PAKISTAN ECONOMY

M.Rahim Ejaz
HASNAIN IRFAN COTTON AND GINNERS

History of Cotton
What is Cotton?
Cotton, belonging to a family that includes hibiscus and okra, produces a natural vegetable fiber used in the manufacture of cloth. Cotton produces sweet nectar that attracts a variety of destructive insect pests, including the boll weevil, bollworm, armyworm, and the red spider. In addition to insect pests, there is also a very destructive fungus, called the wilt that attacks the root system of the cotton plant.

Species
A few species are grown commercially; these range from a small tree of Asia, to the common American Upland cotton, a low, multi branched shrub that is grown as an annual. Another species includes the long-fiber Egyptian and Sea Island cottons botanically derived from the Egyptian species brought to the United States about 1900. Sea Island cotton thrives in the unique climate of the Sea Islands, located off the southeastern coast of the United States, and on the islands of the West Indies such as Barbados. As with Egyptian cotton, the fiber is white and lustrous but its fiber length is longer than that of any other type of cotton, which permits the spinning of extremely fine yarns. Pima, originally called AmericanEgyptian cotton, is a hybrid type. It is the only variety of long-fiber cotton now grown in commercially significant quantities in the United States, where it is cultivated under irrigation in the Southwest.

Foot Steps
It is almost impossible to determine the original habitats of the various species of cotton. Scientists have determined fiber and boll fragments from the Tehuacán Valley of Mexico to be about 7000 years old. The plant has certainly been grown and used in India for at least 5000 years and probably for much longer. Cotton was used also by the ancient Chinese, Egyptians, and North and South Americans. It was one of the earliest crops grown by European settlers, having been planted at the Jamestown colony in 1607. Cotton was the most important crop in South before the American Civil War (1861-1865). Slaves usually worked all day picking cotton for their masters while overseers watched from their horses.

PAKISTAN ECONOMY

M.Rahim Ejaz
HASNAIN IRFAN COTTON AND GINNERS

England was one of the South's largest cotton customers, many therefore Southerners believed England would enter the war on their behalf to Preserve England’s supply of cotton. The South was confident this would assure a swift Confederate victory. Cotton was king and Louisiana was queen! New Orleans was the major l9th-century port for cotton export, and Louisiana's fertile valleys were the South's major cotton producers. The Confederate government realized cotton was as good as if not better than gold. Cotton's value gave Louisiana a major financial role during the war. Not only did the Confederacy use the foreign exchange paid to the South for the exported 1860 cotton crop, the Confederate government purchased cotton to use both as security for European loans and for export. This plan worked until 1862 when the Union army occupied New Orleans and Baton Rouge. Federal forces raided from Morgan City up to Alexandria. Vicksburg and Port Hudson fell, giving the Union control of the Mississippi River. As Confederate troops retreated, they destroyed as much of the cotton crop as possible, to prevent this "gold" from falling into enemy hands.

History of Cotton Ginning

The cotton gin, invented in 1793 by Eli Whitney, was designed to separate raw cotton fibers from seeds and other foreign materials prior to baling and marketing. The design was so efficient that it remains virtually unchanged to the present day. American Eli Whitney invents the cotton gin, a device that rapidly and effectively removes seeds from cotton fiber. This task had previously been done by hand, making fiber processing slow and expensive. The invention will help spur expansion of the cotton industry in the southern United States. The South as booming cotton economy in turn will increase the reliance on slaves, owing to the labor-intensive character of cotton harvesting. Although the invention of the cotton gin changed history, its inventor, Eli Whitney, did not reap much of a profit. The gin made cotton cleaning so

PAKISTAN ECONOMY

M.Rahim Ejaz
HASNAIN IRFAN COTTON AND GINNERS

efficient that the crop became a primary enterprise for the South. However, patent disputes and supply problems kept Whitney from successfully producing the cotton gin. His later venture into arms manufacturing was more fruitful, and Whitney became a strong promoter of mass production and interchangeable parts. The role of the cotton gin has changed dramatically in the last 50 years to keep up with technological and production changes in the cotton industry. At one time, the gin's only function was to remove cottonseed from the fiber. Today, gins must not only separate the seed from the fiber, they must also dry and clean the fiber and package it into bales before it reaches the textile mill. All gins differ in some aspects of the ginning process. In the Southwest, for instance, gins are equipped with both saw and roller gins: saw gins for ginning Upland cottons, and roller gins for ginning Pima cotton, a cotton grown almost exclusively in this region of the Cotton Belt. Elsewhere in the Cotton Belt, gins use only saw gins in their operation.

Role of cotton in Pakistan

Pakistan is the fifth largest producer of cotton in the world, the third largest exporter of raw cotton, the fourth largest consumer of cotton, and the largest exporter of cotton yarn. 1.3 million Farmers (out of a total of 5 million) cultivate cotton over 3 million hectares, covering 15 per cent of the cultivable area in the country. Cotton and cotton products contribute about 10 per cent to GDP and 55 per cent to the foreign exchange earnings of the country. Taken as a whole, between 30 and 40 per cent of the cotton ends up as domestic consumption of final products. The remaining is exported as raw cotton, yarn, cloth, and garments. Cotton production supports Pakistan’s largest industrial sector, comprising some 400 textile mills, 7 million spindles, 27,000 looms in the mill sector (including 15,000 shuttle less looms), over 250,000 looms in the non-mill sector, 700 knitwear units, 4,000 garment units (with 200,000 sewing machines), 650 dyeing and finishing units (with finishing capacity of 1,150 million square meters per year), nearly 1,000 ginneries, 300 oil expellers, and 15,000 to 20,000 indigenous, small scale oil expellers (kohl us). It is by any measure Pakistan’s most important economic sector. Not surprisingly, government policy has generally been used to maintain a stable and often relatively low domestic price of cotton, especially since

PAKISTAN ECONOMY

M.Rahim Ejaz
HASNAIN IRFAN COTTON AND GINNERS

1986-87 through the imposition of export duties, in order to support domestic industry.

First BT Cotton Grown in Pakistan
Cotton is an important cash crop for Pakistan known as “white gold”. It accounts for 8.2 percent of the value added in agriculture and about 3.2 percent to GDP; around two thirds of the country’s export earnings are from the cotton made-up and textiles which adds over $2.5 billion to the national economy; while hundreds of ginning factories and textile mills in the country heavily depends upon cotton. Life of millions of farmers is dependent on this crop, in addition to millions of people employed along the entire cotton value chain, from weaving to textile and garment exports The area under the cultivation of cotton crops has been increased significantly in the last 30 years - around 7.85 million acres in 2005-06 as compared to 7.2 million acres in 2002-03. Beside being the world’s fourthlargest cotton producer and the third largest exporter of raw cotton and a leading exporter of yarn in the world our yield per acres ranks 13th in the world; as a result Pakistan annually imports around 1.5-2.00 million bales of cotton to meet growing demand from local textile mills; therefore it has become vital for Pakistan to increase its yield per acre. If we look at the Pakistan scenario, two major types of pests are damaging our cotton crops – sucking and chewing; to certain extent it is easier to control sucking pest by strong pesticides but is very challenging to control chewing pests - Bollworms known as “Sundies” – American, Army, Pink and Spotted - cause major devastations in the cotton crop fields; as a result of this, overall both quality of lint and production of cotton have declined substantially. Moreover, recent disaster resulting from the cotton leaf curl virus (CLCV) spread in Punjab and Sind pushed our institutes like Pakistan Atomic Energy Commission (PAEC), National Institute for Biotechnology and Genetic Engineering (NIBGE) and Nuclear Institute of Agriculture and Biology (NIAB) in Faisalabad, and National center of Excellence in Molecular Biology (NCEMB) at Punjab University Lahore to cope with such problems; significant amount of financial resources and manpower have been committed by the Government of Pakistan for developing genetically modified (GM) local cotton varieties. Farmers, who cultivated these Bt cotton varieties at heart of cotton

PAKISTAN ECONOMY

M.Rahim Ejaz
HASNAIN IRFAN COTTON AND GINNERS

growing regions in Punjab - Bahawalpur, Multan, Muzaffer Garh and Karor Pakka; observed and evaluated independently its resistance and susceptibility to different pests including factors like a biotic stress and yield than compared it with non Bt cotton varieties grown in the same locations. A large number of farmers have visited these fields, and become aware of the benefits of the locally developed BT cotton. Today, all major cotton producing countries are benefiting from the cultivation of Bt Cotton. In the last season 54 percent of cotton crops grown in USA, 76 percent in China and 80 percent in Australia were with “single” or “double” BT gene technology. India, the world’s third-largest cotton-grower has cultivated 1.36 million acres of BT cotton crops. It is expected that within two years more than half the world’s cotton may be grown from genetically modified crops. Crop reviews carried out by various independent sources illustrate that unrecorded sowing of new Bt cotton varieties also played its role in increasing cotton productivity, with unofficial estimates suggesting 3 to 5 percent of the area in Punjab and 10 to 15 percent of the area in Sind may have been planted in transgenic cotton.

PAKISTAN ECONOMY

M.Rahim Ejaz
HASNAIN IRFAN COTTON AND GINNERS

HASNAIN IRFAN COTTON AND GINNERS

PAKISTAN ECONOMY

M.Rahim Ejaz
HASNAIN IRFAN COTTON AND GINNERS

Hasnain Irfan Cotton and Ginners

Introduction
Hasnain Irfan Cotton and Ginners is one of the oldest and famous organizations in the D.G.Khan area. It is located at Jampur road D.G.Khan. It is a partnership organization. They are engaged in this field for more than 20 years. They are famous for their goodwill and reputation in the local as well as countrywide market. It is their family business. Now they are expanding their business. They recently planted new machinery for the cotton seed. They started their business with only one cotton ginning factory, now they have two cotton ginning factories and also have shares in other businesses.

Nature of Business
It is not an easy job to perform by the managers and owners of the organization. A manager faces many difficulties during performing its job. At local level prices fluctuate at daily basis. It is very difficult to predict the prices of next day. Next day what happen, no body knows about it. The rate of raw cotton is related to the rate of a bale of cotton lint. If an organization buys raw cotton and high prices and next day price falls then the organization surely face the deficit in that buying and if this trend goes throughout the season then the organization must face the condition of total loss. There are many examples present in the D.G.Khan area. They become bank defaulter; some of them sold their business to repay their loans. Thus this is the business of high risk and high return.

Organization Working
The nature of organization working is to buy raw cotton, produce cotton lint, oil and oil cake and sell the production for profit generating purpose.

PAKISTAN ECONOMY

M.Rahim Ejaz
HASNAIN IRFAN COTTON AND GINNERS

Inputs

In the cotton industry only raw cotton is used as an input for the production process.

Input Supplier
Their supplier is an intermediary person between them and farmer. He buys the raw cotton from the farmer and they purchase it from him. In another words he is doing business of buying and selling of raw cotton.

Outputs
After the completion of production process, raw cotton produces 1. Cotton lint 2. Cotton seed Now further cotton seed is processed and they produce 1. Raw Oil 2. Refined Oil 3. Oil cake

Output Supplier
Now their output becomes input for other industries. They sell cotton lint to textile mills where it becomes thread and cloth. Another output is cotton seed; it is further processed and it provides oil and oil cake. Oil becomes input of Ghee industry and oil cake becomes the input of livestock and of soap industry. Oil cake is also sold to stockers for profit generating purpose.

Buying and Selling Process
Pakistan cotton ginners association (PCGA) plays an important role in buying and selling process. PCGA is directly linked with the New York trade cooperation. It sets rate of raw cotton per 40 kg and cotton lint per 1 bale of cotton. These are revised after every 15 days. Every organization

PAKISTAN ECONOMY

M.Rahim Ejaz
HASNAIN IRFAN COTTON AND GINNERS

in the cotton industry follows the rates fixed by the PCGA. The buying and selling process of raw cotton and bale of cotton is totally based on PCGA.

Production Process of Raw Cotton
Raw cotton is placed on the ground; firstly its quality is checked than through pipes it sends to the ginning machine. Big fans are placed that pulls the raw cotton from pipes and throw it to production chamber. In this chamber raw cotton is refined and separated into cotton lint and cotton seed. On the other side outputs are received. Then manually cotton lint is converted into a bale of cotton. Now the production process is completed and bales of cotton are ready for sale.

Production Process of Cotton Seed
In this stage cotton seed is further processed in the cotton seed machinery. This plant separates raw oil and oil cake in the production process. On one side oil cake is collected and on the other side raw oil is collected in large basins. This Raw oil is further processed to convert it into its refined form.

Peak Time of Business
Peak time of their business is November-December in lower Punjab and September-October in upper Punjab.

Financial Information
Organization was not willing to show me their financial reports, balance sheets, income statements and other information because they believe that it is confidential and cannot be shown to other than organization’s personal. However they gave us slight information about their assets and investment.

Assets
Their total amounts of assets are estimated 15 million to 20 million. It includes land, building, office supplies and machinery.

Investment

PAKISTAN ECONOMY

M.Rahim Ejaz
HASNAIN IRFAN COTTON AND GINNERS

Their investment in the business is Rs. 20 million for the current season. In this nature of business maximum to maximum amount is not a guaranty of fulfilling the desired requirements. Many organizations borrowed loan from the banks and after the season they returns the loan.

Profit and Loss Indicators
In this nature of business there are no specific indicators for recognizing profit and loss situation. The only way to avoid from the loss is to buy best quality raw cotton as possible. The reason is the best quality cotton produces more cotton lint after ginning, so it earns revenue more and vice versa. In many cases organizations realize their financial position at the end of year. It is difficult to determine profit and loss during the running season. Organizations come to know their financial position at end of season.

Employees
There are 55 employees working in the organization. In which 10 employees are on permanent basis and rest are on temporary and daily wage basis.

Problems
In this industry organizations faced many problems. It happens for many times that organization does not get raw cotton according to their expectations. Another problem is increasing number of cotton factories in the local area. The amount of raw cotton is not increasing as compared to increasing number of cotton factories. In this way they tried to snatch share of each other. They tried to buy more raw cotton so they pay more than the fix price and this is alarming situation. Government must fix the number of cotton factories in the specific local area according to the supply of raw cotton. Another problem is that government does not play a role as a second buyer. Like wheat, governments should fix the purchasing price of raw cotton and play a role as a second buyer.

PAKISTAN ECONOMY

M.Rahim Ejaz
HASNAIN IRFAN COTTON AND GINNERS