Cotton trade with Pakistan
Huge potential through land route

by Davinder Kumar Madaan

The Tribune, April 17, 2007

The Hussainiwala border is just 11 km from Ferozepore and 9 km from Kasur city of Pakistan. This border was the lifeline of traders dealing in clothes, dry fruits, dates, grapes, pomegranates and vegetables before 1971.

But due to the collapse of a bridge over river the Satluj at this border in the 1971 war to stop the entry of the rival forces, this route was closed.

Now the resumption of trade talks between India and Pakistan has again raised the demand for opening the Hussainiwala border for trade and transit.

Earlier also this demand had been raised at various forums by Chowdhary Manzoor Ahmed, Pakistani MP from Kasur, Paramjit Kaur Gulshan, Indian MP from Bathinda, K.S. Jeeda, President, Punjab Cotton Growers Association, and others.

Pakistan’s Foreign Affairs Minister, Mr Khurshid Mehmood Kasuri, who belongs to Kasur, has assured India of full cooperation for opening this border.

Already the road from Lahore to Hussainiwala had been widened to benefit traders a lot. In fact, the overall official trade between India and Pakistan has increased from $ 345 million in 2003-04 to $ 869 million in 2005-06 and is likely to cross $ 1500 million in 2006-07.

Cotton has become a catalyst to boost trade between India and Pakistan through the Hussainiwala border. It is one of the several other items in which India has a cost advantage over Pakistan. India’s global exports of cotton jumped from $ 237 mn in 2003-04 to $ 842 mn in 2006-07. Its production increased from 13.9 mn bales to 21 mn bales, respectively, during the same period. India accounted for 18 per cent of the world production of cotton during 2006-07 and has become the second largest producer in the world after China.

Pakistan annually imports 1.5-2 mn bales of cotton. Its production declined from 14.3 mn bales in 2004-05 to 12.3 mn bales in 2006-07 due to adverse weather conditions. As a result, the net import requirements of Pakistan are 3.5 mn bales in the current year.

With the introduction of Bt cotton in Indian Punjab officially during 2005-06, the per hectare yield of cotton has increased by 40 per cent in the cotton-belt, particularly in Ferozepore, Bathinda, Faridkot, Muktsar, Mansa, and Moga districts, which are very much close to Hussainiwala border.

Punjab contributed 13 per cent in India’s cotton production in 2006-07. The per hectare yield of cotton in Punjab was 743 kg in 2006-07 as compared to 503 kg of India and 674 kg in Pakistan. Cotton surplus in the state is about 1.7 mn bales.

It is relevant to mention that India’s export price of cotton to Pakistan during 2003-06 was less as compared to the rest of world. As such, Pakistan gained Rs 17 lakh during 2006-07 (April-June) for importing 764 tonnes cotton from Punjab. Therefore, there is a high potential for Punjab cotton exports to Pakistan. If India and Pakistan allow cotton trade through the Hussainiwala border, it would be beneficial to both. The signing of a memorandum of understanding at Bathinda by the President, Punjab Cotton Factory and Ginners Association, and the Chairman, Indo-Pak Cotton Ginners Association, on March 19, 2007 for free cotton trade through the Hussainiwala border has given a boom for Punjab cotton farmers, who would be getting about Rs 200 per quintal more than the domestic price.

At present, cotton trade between the two countries is through the ports of Karachi and Mumbai/Kandala, which is very expensive. From the economic point of view, it is illogical to confine trade through ports, when a large common land border is shared by both countries. The transport time for goods through ports is more than seven days. The land route is cheaper, faster and safer as the carrying cost through Hussainiwala is Rs 12 per quintal only, and the transport time is half an hour only from Ferozepore to Kasur (20 km). The lack of road routes force the Indian exporters to transport goods from Delhi to Mumbai port and then to Karachi (2,274 km). Its transaction costs are 2.7 times of those in the direct route between Delhi and Hussainiwala (431 km). Further, this is also the reason for unofficial trade, which stands at more than $ 2 billion annually and results in loss of tax revenue to both countries.

Pakistan needs the vast market across India and that is possible only in the framework of win win cooperation. Punjab will be a major beneficiary from the opening of this land route. The entire Central Asia can be accessed by Punjab through this land route. Similarly, South-East Asia can be accessed by Pakistan. It will fetch valuable foreign exchange. Unfortunately, Pakistan’s insistence on the settlement of Kashmir and the fear of its swamping with Indian goods have hit the interests of both countries.

However, if both countries make any sincere and earnest efforts to exploit the enormous potential of cotton trade, Indian Punjab will fetch crores of rupees to Punjab farmers and both countries would gain in terms of trans-shipment costs and lower prices due to the geographical proximity.

Though India accorded most favoured nation (MFN) status to Pakistan in 1996, the latter has not reciprocated this gesture and continues to restrict imports from India to 1,076 items.

However, it is hoped that the South Asian Free Trade Area (SAFTA), effective from July 2006 and aimed at reducing tariffs for intra-regional trade, will boost trade between the two countries. Both the Indian and Pakistani leadership must transcend the past hesitations and march jointly towards the betterment of their people.


The writer is a Professor of Economics, Department of Management, Lovely Professional University, Phagwara

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