Cotton crisis: where Pakistan’s export battle is being lost

Prime Minister Shehbaz Sharif’s administration has, like every administration before it, placed renewed emphasis on exports as a route to stabilise the economy. The instinct is correct. What remains persistently under-appreciated is where the export battle is actually being won or lost.

It is relevant to note that Pakistan’s export base remains heavily concentrated in textiles. Official Commerce Division data for July–June 2023–24 shows the Textile Group at US$ 16,655.90 million, accounting for 54.29 percent of the export share in that group-wise breakdown. When a single value chain carries this much of the external account, the country cannot afford complacency about the first mile of the chain.

The “nail” in the cotton story is not a mysterious macroeconomic variable. It is plain and physical. It is cotton being picked and handled in ways that allow contamination and inconsistency to enter the fibre before it becomes lint, before it becomes yarn, before it becomes fabric, and long before it becomes something a global buyer will pay a premium for. Pakistan’s cotton is still widely picked manually, mostly by rural women, and while manual picking is not inherently inferior, it becomes economically damaging when the system incentivises speed and weight over cleanliness and consistency. It has been historically pointed out that a major contamination pathway is polypropylene introduced when pickers use repurposed fertiliser bags as picking sheets or bags.

Look at cotton leaders such as the US and Australia where cotton is treated as a measured, standardised industrial input and harvested within systems designed for consistency rather than improvisation. That discipline translates into fewer disputes, lower hidden costs, and real price differentiation, because buyers know what they are getting and can price accordingly.

One may argue that these are micro issues, not boardroom issues. That is a misreading. In a value chain as long as textiles, the earliest defect is also the cheapest to prevent and the most expensive to ignore.

Cotton is not like ore that can be melted and reset into uniformity. Contamination, especially plastic threads and fibres, behaves like a compounding tax that survives processing. It shows up as defects, increases waste, forces stoppages, triggers claims, and, most damagingly, erodes buyer confidence over time.

The State Bank of Pakistan has treated cotton contamination as a macro-relevant problem for years, noting that contamination materially affects price and export earnings. In a special section, SBP cited APTMA’s estimate that contamination causes an annual loss of US$ 1.4 billion, and referenced an alternative estimate placing the loss at US$ 3 billion in export earnings. The same SBP section discussed a survey-based assessment that placed Pakistan’s contamination at 18–19 grams per bale, versus an international standard of up to 2.5 grams, and further concluded that appropriate control measures could raise cotton production value by 10–15 percent. APTMA has echoed the same magnitude—18g per bale versus 2.5g—and tied it again to roughly US$ 1.4 billion in losses.

There is, therefore, nothing speculative about the economic cost. The question is why the response remains episodic and rhetorical rather than structural.

It is a foregone conclusion that Pakistan does not compete only on cost. Pakistan competes on risk. Buyers do not merely ask whether a supplier can meet a price; they ask whether the supplier can deliver consistent quality at a predictable level of defects, and whether shipments reliably match samples. When raw material quality is variable, the entire chain becomes variable, and variability is a tax that is eventually priced into Pakistan’s bargaining position.

This is also why the issue cannot be dismissed as farmers’ problems. The mill pays for it. The exporter pays for it. And the economy pays for it through weaker unit values and weaker foreign exchange inflows, precisely when the country needs export earnings to finance upgrading, imported intermediates, and industrial stability.

Look at cotton leaders such as the United States and Australia. Their advantage is not moral superiority or “better farmers” in the abstract. Their advantage is that cotton is treated as a measured, standardised industrial input and harvested within systems designed for consistency rather than improvisation. That discipline translates into fewer disputes, lower hidden costs, and real price differentiation, because buyers know what they are getting and can price accordingly.

Then consider countries that do not grow much cotton but still dominate garments, Bangladesh is the clearest case. The edge there is not the raw material; it is predictable factory throughput, stable access to inputs at scale, smoother logistics, faster turnaround, and fewer policy or financial disruptions that break production flow. A system that delivers consistently, on time, becomes commercially “safe,” and safety is rewarded in global supply chains.

Pakistan sits in an awkward middle. It has a domestic cotton base, yet it leaks quality early. It has substantial manufacturing depth, yet it often runs under stop-start volatility. The end result is that competitors do not defeat Pakistan with a single silver bullet. They defeat Pakistan by removing friction at multiple points until the chain behaves like a machine rather than a sequence of heroic recoveries.

At the same time, it is relevant to note that the cotton crisis is not confined to contamination. As of July 15, 2025, cotton arrivals at ginning factories were 297,751 bales, down from 442,041 in the same period of 2024, a 32 percent drop, while the 2024 figure itself reflected a 48.48 percent decline from 2023, implying that over corresponding periods in two years, raw cotton production had effectively plummeted by about 65 percent. This retreat has been explicitly linked in places like Rahim Yar Khan to sugarcane expansion and the influence of sugar interests.

These facts matter because they underline a broader point: Pakistan is trying to win an export race while allowing its foundational crop to deteriorate in both quantity and quality. Under such conditions, mills inevitably turn to imports, working capital strains intensify, and the country’s bargaining power erodes.

The debate must be reframed. This is not charity for farmers. It is ROI for industry and foreign exchange for the country. And it is not solved by announcing “mechanisation” as a slogan. It is solved by governance of quality at the farm gate, by correcting incentives, and by ending leakage pathways that everyone already knows.

First, what must be considered is that Pakistan has tried to price “clean cotton” before, which means the problem is not ignorance; it is follow-through. SBP’s quarterly documentation from the early 2000s records that the Federal Textile Board announced a premium (for a pilot area) of Rs 200 per maund for contamination-free cotton and Rs 75 for cotton with low contamination, to reduce international price loss. The idea was sensible. The fact that the same debate persists today indicates the limits of short-lived interventions that do not rewire the market.

Second, a hard cultural and commercial shift is required from “paid by weight” to “paid by quality.” If the procurement system keeps paying the same price for clean cotton and contaminated cotton, then the system is purchasing its own future disputes and losses. Premiums and penalties must exist at the procurement point, be simple, be visible, and be enforced. Without that, the cost will continue to be dumped downstream onto ginners, mills, and exporters, who are the least able to prevent it once it has already entered the fibre.

Third, the worst contamination pathways need to be ended, not merely discouraged. The polypropylene pathway from fertiliser bags used in picking is already known. This is not a problem that requires new committees; it requires enforcement through procurement rules and market exclusion, i.e., contaminated lots must be discounted or refused so that behaviour changes where it originates.

Fourth, clean aggregation and handling cannot be treated as optional. A practical network of covered collection sites, clean floors, basic storage discipline, and simple grading would reduce the needless mixing, dragging, and exposure that turns seed cotton into a quality dispute before it reaches the gin. These are not glamorous reforms, but they are high-leverage reforms.

Fifth, mechanisation should be approached with realism. Punjab’s cotton revival planning material explicitly notes the labour shortage for picking and proposes introducing efficient mechanical pickers through an effective model such as service providers. This is directionally correct, because farm structure and capital constraints make universal ownership unrealistic. However, it bears repeating that mechanisation works only as part of a system, field suitability, varietal choices, agronomic practices, logistics, and maintenance capacity. Mechanising chaos merely scales chaos faster.

Finally, traceability and measurement must be introduced gradually but deliberately. Pakistan does not need to replicate the most advanced systems overnight, but it must build a path toward lots that can be tracked, classed, and trusted.

Buyers do not pay premiums for patriotism. They pay premiums for predictability.

If the state’s objective is to align agricultural output with global requirements to boost exports, then cotton demands urgent priority, because cotton is not merely an agricultural commodity. It is the first industrial input in a value chain that constitutes the backbone of Pakistan’s export earnings.

The nail is small. The loss is not. And the remedy, while politically inconvenient, is economically straightforward: stop allowing preventable quality destruction at the beginning of the chain, so the rest of the chain can finally compete on value rather than apology.