Cotton cess increased to Rs 50 per bale


The federal government has approved a cess of Rs 50 per bale, replacing the current rate of Rs 20 per bale with the condition of a functional restructuring of Pakistan Central Cotton Committee (PCCC) with All Pakistan Textile Mills Association (APTMA) poised to occupy all senior positions. The PCCC, established under Cotton Cess Act, 1923, is engaged in cotton research and development.

It operates through funds generated by cotton cess levied on each cotton bale exported or consumed by the industry. The Rs 20 cess per bale has been effective since July 1, 2006. Official documents obtained from Ministry of Textile Industry revealed that in a meeting of PCCC held under the chairmanship of the then Minister of Food and Agriculture on December 21, 2010, it was decided to increase the cess rate from Rs 20 to Rs 50 per bale from January 1, 2011. This decision was endorsed by all stakeholders.

Accordingly, the then Ministry of Food and Agriculture (Minfa) submitted a summary to ECC of the Cabinet on February 18, 2011 to increase the cotton cess from Rs 20 to Rs 50 per bale from January 1, 2011. The ECC of the Cabinet, in its decision on March 8, 2011, directed Minfa to make a detailed presentation regarding performance of PCCC to the Ministers for Food and Agriculture, Privatisation, the Deputy Chairman of the Planning Commission and Secretary of the Finance Division and resubmit a summary.

Minfa presented the achievement/ performance of PCCC to the committee on April 13, 2011 and the Committee agreed to the proposal of increasing the cotton cess from Rs 20/- to Rs 50/- per bale. The ECC of the Cabinet, in its meeting held on April 26, 2011, approved, in principle, the summary of Minfa of an increase in the rate of cotton cess, and constituted a committee to examine the issues of research activities of PCCC and asked to submit its recommendations. The committee met on May 6, 2011 under the chairmanship of Deputy Chairman, Planning Commission, with Secretary Minfa in attendance while Chairman, APTMA joined via video conference. After June 30, 2011, when Minfa ceased to exist, the Cabinet Division substituted Secretary Minfa by Secretary, Ministry of Textile Industry and requested the committee to submit its report.

Deputy Chairman, Planning Commission, submitted the Committee’s report to the Cabinet Division on October 5, 2011. The specific recommendations of the committee are summarised as under: (i) the cotton cess be increased from Rs 20 to Rs 50 per bale as already approved by ECC in principle. The cess rate may be increased by 30 percent every third year to adequately meet the anticipated increase in organisation’s expenditure; (ii) in addition to PCCC, other research institutions’ access to cotton cess funds may be ensured.

A specified percentage of cotton cess ie 30%, be used through introducing competitive grant mechanism for promoting research on vital emerging issues; (iii) PCCC should play an effective role of co-ordination with other research institutions engaged in cotton research. (Provincial Agriculture Research Institutes, PAEC, PARC, universities and private sector); (iv) the distortions in salary structure of scientists of PCCC and employees of Provincial Institutions, PAEC and PARC be rectified;(v) the career structure of the scientists be linked with their professional performance irrespective of availability of sanctioned posts;(vi) scientists developing improved varieties/ technologies having significant economic impact should be appropriately rewarded/ recognised;(vii) early approval of Plant Breeder’s Right Act and amended Seed Act may be accorded to encourage private participation in the seed industry and provide incentive to scientists/ research institutions through royalty;(viii) performance review of PCCC and its institutions by an independent third party be undertaken every fifth year;(ix) the management structure of PCCC be overhauled to make it a vibrant and result oriented organisation.

The members of committee may have balanced representation of major stakeholders, including APTMA; and (x) the recommendations on restructuring of PCCC be put on hold till final decision in which stay order was granted by the Lahore High Court (LHC).

The writ petition No14488/2011 filed in the Lahore High Court, in which stay order was granted against restructuring of PCCC, was disposed of on November 3, 2011. Subsequently, consultations were held with APTMA on January 13 this year regarding management structure of PCCC. APTMA demanded a larger representation on the PCCC ie in addition to Chairman, APTMA, five members to be nominated by APTMA one of which shall act as Vice President PCCC with full administrative & financial powers. APTMA also stated that increase in cotton cess rate should take effect upon restructuring of PCCC and not with effect from January 1 last year as earlier approved in principle by ECC of the Cabinet.

Keeping in view the entire situation, Ministry of Textile Industry, proposed the following to the government: (i) The rate of cotton cess be increased from Rs 20/- to Rs 50/- per bale with immediate effect. This cess rate be increased @30% after every three years to meet the anticipated increase in organisation’s expenditure and (ii) PCCC be reconstituted as per revised composition whereby Chairman, APTMA and his five nominees be included, one of whom will act as Vice-President who will be delegated administrative and financial powers by PCCC for efficient running of the organisation. The Vice-President PCCC will be an honorary position who will not avail any privilege or salary. Further, in addition to Chairman PCGA and Chairman, KCA, their two nominees each shall also be included as members of PCCC.

This proposal has been circulated to Planning and Development Division, Finance Division and National Food Security and Research Division. Ministry of Finance and National Food Security have concurred with the recommendation. However, Planning and Development Division has suggested that the membership be restricted to 15 instead of 25.

According to documents, the proposal was forwarded to Cabinet Division on February 28 this year for placing before ECC of the Cabinet. The Cabinet Division returned the proposal and advised to seek the opinion of the Law and Justice Division, on the competence of the federal government to issue any order under the Cotton Cess Act of 1923 and resubmit the proposal if so required. Accordingly, a note was referred to Law and Justice Division for their opinion.

The Law and Justice Division stated that in line with entries 16, 27, 31 and 43 of the Federal Legislative List in the Fourth Schedule to the Constitution, cotton cess is a federal law and the federal government can issue any order under the Cotton Cess Act of 1923.