).
241
6.29 HYPOTHESIS FORMULATION AT SPINNER’S LEVEL
Dependent Variable
CM = Cotton marketing attaining the value of 1 if doing marketing, 0 otherwise.

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
FGS: Factory gate supply, if the spinners reply as attractive factor then
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.
After defining the variables of the model, following hypothesis were

formulated.
6.29.1 Hypothesis 1
H 0: High profit margin is an attractive factor for marketing of cotton at spinners

level.
H 1: High profit margins is not an attractive factor for marketing of cotton at

spinners level.
242
6.29.2 Hypothesis 2
H 0: Low variable cost is an attractive factor for cotton marketing.
H 1: Low variable cost is not an attractive factor for cotton marketing.
6.29.3 Hypothesis 3
H 0: High demand of product is an attractive factor in marketing of cotton.
H 1: High demand of product is not an attractive factor in marketing of cotton.
6.29.4 Hypothesis 4
H 0: Factory gate supply is an attractive factor for cotton marketing.
H 1: Factory gate supply is not an attractive factor for cotton marketing.
6.29.5 Hypothesis 5
H 0: Low quality of yarn is a detractive factor for marketing of cotton.
H 1: Low quality of yarn is not a detractive factor for marketing of cotton.
6.29.6 Hypothesis 6
H 0: High rate of mark up on investment is a detractive factor in marketing of

cotton.
H 1: High rate of mark up on investment is not a detractive factor in marketing of

cotton.
6.29.7 Hypothesis 7
H 0: Daily changing demand is a detractive factor for cotton marketing
H 1: Daily changing demand is not a detractive factor for cotton marketing
243
6.29.8 Hypothesis 8
H 0: Urgent payment to ginners is a detractive factor towards cotton marketing.
H 1: Urgent payment to ginners is not a detractive factor towards cotton

marketing
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

High profit margins 0.125 0.082 1.519
Low variable cost 0.052 0.043 1.232
High demand of product 0.091*** 0.025 3.710
Factory gate supply 0.102** 0.043 2.400
Low quality of yarn -0.097** 0.040 -2.421
High rate of mark up on investment -0.169*** 0.052 -3.237
Daily changing demand -0.212** 0.088 -2.426
Urgent payment to ginners -0.022 0.011 -1.946
6.30 TESTING THE HYPOTHESIS AT SPINNER’S LEVEL
6.30.1 Hypothesis 1
It was estimated that at spinner’s level, marketing of cotton is an attractive

business as there is high profit margins in it. Logit model results depicts a positive
relationship between independent and dependent variable as the coefficient value
for this variable is 0.125 but it is not found significantly different from zero
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
As the profit is derived from variable cost, it is an expectation that spinners

bear low variable cost that is why they are associated with the cotton marketing.
Results reveals that there is no doubt positive association between Low Variable
Cost (LVC) and cotton marketing (0.052) but the results are not significant,
indicating that null hypothesis H0 can not be accepted. Thus, alternative hypothesis
H1 is accepted that low variable cost is an attractive factor towards the cotton
marketing at spinner’s level.
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
As discussed in the previous hypothesis that every entrepreneur tries to

involve in the business for which they have easy access to inputs. Spinning is such a
business in which inputs are supplied at the factory gate. In order to test this
assumption individual spinners were interviewed and the data was analyzed.
Results given in Table 6.58 reveals that the coefficient for Farm Gate Selling (FGS)
is 0.102 and significantly different from 0 and positively associated with the
dependent variable i.e. cotton marketing. Thus the null hypothesis H0 is accepted
and alternative hypothesis H1 is rejected.
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.
In this chapter, an effort was made to identify the problems of all

stakeholders in the cotton marketing. At the same time the factors which attract and
detract the market mechanism in cotton marketing were also highlighted. Cost of
production of the growers (the main stakeholders) and their income pattern was also
calculated to elaborate the cost benefit ratio. The net result is that having produced
a healthy cotton crop is just not enough, unless the marketing mechanism provides
an opportunity for fair profit to all stakeholders. At the same time, in the highly
competitive international market for cotton and textile goods, only those will stay in
market who can create and maintain their credibility. The circumstances have thus
changed underlying the necessity of developing a futuristic vision of the market
demand with particular reference to the quality specification matching the buyer’s
requirements.
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.
Major data sources available for collecting secondary data consisted of

Agriculture Statistics of Government of Pakistan, Pakistan Central Cotton Committee,
United States Department of Agriculture and Central Cotton Research Institute, Multan.
The data has been analyzed by using time series analysis techniques by using
econometrics models with the help of EVIEWS (a statistical package). The results are
explained in the preceding sections. Forecasting has been done to foresee the future
trends in acreage and yield of cotton crop in Pakistan.
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
Source: Cotton Production Prospects for the Next Decades (1995).
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.
The yield and acreage response is analyzed assuming profit maximizing

behaviour of cotton grower. Under this assumption, cotton yields and acreage are affected
by cotton price, input price (Buksh et al, 2005), alternative crop price, acreage under
cultivation and climate variable (Carlos et al, 2002, Arifullah, 2007).
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).
7.2 DATA AND ESTIMATION METHOD
An attempt was made to visualize the distributional properties of the data by

plotting actual values of the variables against time. In addition to that, each of the
explanatory variables was also plotted against the dependent variable and the residuals
were also examined by running an initial regression analysis. Such an exploratory data
analysis revealed the existence of non-linearity among the variables. Hence, natural scale
variables were converted into natural logarithms (denoted by L) to ensure symmetry and
linearity in the data set. This also facilitates the interpretation of co-efficients as
elasticities.
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.
The classical assumptions:
I. The regression model is linear in the coefficients and the error term.
II. The error term has a zero population mean.
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)
V. The error term has a constant variance (no heteroskedasticity).
VI. No explanatory variable is a perfect linear function of other explanatory variables

(no perfect multi-collinearity).
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
LRF LYI ELD
253
7.3 SPECIFICATION OF MODELS
7.3.1 Dependent and Explanatory Variable
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:
L(Yield)t = C + β1 (LArea)t + β2 (LCRPR)t + β3 (LCRPW)t + β4 (LPesticide)t + β5 (LRF)t + εt
Model 2
L(Yield)t = C + β1 (LArea)t + β2 (LPesticide)t β3 (LCRPR)t + β4 (LRF)t + εt
The functional form of the model for Area is explained as under:-
Area Model
Model 1:
L(Area)t = C + β1 (LYield)t + β2 (LCRPR)t + β3 (LCRPW)t + β4 (LPesticide)t + β5 (LRF)t + εt
Model 2
L(Area)t = C + β1 (LYield)t + β2 (LCRPR)t + β3 (LRF)t + β4 (LPesticide)t + εt
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.
Table 7.2 Yield Model-1
Dependent Variable: LYIELD

Sample(adjusted): 1976 2005
Included observations: 30 after adjusting endpoints
Variable Coefficient Std. Error t-Statistic Prob.
C -4.668430 3.603540 -1.295512 0.2075
LAREA 1.476098 0.511555 2.885513 0.0081
LCRPR -0.260204 0.181273 -1.435422 0.1641
LCRPW -0.137174 0.204963 -0.669259 0.5097
LPESTICIDE 0.050170 0.064432 0.778647 0.4438
LRF -0.147861 0.053585 -2.759388 0.0109
R-squared 0.865101 Mean dependent var 6.176103
Adjusted R-squared 0.836997 S.D. dependent var 0.340408
S.E. of regression 0.137435 Akaike info criterion -0.954472
Sum squared resid 0.453322 Schwarz criterion -0.674233
Log likelihood 20.31709 F-statistic 30.78213
Durbin-Watson stat 1.613083 Prob(F-statistic) 0.000000
LYIELD = -4.668 + 1.476LAREA - 0.260LCRPR - 0.137LCRPW + 0.050LPESTICIDE - 0.147LRF
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
Dependent Variable: LAREA

C 6.012752 0.368791 16.30396 0.0000
LCRPR 0.036428 0.064519 0.564610 0.5776
LCRPW -0.039470 0.070667 -0.558532 0.5817
LPESTICIDE 0.073886 0.016604 4.449894 0.0002
LRF 0.040248 0.019484 2.065711 0.0498
LYIELD 0.174492 0.060472 2.885513 0.0081
LAREA = 6.012 + 0.036LCRPR - 0.039LCRPW + 0.073LPESTICIDE + 0.040LRF + 0.174LYIELD
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.
7.3.2 Stationery Test
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.
Fig. 7.3 A non-stationary trend of the dependent variable (Yield)
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.
7.3.3 Augmented Dickey-Fuller Test

In order to convert the series into stationary, a unit root test is applied by using
Augmented Dickey Fuller Test. The tests are based on the following three regression
forms:
Let Log Yield t =Y t Δ Y t = δYt-1+µt  Without Constant and Trend
ΔYt = α+ δYt-1+µt  With Constant
ΔYt = α+βT+ δYt-1+µt  With Constant and Trend
Let Log Area t =A t Δ A t = δAt-1+µt  Without Constant and Trend
ΔAt = α+ δAt-1+µt  With Constant
ΔAt = α+βT+ δAt-1+µt  With Constant and Trend
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.
7.4. EMPIRICAL RESULTS & DISCUSSIONS
7.4.1. Unit Root Test
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
Table 7.4: Augmented Dickey-Fuller Test with Intercept
Variables Level 1st Difference 2nd Difference Conclusion

Log (AREA) -1.95 - 5.53 - I (1)
Log (CRPR) - 2.27 - 3.78 - I (1)
Log (YIELD) - 1.97 - 5.08 - I (1)
Log (CRPW) - 2.73 - 5.48 I (1)
Log - 1.26 - 4.11 - I (1)
(PESTICIDE)
Log (RF) - 3.90 - - I (0)
Source: Author’s Calculations
259
Table 7.5: Augmented Dickey-Fuller Test with Trend and Intercept
Variables Level 1st Difference 2nd Difference Conclusion

Log (AREA) - 2.48 - 6.00 - I (1)
Log (CRPR) - 2.42 - 3.77 -5.23 I (2)
Log (YIELD) - 2.26 - 5.26 - I (1)
Log (CRPW) - 2.84 - 5.40 - I (1)
Log - 1.91 - 4.22 -5.02 I (2)
(PESTICIDE)
Log (RF) - 4.12 - 6.72 - I (1)
Both the models are reconsidered for multi-collinearity and autocorrelation.

Problem from yield and area models, one variable i.e LCRPW is dropped and regression
has been run. The results are as under in Table 7.6 and Table 7.7.
Table 7.6 Yield Model 2

C -5.329102 3.427208 -1.554940 0.1325

LAREA 1.549073 0.494249 3.134193 0.0044
LCRPR -0.345695 0.127190 -2.717928 0.0118
LPESTICIDE 0.054343 0.063418 0.856912 0.3996
LRF -0.154215 0.052151 -2.957073 0.0067

LYIELD = -5.329 + 1.549LAREA - 0.345LCRPR + 0.054LPESTICIDE - 0.154LRF
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.
Table 7.6 Acreage Model 2

C 5.926794 0.330500 17.93279 0.0000

LCRPR 0.013829 0.049558 0.279042 0.7825
LPESTICIDE 0.075773 0.016032 4.726483 0.0001
LRF 0.039742 0.019193 2.070667 0.0489
LYIELD 0.182101 0.058101 3.134193 0.0044

LAREA = 5.926 + 0.013LCRPR + 0.075LPESTICIDE + 0.039LRF + 0.182LYIELD
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.
261
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
Adjusted R2 0.83 0.84 0.91 0.92
D Watson 1.61 1.54 1.174 1.21
F-stat 30.782 39.232 67.412 86.56
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)

C 0.410909 5.042297 0.081493 0.9358

LAREA 0.793264 0.700333 1.132695 0.2701
LCRPR -0.156107 0.201659 -0.774116 0.4475
LCRPW -0.242062 0.220569 -1.097443 0.2849
LPESTICIDE 0.098773 0.075539 1.307575 0.2052
LRF -0.155957 0.050782 -3.071106 0.0058
AR(1) 0.136371 0.219390 0.621594 0.5409
MA(2) 0.004569 0.224343 0.020366 0.9839

LYIELD = 0.410+ 0.793LAREA - 0.156LCRPR 0.242LCRPW + 0.098LPESTICIDE - 0.155LRF
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)

C -1.534472 4.569682 -0.335794 0.7402

LAREA 1.027949 0.648189 1.585880 0.1270
LCRPR -0.327435 0.136164 -2.404709 0.0250
LPESTICIDE 0.098216 0.074936 1.310664 0.2035
LRF -0.162489 0.049782 -3.264038 0.0036
AR(1) 0.194926 0.215274 0.905479 0.3750
MA(2) 0.006795 0.219906 0.030901 0.9756

LYIELD = -1.534 + 1.027LAREA - 0.327LCRPR + 0.098LPESTICIDE - 0.162LRF
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-
statistics i.e. 21.75 indicates that model is good fit.
264
Table 7.11 ARMA (Acreage-1)

C 6.873605 0.424264 16.20126 0.0000

LCRPR 0.070847 0.066008 1.073307 0.2953
LCRPW -0.110106 0.073680 -1.494380 0.1500
LPESTICIDE 0.075048 0.018797 3.992568 0.0007
LRF 0.021938 0.016244 1.350592 0.1912
LYIELD 0.059337 0.064690 0.917262 0.3694
AR(1) 0.501958 0.224235 2.238537 0.0361
MA(2) 0.083139 0.284868 0.291852 0.7733

LAREA = 6.873 + 0.070LCRPR - 0.110LCRPW + 0.075LPESTICIDE + 0.0219LRF + 0.059LYIELD
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.
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Table 7.12 ARMA (Acreage-II)
C 6.557709 0.374327 17.51866 0.0000

LCRPR 0.007892 0.048411 0.163018 0.8720
LPESTICIDE 0.084094 0.017024 4.939733 0.0001
LRF 0.023270 0.016830 1.382666 0.1806
LYIELD 0.085490 0.062116 1.376312 0.1826
AR(1) 0.462264 0.189965 2.433416 0.0235
MA(2) -0.101547 0.226958 -0.447425 0.6589

LAREA = 6.557 + 0.007LCRPR + 0.084LPESTICIDE + 0.023LRF + 0.085LYIELD
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:
 The happening of the past will happen again in future

 Accuracy of the forecast increases as the horizon of forecast is short or less
i.e. forecast for tomorrow will be more accurate than the forecast for next
month.
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 Formulae
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
Y0 = Base year area/yield
r = compound growth rate
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Basing on the following formulae, forecasting of area and yield has been carried out up to
the year 2015.
Yt + 1 = Yt + (Yt*r) / 100 (Shah et al, 2005)
7.5.1. Harvested Area and Yield Per Hectare
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.
Table 7.13: Forecasting for Area and Yield (2008-2015)
Year Area Yield

(000 ha) (Kgs/ha)
C.G.R. %* 1.188699 2.129313
2008 3289 616
2009 3328 629
2010 3367 642
2011 3407 656
2012 3448 670
2013 3489 684
2014 3530 699
2015 3572 714
*Compound Growth Rate
Source: Authors Estimation
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
1972
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
2005
2006
2007
Forecasting of Area & Yield using Annual Compound Growth Rate Method
2008
2009
2010
2011
2012
2013
2014
2015
0
100
200
300
400
500
600
700
800
900
Yield (Kgs/ha)
269
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
CONCLUSION AND POLICY IMPLICATIONS
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.
Quality of cotton has different meanings to different stakeholders. Its high

ginning out-turn (GOT) for the ginners, high grade, longer, stronger and higher
uniformity to the spinners. In the study area, it was observed that primitive and
careless harvesting, handling, storage, transportation and ginning technology is being
used. This seriously affects the lint quality at the post-harvest stages. It was also
observed that the marketing system is based on subjective cotton standards. It is based
on variety and the area where cotton has been grown. It is my strong belief, that
implementation of cotton standards and pricing based on premium and discounts
would encourage the growers and the ginners to improve the quality which will
improve international prices of Pakistani cotton.
Pakistani cotton is inherently of good quality but marketing distortions and

absence of quality control lead to depreciation of the value of raw cotton. It was
observed that the mal-practices of picking, excessive yield trash, mixing dirt in seed
cotton, picking of immature bolls with inferior lint quality, ultimately results in bad
marketing and low returns.
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.
Globalization and reduction of trade barriers have brought additional

competition for Pakistani cotton against all over cotton world, having latest spinning
technology. There is a need to improve the spinning industry on emergency basis.
Pakistani growers, ginners and spinners have to increase productivity through

adoption of better technology and management practices. Ginners and spinners need
to be better trained to meet the future demand.
The present chapter aims at presenting the theoretical implications resulting

from the study (Section 8.1) it also endeavors to denote some of the methodological
implications of the methodology adopted in this research and the extent to which it
proved useful (Section 8.2). An attempt is also made to highlight some of the policy
implication along with the priority needs of all the stakeholders in cotton marketing
channel and for policy makers in Pakistan (Section 8.3).
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.
Allocative efficiency of inputs being used for cotton production by the

growers in the study area was studied by using Cobb Douglas production function. At
the same time marginal value products to opportunity cost was calculated and basing
on their results, economic efficiency for the use of critical inputs by the growers in
study area was estimated.
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.
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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.
8.3 IMPLICATIONS FOR PUBLIC POLICY
Before discussing the final policy recommendations basing on the core

chapters, the most critical problem being faced by the growers, commission
agents/village beoparis, ginners and spinners in the marketing of cotton will be
presented on the priority basis, basing on the findings in Chapter 6.
8.3.1 Grower Level Problems
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.
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Second Priority
Undue kind deductions by the buyers: 99.44 percent growers of all

categories of small, medium and large farmers gave second priority to the undue kind
deductions by the buyers as the most critical problem in the marketing of cotton.
Third Priority
No premium for clean cotton: 97.78 percent growers of all categories of

small, medium and large farmers gave third priority to the no premium for clean
cotton by the buyers as the most critical problem in the marketing of cotton.
8.3.2 Village Beopari / Commission Agent Level Problems
First Priority
Demand of clean cotton by the ginners, and Mixing up of varieties /

contaminated cotton: 90 percent village beopari / commission agents gave first
priority to the demand for clean cotton by the ginners and mixing up of varieties and
contaminated cotton as the most critical problem in the marketing of cotton.
Second Priority
Rapid fluctuation of markets, and Undue kind deduction by the

ginners/spinners: 87 percent village beopari / commission agents gave second
priority to the rapid price fluctuation as well as undue kind deductions by the ginners
and spinners as their most critical problems in the marketing of cotton.
Third Priority
Lack of storage facility/transport: 83 percent village beopari / commission

agents gave third priority to the lack of storage facility and transport facility as their
most critical problems in the marketing of cotton.
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8.3.3 Cotton Ginners Problems
First Priority
Contaminated seed cotton: 100 percent ginner ranked provision of

contaminated seed cotton by the growers as the most critical problem / first priority in
Second Priority
Non-availability of credit from banks: 90 percent ginners gave second

priority to the non-availability of credits from the banks as the most critical problem
in the marketing of cotton.
Third Priority
Non-availability of technical staff: 84 percent ginners gave third priority to

the lack of technical staff in ginning processes cotton as the most critical problem in
8.3.4 Spinners Problems
First Priority
Grading/classification not being done by the ginners: 93 percent spinners

gave first priority to the grading/classification not being done by the ginners as the
most critical problem in the marketing of cotton.
Second Priority
Mixing of varieties by the ginners, and Bales of no standard weight and

size: 90 percent spinners gave second priority to the mixing of varieties by the ginners
and bales are of no standard weight and size, as the most critical problem in the
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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
8.4 POLICY RECOMMENDATIONS FOR GROWERS
8.4.1 Key Issues
 The main dealing agents in the marketing of cotton were identified as

Growers, Village Beoparies/Commission Agents, Ginners and Spinners. Three
types of the farmers were identified on the basis of their land holdings as
small, medium and large. 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 the 25 acres of land holdings. Large farmers were holdings
more than 25 acres of land.
 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.
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 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.
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 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
 It was observed that the cultivated area is deteriorating by salinity, alkalinity,

water logging and due to less organic matter in the soil than the required level.
There is a dire need to adopt all available measures to arrest further deterioration
of the soil productivity due to above mentioned factors.
 Soil, Water and Plant Testing Laboratories at tehsil level and provision of Mobile
Soil and Water Testing Laboratory for Advisory Services to the farmers should be
ensured.
 Maintenance of organic matter in the soil by curing and preserving farm yard
manure properly by burying crops residues into the soil and use of bio-fertilizers
may be encouraged.
 Apply single ‘rouni’ on well-leveled fields for flat (conventional) planting due to
scarcity of canal water.
 Improvement and maintenance of soil physical condition ensures better soil
productivity. Therefore, green manuring should be practiced to improve the
physical condition of the soil. Among green manuring crops, berseem is the best.
Green manuring crops should be buried into the soil at tender stage before 3-4
weeks of cotton planting for timely decomposition.
 Promulgation of intellectual property rights to attract investment in seed industry
and plant breeding and facilitation of public and private seed sectors for adequate
supply of high quality seed may be ensured. Certified seed of a particular variety
with complete production technology may be provided to the growers.
 Sale of unapproved varieties and uncertified seed should be restricted.
 Seed Research Institute may be established to carry out research on Seed Cell for
the production of pre-basic and basic seed. Following points must be given due
importance;
o Breeding for long staple cotton
o Breeding for coloured cotton
o Organic cotton
o Breeding of drought tolerant varieties
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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.
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 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
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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.
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 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.
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 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
8.5.1 Key Issues
 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
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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.
8.6 RECOMMENDATIONS FOR GINNERS
8.6.1 Key Issues
 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.
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 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.
 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.
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 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.
293
8.7 RECOMMENDATION AT SPINNERS LEVEL
8.7.1 Key Issues
 The factors, which identified as attractive regarding cotton marketing at the

spinners level were Easy to Handle, High Profit, Low Variable Cost, High
Demand of Product.
 The most critical and discouraging factors which were detractive towards cotton
by marketing at the spinners level were Low Quality of Yarn, Late Payment from
Buyers and High Rate of Markup on Investment.
 It was observed that spinners received contaminated cotton containing serious
contaminating agents like human hairs, jute fibres, poultry feathers, pieces of
threads and polyethylene. This makes the yarn unfit for high value added goods.
 Some spinning mills were found using contamination detector, but this process of
contamination removal increases the overall cost of yarn.
 Spinners were of the point of view that the process of obtaining contamination
free cotton should start from the fields followed by the proper storage and
transportation. Cotton standards should be strictly implemented and premium be
paid to the stakeholders for supplying contamination free cotton.
 Spinners are receiving ginned cotton having high neps and floating fibres due to
the use of worn-out saws by the ginners. Moreover, the varieties of the cotton are
mixed which are having trash in it.
 Since the artificial drying facilities is not available to the ginners, so they are
using sunshine drying which is damaging fibre properties and its grade.
 Spinners are getting bales of non-standard weight and size. There is no adherence
to the universally recognized uniform density standards.
 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
CROPPING PATTERN IN PAKISTAN

Annexure-C
PAKISTAN PRINCIPAL EXPORTS (Value in Million USD)
2006-07 2005-06 2004-05 2003-04 2002-03
% % % %
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
Fruits & Vegetables Incl.

169 1.00 155 0.94 112 0.78 129 1.05 109 0.98
Juice
Engineering Goods 237 1.40 219 1.33 182 1.26 100 0.81 74 0.66
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
Tents & Canvas 69 0.41 39 0.23 67 0.47 75 0.61 73 0.65
Molasses 28 0.41 44 0.26 72 0.50 47 0.38 45 0.40
Footwear 97 0.57 115 0.69 116 0.81 89 0.72 85 0.76
Cotton Waste - - 0 - 0 - 50 0.41 47 0.42
Raw Cotton 50 0.29 68 0.41 110 0.76 48 0.39 49 0.44
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
Source: TDAP / CSO, Pakistan

Annexure-H
Table-1
Budget Estimates of cotton for small farmers in The District of Multan.

Figure on per acre basis)
Operations Units Quantity Rate/u Cost(Rs.)
Cultivation Tractor NO. 5.13 250.00 1282.50

Cultivation Bullock NO. 0.00 200.00 0.00
Planking Tractor NO. 2.14 75.00 160.39
Planking Bullock NO. 3.15 50.00 157.50
Seed Kgs 6.70 100.00 670.00
Sowing cost Rs. 1.00 200.00 200.00
DAP Bags. 0.72 940.00 679.52
UREA Bags. 1.50 525.00 787.50
NP Bags. 0.00 650.00 0.00
Canal irrigation NO. 3.25 350.00 1137.50
T.well irrigation NO. 1.64 300.00 491.57
Hoeing NO. 1.50 1000.00 1500.00
Intercultur NO. 1.42 250.00 355.42
Spray NO. 5.38 528.25 2841.99
Management & other operations
labor* Hrs. 102.98 11.25 1158.51
Harvesting/Picking Hrs. 1.32 950.00 1254.00
Rent Rs. 0.50 7500.00 3750.00
Yield Mds. 21.12 950.00 20064.00
Total cost per acre. Rs. - - 16426.39
Net Income Per Acre Rs. - - 3637.61
*Labor for all others operations including management except/picking and
transportation
Annexure-I
Table-2
Farm Budget Estimates of Cotton For medium farmers in The District of Multan.
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
Hoeing NO. 1.55 1000.00 1550.00
Intercultur NO. 0.22 250.00 55.15
Spray NO. 5.76 550.00 3170.59
labor* Hrs. 106.96 11.25 1203.30
Rent Rs. 0.50 7500.00 3750.00
Yield Mds. 22.15 975.00 21596.25
transportation
Annexure-J
Table-3
Farm Budget Estimates of Cotton for large farmers in The District of Multan
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
Hoeing NO. 1.15 1000.00 1150.00
Intercultur NO. 1.89 250.00 471.77
Spray NO. 6.47 550.00 3557.26
labor* Hrs. 109.79 11.25 1235.15
Rent Rs. 0.50 7500.00 3750.00
Yield Mds. 25.41 1040.00 26426.40
transportation
Annexure-K
Table-4
Farm Budget Estimates For Cotton in The District of Multan

(Figure on per acre basis)
Seed Kgs 6.88 100.00 688.19
Sowing cost Rs. 1.00 200.00 200.00
DAP Bags. 1.12 926.67 1041.85
UREA Bags. 1.68 521.67 878.14
NP Bags. 0.10 641.67 62.10
Hoeing NO. 1.40 1000.00 1400.00
Intercultur NO. 1.18 250.00 294.11

Spray NO. 5.87 542.75 3186.39
Management & other
operations labor* Hrs. 106.58 11.25 1198.99
Rent Rs. 0.50 7500.00 3750.00
Yield Mds. 22.89 988.33 22626.24
transportation
Annexure-L
Table-5
Farm Budget Estimates of Cotton for small farmers in The District of Bahawalpur
Seed Kgs 6.50 100.00 650.00
Sowing cost Rs. 0.95 200.00 190.00
DAP Bags. 1.18 940.00 1105.44
UREA Bags. 1.30 525.00 681.45
NP Bags. 0.25 650.00 162.50
Hoeing NO. 1.24 1000.00 1240.00
Intercultur NO. 1.75 250.00 438.00
Spray NO. 5.59 528.25 2950.28

labor* Hrs. 107.27 11.25 1206.78
Rent Rs. 0.50 8000.00 4000.00
Yield Mds. 23.85 985.00 23492.25
transportation
Annexure-M
Table-6 Farm Budget Estimates of Cotton for medium farmers in The District of
Bahawalpur Figure on per acre basis
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
Hoeing NO. 1.19 1000.00 1185.00
Intercultur NO. 2.25 350.00 787.50
Spray NO. 5.73 550.00 3150.40
labor* Hrs. 111.72 11.25 1256.85
Rent Rs. 0.50 8000.00 4000.00
Yield Mds. 25.35 1025.00 25983.75
transportation
Annexure-N
Table-7
Farm Budget Estimates of Cotton for large farmers in The District of Bahawalpur
Figure on per acre basis
Seed Kgs 6.80 120.00 816.00
Sowing cost Rs. 1.00 200.00 200.00
DAP Bags. 1.54 945.00 1455.30
UREA Bags. 2.05 525.00 1076.25
NP Bags. 0.15 625.00 93.75
Hoeing NO. 1.15 1000.00 1150.00
Intercultur NO. 2.64 350.00 924.00
Spray NO. 6.84 550.00 3762.00

labor* Hrs. 117.65 11.25 1323.51
Rent Rs. 0.50 8000.00 4000.00
Yield Mds. 28.94 1065.00 30821.10
transportation
Annexure-O
Table-8
Farm Budget Estimates For Cotton in The District of Bahawalpur.

Seed Kgs 6.59 115.00 758.23
Sowing cost Rs. 0.98 200.00 196.67
DAP Bags. 1.32 941.67 1244.88
UREA Bags. 1.64 525.00 862.40
NP Bags. 0.30 641.67 192.50
Hoeing NO. 1.19 1000.00 1191.67
Intercultur NO. 2.21 316.67 701.10
Spray NO. 6.05 542.75 3284.18
labor* Hrs. 112.21 11.25 1262.38
Rent Rs. 0.50 8000.00 4000.00
Yield Mds. 26.05 1025.00 26697.83
transportation
Annexure-P
Table-9
Budget Estimates of Cotton for small farmers in the Multan and Bahawalpur region

Seed Kgs 6.60 100.00 660.00
Sowing cost Rs. 0.98 200.00 195.00
DAP Bags. 0.95 940.00 892.48
UREA Bags. 1.40 525.00 734.48
NP Bags. 0.13 650.00 81.25
Hoeing NO. 1.37 1000.00 1370.00
Intercultur NO. 1.59 250.00 396.71
Spray NO. 5.48 528.25 2896.13
labor* Hrs. 105.12 11.25 1182.65
Rent Rs. 0.50 7750.00 3875.00
Yield Mds. 22.49 967.50 21754.24
*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.
Seed Kgs 6.64 112.50 746.67
Sowing cost Rs. 1.00 200.00 200.00
DAP Bags. 1.20 940.00 1128.00
UREA Bags. 1.67 525.00 874.13
NP Bags. 0.25 650.00 162.50
Hoeing NO. 1.37 1000.00 1367.50
Intercultur NO. 1.24 300.00 370.59
Spray NO. 5.75 550.00 3160.49

labor* Hrs. 109.34 11.25 1230.08
Rent Rs. 0.50 7750.00 3875.00
Yield Mds. 23.75 1000.00 23750.00
* 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.
Seed Kgs 6.98 110.00 765.58
Sowing cost Rs. 1.00 200.00 200.00
DAP Bags. 1.52 922.50 1402.65
UREA Bags. 1.93 520.00 1001.63
NP Bags. 0.22 625.00 137.60
Hoeing NO. 1.15 1000.00 1150.00
Intercultur NO. 2.26 300.00 697.89
Spray NO. 6.65 550.00 3659.63

labor* Hrs. 113.72 11.25 1279.33
Rent Rs. 0.50 7750.00 3875.00
Yield Mds. 27.18 1052.50 28601.69
transportation
Annexure-S
Table-12
Budget Estimates of Cotton for all farmers in the Multan and Bahawalpur region.
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
Hoeing NO. 1.30 1000.00 1295.83
Intercultur NO. 1.70 283.33 480.31
Spray NO. 5.96 542.75 3235.28
labor* Hrs. 109.39 11.25 1230.68
Rent Rs. 0.50 7750.00 3875.00
Yield Mds. 24.93 1006.67 25091.17
transportation.

Economic Analysis of Cotton Marketing Problems in Pakistan

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AN ECONOMIC ANALYSIS OF MARKETING

All acclamation and approbation is due to Allah (Subhan-u-Tahala) my Creator, my

I convey special acknowledgement to my beloved institution PAKISTAN ARMY for

Collective and individual acknowledgements are also owned to Central Cotton

I transcend my power of narration to express how I feel obliged to my cherished and

MUHAMMAD BASHIR KHAN

AMRI Agricultural Mechanization Research Institute

AMS Aggregate Measure of Support

APCom Agricultural Prices Commission

APTMA All Pakistan Textile Mills Association

ASEAN Association of South East Asian Nations

CB Ratio Cost Benefit Ratio

CCRI Central Cotton Research Institute

CEC Cotton Export Corporation

CHL Casual Hired Labour

CIF Cost Insurance Freight

CLCV Cotton Leaf Curl Virus

DAP Di-ammonium Phosphate

DRC Domestic Resource Cost

DRC Domestic Resource Cost

EPC Effective Protection Coefficient

FEC Feeder Extract Cleaner

GDP Gross Domestic Product

GNI Gross National Income

GNP Gross National Product

GOT Ginning Outturn

ICAC International Cotton Advisory Committee

IPM Integrated Pest Management

IRDP Integrated Rural Development Programme

KCA Karachi Cotton Association

LDC Least Developed Countries

MEP Minimum Export Price

MVP Marginal Value Product

NARC National Agriculture Research Council

NPC Nominal Protection Coefficient

NSP Net Social Profit

NWFP North West Frontier Province

OER Official Exchange Rate

OLS Orderly Least Square

OPEC Oil Producing and Exporting Countries

PAM Policy Analysis Matrix

PCCC Pakistan Central Cotton Committee

PCGA Pakistan Cotton Ginners Association

PSE Producer Subsidy Equivalent

SCB Social Cost Benefit

SCF Social Conversion Factor

SER Shadow Exchange Rate

SMEDA Small and Medium Enterprises Development Authority

TCP Trading Corporation of Pakistan

WTO World Trade Organization

MUHAMMAD BASHIR KHAN

Table 3.1 Pakistan’s Place in World Cotton and Textile 72

Table 3.2 Pakistan’s Share in World Cotton Production (2006-07) 72

Table 3.3 Percentage Change in Cultivated Area, Production and 73

Table 3.4 Zones of Cotton Production in The Punjab Province 76

Table 3.5 Yield/ha in Punjab from (1947-48) to (2004-05) 78

Table 3.6 Area, Production & Yield/ha in Sindh from (1947-48) to 79

Table 3.7 Cotton and Textile Sector Growth in Pakistan 81

Table 3.8 Area, Production & Yield, Consumption and Export 82

Table 3.10 Cotton Yield Comparison in Top Cotton Producing 98

Table 3.11 Potentials to Increase Production Through Area Expansion 99

Table 4.1: Literacy Rate in Punjab 105