The government is considering handing over Pakistan Central Cotton Committee (PCCC), which conducts research to improve cotton quality, to the All Pakistan Textile Mills Association (Aptma).
The committee is facing a financial crunch due to failure of textile millers to pay their dues. Millers are reluctant to pay cotton cess and in this regard they have filed lawsuits. Following this, the government has decided to dissolve PCCC, an institution created to undertake research work to improve the quality of Pakistan's cotton crop, which is the mainstay for the textile industry.
The government is working on two proposals. First proposal involves the handing over of PCCC, which is working as an attached department of the Ministry of National Food Security and Research, to Aptma, a major body of textile millers.
Second proposal entails the transfer of PCCC to the National Agricultural Research Centre (NARC).
Earlier, the Economic Coordination Committee (ECC) noted that PCCC had become inefficient due to its financial troubles. Consequently, it recommended the organisation's closure.
The ECC directed the Ministry of National Food Security to prepare and submit a case to the Cabinet Committee on Rightsizing along with the way forward in order to continue cotton research after the dissolution of PCCC.
Additionally, the food security ministry was tasked with consulting the Attorney General of Pakistan and provincial advocate generals to expedite the settlement of court cases involving cess payments.
Following that, the ECC, in a recent meeting, was informed that two proposals were under consideration, which included whether the cotton committee should be handed over to Aptma or NARC.
According to the food ministry, since 2016, mills have been reluctant to pay cotton cess and filed 65 cases in various high courts and the Supreme Court. This has resulted in significantly reduced earnings for PCCC, leading to partial salary payments over the past two years.
While cotton research is crucial for the agricultural economy, structural issues persist. The cess, levied on the private sector, funded research in the public sector, primarily covering employee-related expenses. The ECC suggested that research should instead be conducted by the private sector.
The food security ministry informed ECC that the cotton committee had been allocated a loan of Rs656 million for employee-related expenses in the federal budget for fiscal year 2024-25.
PCCC, established in 1948 under the Cotton Cess Act 1923, operates under the Ministry of National Food Security with a mandate to promote cotton research, increase production and improve marketing through a cess of Rs50 per cotton bale, collected from textile mills.
Since 2016, mills have resisted cess payments, especially after the rate was increased from Rs20 to Rs50 per bale, as recommended by ECC in 2012, and imposition of the cess on imported cotton.
Although PCCC won 63 of the 65 legal cases, with only two pending in Peshawar High Court, the lack of cess payments has severely impacted the release of employee salaries and pensions, which have been cut by 50% and 80%, respectively, since June 2022.
To address the shortfall, the federal government provided a supplementary grant of Rs419 million in May 2021. Additionally, the ECC approved a Rs300 million loan in June 2023 to ensure payment of salaries and pensions. However, the loan was not disbursed because the financial year was ending on June 30, 2023.
The ECC also directed the food ministry to devise a permanent solution for the cotton committee's financial sustainability.
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