Report No. 922a-PAK FILE opy Pakistan Special Agriculture Sector Review (In Five Volumes) Volume V: Annex on Marketing and Processing January 28, 1976 General Agriculture Division South Asia Projects Department Not for Public Use U Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
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Report No. 922a-PAK FILE opyPakistanSpecial Agriculture Sector Review(In Five Volumes)
Volume V: Annex on Marketing and ProcessingJanuary 28, 1976
General Agriculture DivisionSouth Asia Projects Department
Not for Public Use
U
Document of the World Bank
This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may nototherwise be disclosed without World Bank authorization.
ADB - Agricultural Development BankCSU - Colorado State UniversityFAO - Food and Agriculture OrganizationGOP - Government of PakistanHTS - Hunting Technical Services LimitedIACA - Irrigation and Agriculture Consultants AssociationILACO - International Land Development Consultants, N. V.NWFP - North West Frontier ProvincePIU - Produce Index UnitSCARP - Salinity Control and Reclamation ProjectUNDP - United Nations Development ProgrammeUSAID - United States Agency for International DevelopmentWAPDA - Water and Power Development Authority of West Pakistan
GOVERNMENT OF PAKISTANFISCAL YEAR
July 1 to June 30
This report was prepared by a mission comprisingMessrs. Risto Harma (Chief of Mission), William Edwards, John Wall(Bank), Lindsay Durham, John Cunningham, Howard Hjort andLee Paramore (consultants). The mission visited Pakistan from lateMarch to late April 1975.
FOR OFFICIAL USE ONLY
PAKISTAN
SPECIAL AGRICULTURE SECTOR REVIEW
MARKETING AND PROCESSING
Table of Contents
Page No.
SUMMARY AND CONCLUSIONS ....... .................. 1...........
1. COTTON AND COTTONSEED MARKETING AND PROCESSING ............. 7
A. Production Situation and Outlook .......................................... 25Future Trends in Pakistan ..-. .... .... ...... .. . . . . ... ......-. 26
B. Marketing Methods and Practices ................. 27Rice Export Corporation .............. ....... . ' 29Rice Milling, Storage and Drying ....................... 29
A. Sugar Milling ........... ............................. 35B. Price Policies ...... *............. .................... 35C. FAO Sugar Policy Study ..... ............. .......... 36D. Substitution of Sugarbeets for Sugarcane .......... *.. 36
Advantages and Restraints in Sugarbeet Production ...... 37E. Recommendations . ... ..................... 38
This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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Page No.
4. MARKETING FRUITS AND VEGETABLES ... ......................... 39
A. Production Mainly for Domestic Consumption ............. 40B. Processing Fruits and Vegetables ....................... 40C. Exports of Fruits and Vegetables ..................... *. 40D. Marketing and Gradings .... ...................... .......... 40E. Recommendations ..... .. .......... .. 41
5. FOODGRAIN STORAGE AND HANDLING FACILITIES .............. .... 43
PAKISTAN
SPECIAL AGRICULTURE SECTOR REVIEW
MARKETING AND PROCESSI&NG
SUMMARY AND CONCLUSIONS
i. The agricultural commodity and food marketing system in Plakistanis grossly underdeveloped and has been neglected over the years. Whilethe past and current emphasis on crop production and irrigation are fullyjustified, in many instances their effectiveness has been limited by in-efficient marketing, poor processing and ill conceived pricing policies.
ii. The existing marketing system is not geared for efficient hand-ling, processing or distribution of cash crops and food products. Theresponsibility for market improvement rests largely with the Provincialand City Governments. There is a Director of Marketing in each of theProvincial Departments of Agriculture. However, these Directors areusually non-professional people without sufficient staff to make muchpositive impact on marketing practices and facilities.
iii. Markets for crops such as cotton, wheat, rice, pulses, fruitsand vegetables are characterized by the lack of adequate storage facilitiesand outmoded sales practices. Large numbers of middlemen securely estab-lished in the system are perpetuating inefficiency. The lack of an in-stitutional framework for effective cooperatives and other farmers' orga-nizations is a major constraint in creating competition among operatingmiddlemen. The producer's share of the consumer's rupee, except for sub-sidized products such as flour and margarine vanaspati, is quite low. Thepercentage share varies from 30 to 35 percent for perishable produc.ts upto about 65 percent for grain crops.
iv. The Central Government is a dominant factor in the marketing ofwheat, rice, sugar, and vanaspati. The exportation of raw cotton,iriceand the vegetable oil processing industry has been nationalized. Theprice and subsidization policies have hindered rather than encouraged ex-panded production. In addition, the high level of export duties on cottonand rice combined with excessive profits made by the Rice Export Corpora-tion do not contribute toward pricing policies designed to bring aboutexpanded production and improvements in marketing and processing.
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v. Except for a few products like raw wool, dried fish and fish mealwhich are sold in export trade, the grading of agricultural products isvirtually non-existent. Farmers are obliged to sell their products withoutdue regard for quality differences, subsequently, there is little incentiveto deliver better products.
vi. Although Pakistan has a cooperative society law of long standing,there are no agricultural marketing cooperatives of any importance inexistence. The lack of management, enlightened membership and sustainedinterest on the part of farmers, coupled with unavailability of capitaland-the opposition of vested interests have prevented the cooperativemovement from becoming well established. The development of cooperativecotton oil, rice and sugar mills and cotton gins would offer an opportunityto improve marketing and processing if sufficient investment and operatingcapital and efficient management could be provided. The Integrated RuralDevelopment Program now being promoted in Pakistan includes provisionsfor marketing, purchasing and processing cooperatives. If this programdevelops as anticipated it could form the basis for the eventual establish-ment of a sounder system of producer-owned cooperatives providing bothmarketing and production services.
vii. The educational institutions have very limited curriculums fortraining in marketing and processing. Little or no marketing research isdone either in the educational institutions or in the Central and ProvincialGovernments. Market information and price reporting are quite limited anddo not serve farmers to any appreciable extent in selling their products.
viii. The agricultural extension services established in the ProvincialDepartments of Agriculture have never undertaken to provide educationalmarketing assistance to farmers. The existing extension effort deals onlywith production problems and even in this area is limited and very inef-fective. The development of good marketing educational programs for farmers,dealers and processors would be most beneficial in improving the agriculturaland food marketing system.
ix. The UNDP/FAO is now in the process of preparing a marketing proj-ect in Pakistan to provide technical assistance in developing marketing re-search, grading, standardization, inspection services and market information.
x. The objectives of this project are to:
(a) Determine the economic and technical feasibility and theadvantages of improved marketing of agricultural products,
(b) Improve marketing services and assist in the establishmentof an institutional framework for farmers organizationswith special emphasis on small producers,
(c) Act as a catalytic agency for promoting integratedmarketing in the country's agricultural and food economy,
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(d) Develop an agricultural and food marketing capabilitywithin the Government structure,
(e) Provide technical guidance and assistance in developinggrades and standards for agricultural products sold indomestic and export trade,
(f) Conduct studies and demonstrations on the adoption andapplication of advanced techniques of grading, packing,storage and transport of agricultural products,
(g) Conduct research to determine markets, market channelsand new marketing techniques, and
(h) Encourage the establishment of university curriculumsin agricultural marketing at one or more educationalinstitutions in Pakistan.
xi. This project is to be financed by an input of Rs. 7,510,962 bythe Government of Pakistan and US$2,218,534 by UNDP.
xii. The development and operation of this project will generate theneed for physical facilities, additional research requirements and trainingprograms that may provide investment opportunities for the Bank.
xiii. The study and observations made during this Mission indicate awide range of opportunities and needs for improving marketing and processingof agricultural products. The areas recommend for consideration by theGovernment of Pakistan during the next five to ten years are summarizedas follows:
(a) Rice grading, marketing and processing includingmills and storage facilities, especially in viewof export markets, and rice bran oil extraction.
(b) Development of an improved system of grading and marketingseed cotton to improve and preserve the quality of lintand cottonseed and to provide producer incentive to deliverbetter quality seed cotton to dealers and ginners.
(c) Adoption of the Universal Standard grades established forAmerican upland cottons under the Universal StandardAgreement between the United States Department of Agri-lculture and cotton trade associations in Europe and Asia.Currently there are no official cotton lint gradestandards promulgated or approved by the Pakistani Govern-ment for cotton sold domestically and in export trade.
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(d) Improving the ginning, baling, and storage of lint cottonthrough improved ginning equipment, drying equipment,seed cotton storage and bulk handling of cottonseed.
(e) Cotton warehousing and storage in producing areas, up-country concentration points and at the Port of Karachi.
(f) Insuring one variety production on a community or areabasis to avoid mixing of qualities and to enhance thesales value of cotton lint in both domestic and exporttrade through cotton planting seed program.
(g) Improving the processing of cottonseed and other oilseedsto expand edible oil production and reduce import re-quirements for edible vegetable oil through the developmentof pre-press solvent extraction oil mills phased over a10-year period.
(h) Improving the drying, storage including bulk storageand handling of wheat and coarse grains to reduce lossesfrom insects, rodents, other contamination and excessivemoisture, pilot project.
(i) Pilot fruit and vegetable marketing program, includinggrading, packaging, transporting, quality preservationand processing in the Peshawar area of N.W.F.P. and theQuetta area of Baluchistan.
(j) Developing an incentive system for the pricing of sugarcanedelivered to sugar mills to increase refined sugar produc-tion. Tied in with this system should be a disincentiveprogram directed towards reducing gur production, whichresults in heavy losses of refined sugar production. Thereshould also be a program for improving the utilization ofmolasses for food, feed and industrial products.
(k) Initiating a project for the development of a pilot beetsugar mill in the North West Frontier Province includingthe utilization of beet pulp for feed. If this programproves to be successful, other mills should be developedlater in appropriate areas of Northern Punjab and N.W.F.P.
(1) There is an acute need for improvement in the marketingand processing of milk and dairy products in the largecities--Lahore, Karachi, Multan, Rawalpindi/Islamabad andHyderabad. However, the experience with the dairy de-velopment schemes in Lahore and Karachi has been disap-pointing. Before undertaking any additional projects athorough study and analysis should be made to determine
whether the time is ripe to supplant the traditionalsystem of milk marketing. It may require, measuressuch as modern refrigeration, public health laws tomove the buffalo herds out of the cities to the countryand elimination of the traditional milk peddler whois selling a highly unsanitary low quality product.
(m) The traditional livestock marketing and processing ofbeef cattle, sheep and goats is very primitive, unsanitaryand dangerous to the health of people. The need exists forimproving production and feeding of the animals to increasemeat production and for modernizing the slaughtering,handling and merchandizing of livestock and meat products.The recent studies of the potential for livestock productionand marketing in Pakistan by USAID appear to provide anadequate basis for the Government to undertake a programin this area. A livestock project is under considerationby the Bank group.
(n) In recent years commercial production of poultry and eggshas been introduced in some areas of the country near thelarger cities. These production units have had develop-ment and operating assistance from multinational poultrybreeders operating in Pakistan. The marketing, gradingand processing of eggs and poultry by the commercial pro-ducers is still in the developmental stage. The productionand marketing of Desi poultry and eggs continues in itsprimitive state. Quality is very poor and birds are soldlive in local markets. While there is a need to expandpoultry and egg production to meet better food and nutri-tional requirements, this Mission did not have the time toundertake sufficient study of the problem to provide abasis for recommendations. It is suggested that thisproblem area be left for future study and consideration.
xiv. Programs recommended for action in the field of marketing andprocessing of agricultural products in Pakistan will have to be consideredin relation to other programs for improving agricultural production andwater management. The recommendations for the expansion of marketing andprocessing facilities for cotton, cottonseed, oil extraction, cottonstorage, rice milling, storage and rice bran oil processing are based onprojections of production and exports to 1980 and 1985 made by the PakistanPlanning Commission and FAO. The mission considers the projections forcotton and rice to be too optimistic and are not likely to be realizedwithin the time periods envisioned. Attainment of the targets set forthese crops will require long-term vigorous programs with full support ofthe Government to bring about the changes needed. There is an urgent need
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to undertake a carefully planned and sustained program of marketing andprocessing improvement as recommended to better handle current levels ofproduction. This means that the Government will have to set prioritiesand develop an integrated program for the entire agricultural sector. Onthe basis of these priorities the marketing and processing developmentprogram should be phased in accordance with available funds, the readinessof the Government and the people concerned to move ahead and the urgencyfor improvement in current practices. In view of the lag in the develop-ment of marketing and processing of agricultural products in Pakistan,it appears that the time has come for the Government to establish prioritiesin this field.
xv. Cost estimates are considered in more detail in the subject mattersections of this report. The summary presented here gives a brief overviewof the cost of the individual programs listed in the recommendations foraction.
Estimated Cost of Programs Recommended(US$ million)
Local ForeignTotal Currency Exchange
Program Cost) Cost Cost
Marketing and processingcotton and cottonseed 197 136 60
Rice marketing and processing 100 50 50
Sugar marketing andprocessing 201 48 153
Fruit and vegetablemarketing 15 11 4
Foodgrain storage andhandling 100 50 50
Total 613 296 317
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1. COTTON AND COTTONSEED MARKETING AND PROCESSING
1.01 Cotton is the most important cash crop in Pakistan. Below aregiven acreage and production of lint and cottonseed for the eight-year periodending with 1974/75. The data are broken down according to types, i.e.,Pak-upland and Desi. Area has increased from the level of 3.9 million in1967/68 to 4.5 million acres in 1974/75. Lint and seed production showa similar upward trend. The Pakistani Government and the cotton producingindustry are projecting a continuation upward of production to a level of6 million bales of lint and 2.2 million tons of seed by 1979/80 compared to4.8 million bales of lint and 1.2 million tons of seed in 1974/75. Theprojection to 1979/80 is based on the assumption that acreage and yieldwill each increase by about 20 percent above 1974/75.
Pakistan - Cotton Average, Lint Production and Cottonseed1967/68 - 1974/75 to 1979/80 /a
Acreage Lint Production Cottonseed Production000 acres 000 392 lb bales 000 long tons
Pak- Pak-Year Upland Desi Total Upland Desi Total Total
/a Source: Pakistan Government Statistics - Projections made byPlanning Commission.
1.02 Considering the fact that Pakistani yields are exceptionally lowfor irrigated cotton, the level of production in 1979/80 could be muchhigher. With proper cultivation, optimum use of fertilizers, water, in-secticides and better quality planting seed, the yield per acre could riseto 600 pounds of lint as far as technology is concerned. On 6 millionacres a 600 pound yield would produce 9 million bales (392 pounds net weight)and 3.1 million tons of cottonseed. Following is the trend in yields:
1.03 FAO in its recent study of commodity policy on cotton 1/ projecteda production target ranging from 5.9 to 6.1 million bales of cotton in1979/80 and 7.7 to 8.5 million bales in 1984/85. These projections for1980 are about the same as made by the Pakistan Planning Commission asshown in the first table. The FAO analysis assumes that domestic consump-tion will range from 44 to 45 percent of production in 1979/80 to 47 percentin 1984/85. The range in the percentage of projected production exportedwould decrease in proportion to the rise in domestic consumption. Usingthe high production targets for 1980 and 1985 (6.1 and 8.5 million bales),FAO estimated exports are as follows:
1970-72 1980 1985average _
(in 1,000 bales, raw cotton equivalent)
Raw cotton 1,067 1,324 1,552
Cloth 912 1,343 1,714
Yarn 422 653 819
Total 2,340 3,320 4,085
The FAO study concludes that the projected production targets are attainableover a 10 year period ending with 1985, provided a package program of im-proved production and marketing practices is persistently followed.
1/ Commodity Policy Study on Cotton, Pakistan Food and AgricultureOrganization, 1975.
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1.04 The FAO export projections are admittedly optimistic. The ex-portation of 3.3 million bales raw cotton equivalent by 1980 arnd 4.1 millionbales by 1985 represents an increase of 42 and 75 percent respectively overthe 1970/72 average. Attainment of the 4.2 million bale target by 1985as recommended by FAO will require a vigorous and sustained effort by boththe Cotton Export Corporation and the textile industry to restore anid in-crease the confidence of importers of Pakistani cotton and to improve thequality and uniformity of raw cotton and manufactured cotton products.
1.05 It is the judgment of this Mission that the projected targets forcotton production and exports are in the right direction and over time maybe reached. However, in view of the many constraints to be overcome thehigh level estimates for 1980 and 1985 will not be realized. It wouild bemore realistic to extend the dates to 1985/1990 in order for the necessaryimprovement program to be developed and executed. The mission's estimatesfor expanding ginning, storage, cottonseed processing capacity are in linewith the high 1985 production target. Therefore, it will be necessary forthe Government and the industry to phase the expansion of marketinglandprocessing facilities in harmony with the rate of achievement toward theprojected targets.
1.06 Pakistan produces two types of cotton - Pak-upland, or Americancotton, and short staple known as Desi codton. The Pak-upland cottons arenoted for high tensile strength, good spiAning quality and uniformity.Most of the upland cotton is medium staple length (13/16" - 1"). However,there has been a sharp increase in medium long staple (1-1/32" - 1-3/32")and long staple cotton (1-1/2" - 1-5/16") displacing the short staplenative types. The production of extra long staple cotton (Egyptian type)has not developed to any appreciable extent. While production practiceshave improved over the years and considerable research on productidn andvarieties is underway, dependable high-quality seed stocks are not main-tained which accounts for much of the low yield of Pak-upland varieties.
1.07 Before the establishment of the Export Corporation in July 1973,cotton was traded on a free market basis. At the time of nationalizationof the export trade, the Export Corporation was directed to stabilize thedomestic market to insure a minimum price of 90 rupees per maund for seedcotton to farmers. To carry out this directive, the lint price at Karachiwas fixed at 240 rupees per maund (US$24.47 per maund or US$0.297 perpound). Due to adverse marketing factors, the fixed lint price fell shortof assuring farmers the target price for seed cotton. For the 1974/75season the Export Corporation announced the lint price per maund at 237rupees. As the marketing season progressed, prices declined, and theExport Corporation reduced the Karachi lint price to 200 rupees pez maund(US$0.25 per pound). The Government has, therefore, established thte policyof supporting the price to the farmer, but the method of fixing the pricefor lint cotton in Karachi has not fully accomplished the objective. Ex-perience to date indicates that farmers are not receiving the full target
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price (90 rupees per maund) for seed cotton. Under this price policy, theExport Corporation may have to adjust its program to require dealers andginners to pay farmers the target price for seed cotton in order to achieveits objective.
1.08 Prior to the nationalization of the export sale of cotton inPakistan, the Karachi Cotton Association and the Karachi Cotton Exchangewere the dominant forces in the marketing and pricing of cotton. The As-sociation is made up of cotton merchants who engaged in both export salesand sales to domestic mills. There were also several international firmsoperating in the market. The Cotton Exchange operated one of the most activefutures markets in the world with a daily volume averaging about 50,000bales. The futures market is used by ginners, cotton merchants, domesticmills and speculators. Now that export sales have been nationalized, theCotton Exchange operations have been reduced to domestic trading which will,no doubt, have some effect on its usefulness for hedging purposes. TheExchange is, however, continuing to conduct trading in substantial volumes.
A. Marketing Practices
1.09 Seed cotton is sold by most farmers to local dealers and directto ginners on a weight basis without the benefit of fixed grade standards.The local dealer or ginner may reduce the price for excessive dirt, trashand moisture content. Since there are no standards, the farmer is mostlikely to be the loser. There are no premiums for higher qualities ofseed cotton. Therefore, farmers have no incentive to do a better job ofpicking and handling seed cotton from the fields to market places.
1.10 In the more highly developed cotton producing countries, farmersdeliver seed cotton to gins for customs processing and sell the lint andseed separately on the basis of official grades and quality. This systemof ginning and marketing is not practical in Pakistan at this time becausethe average farmer does not produce a sufficient quantity to facilitateseparate lint and seed marketing. Development of cooperative gins and oilmills may in time permit switching to a system of separate lint and seedmarketing.
1.11 In the meantime it is recommended that Pakistan develop an of-ficial simple system of grading seed cotton that takes into account foreignmaterial content, moisture, weather damage, variety and staple length. Sucha system would make it possible for the Government to adjust its pricepolicy to set a base price for seed cotton to farmers to be paid by dealersand ginners and a price for lint cotton in Karachi that would provide areasonable margin for the services rendered by dealers and ginners andtransportation agencies.
1.12 There are two types of grower sales contracts - fixed and unfixed.Under the fixed contract the farmer receives the market price set by thedealer or ginner when delivered. In the case of unfixed contracts, thefarmer delivers the cotton to the ginner, receiving an advance paymient withthe option to consumate the sale on a date of his choice within 60 days at
the prevailing market price. The larger farmers who are not under pressureto settle debts may sell under an unfixed contract with the hope that priceswill rise. However, this practice is now likely to decline since the Gov-errment is trying to assure a minimum price for seed cotton. Smallifarmersare unable to utilize the unfixed contract -- they must sell their cottonon the date of delivery.
1.13 Quality standardization and fiber testing need more attention in
Pakistan. The undertaking of annual surveys of the quality of the cottoncrop similar to the one made in 1970 by the Pakistan Institute of C,ottonResearch and Technology - including grade and staple length and otherquality measurements such as fineness, fiber strength and uniformity -would provide a useful guide for the Export Corporation and domesti!c millsin purchasing and selling raw cotton. Such surveys would also be usefulin adapting and improving the standards for grading Pakistani upland cotton.Consideration should also be given to expanding the fiber testing programto provide a calibration and checking system for instruments used by cottonmerchants, spinners, plant breeders, and others for quality, strength,finess, color and uniformity testing by micronaire, calorimeter, ShlirleyAnalyzer, Pressly strength testers and fibrograph testers. These are allstandard tests and the instruments are used in many countries throughoutthe world.
1.14 There are no official grade standards for cotton promulga ted orapproved by the Government. Pakistan does not use the Universal CottonStandards established for American upland cotton under agreement wilth theUnited States Department of Agriculture and trade associations in othercountries throughout the world. The Karachi Cotton Association has, estab-lished standards for trading in futures contracts. These standards arebased on Fine Machine Roller Ginned 25/32" cotton against which the dif-ferent varieties grown in Pakistan are tenderable. Sample boxes of thestandards are prepared and maintained by the Karachi Cotton Association.Although these standards are generally acceptable in futures trading, theyhave little influence on the quality of Pakistani cotton. Out of a totalof 46,000 bales tendered against July futures contracts in 1974, 33,800bales were rejected. This is good evidence that improvement in qualitystandards and adherence to them is badly needed to improve the marketingof Pakistani cotton in both domestic and export trade.
1.15 In recent years there has been much dissatisfaction withIPakistanicotton purchased by importers in the United Kingdom, Japan and Hong Kong,the major export markets. The common complaints are:
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(a) Failure to fulfill forward sales contracts,
(b) Pakistan government interference in contractcompliance through increased export duties causingprice increases,
(c) Failure to ship cotton in accordance with contractterms for grade and quality, and
(d) Un-reliability of Pakistani cotton export merchants.
1.16 All of these factors have given Pakistani cotton a bad image ininternational cotton markets and were no doubt a factor in the Government'sdecision to nationalize exports. The international cotton merchants whowere operating in Karachi handled most of the export trade prior to theestablishment of the Export Corporation. These firms are now out of theexport business. So it is up to the Corporation to adopt better marketingand quality control practices to overcome the handicap created in foreignmarkets. This means that uniform lint cotton grade and quality standardsmust be established and sales contracts adhered to. The regaining of mostof the raw cotton export market in 1974/75 indicates that the Export Corporationhas made some progress in re-establishing the export market. However, continuedimprovement and reliable merchandising methods must be made if Pakistan isto develop its cotton exports commensurate with its production potential andprojected plans.
B. Cotton Ginning
1.17 The cotton ginning industry in Pakistan is organized on a privateenterprise basis. There are 400 saw gins and over 7,000 roller gins oper-ating in Pakistan.
Pakistan - Cotton Ginning Capacity
Item Unit Punjab Sind Total
Saw gins no 302 103 405Gin stands no 971 320 1,291Roller gins no 5,400 1,828 7,328Ginning capacity '000 bales 3,994 1,485 5,479Baling presses no 238 80 318
/a Source: Pakistan Ginners Association
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1.18 Ginners do not process cotton for farmers or local dealers on acustom basis. They purchase seed cotton either directly from farmers or fromlocal dealers. Ginners also supply production credit to producers.
1.19 The current capacity of existing gins is about 5.5 million balesper year. The 400 saw gins units with over 1,291 gin stands process a goodshare of the cotton in the main producing areas of Punjab and Sind. Mostof the 7,000 roller gins are very old and operate with obsolete equipmentwhich lowers the efficiency of the industry and the quality of lint. Theroller gins are being gradually replaced by locally made saw gins.
1.20 Over 300 gins are equipped with baling presses to which the smalleroperators take their lint for pressing. Often the operation of the ginningunits is contracted out by their owners which contributes to ineffic:Lentoperation. However, there are many gins that follow good operating practices.Nevertheless, there are numerous complaints about (a) mixing seed coittonbefore or during ginning and at storage points, (b) exposing lint and seedto varying climatic conditions and contamination because of insufficLentstorage space, (c) inadequate ginning of seed cotton, (d) poor pressing andwrapping of bales - all of which lead to losses in value through deteriora-tion of quality and excessive foreign material. Pre-cleaning and dryingequipment is installed in some gins, but it is not generally used becauseof processing losses and the lack of premiums paid for quality cotton.
1.21 The roller gins are scattered throughout the cotton-producingareas of Pakistan. This method of separating fiber from the seed is slowand requires extra labor. The only advantage claimed for the roller ginis a marginal increase in staple length if the equipment is in good operat-ing condition. Most of the roller gins are operated by small ginners with-out upkeep and virtually no control over the quality of seed cotton priorto ginning. Roller gins do not have built-in cleaning equipment. The fewthat have separate cleaners frequently do not use them.
1.22 The FAO study on commodity policy for cotton made in 1974 indi-cates there is an urgent need for improvement and modernization of existinggins including equipping them with drying and cleaning units where tShey donot now exist to improve the quality and grade of cotton lint. This'would result in reduced waste in spinning and lower the cost of prod ucingyarn and fabric. The goal should be to provide each cotton growingIcom-munity a modern saw,gin with an annual capacity of 10,000 bales or more.Each installation would include at least three 30-saw Pakistani gin standsequipped with drying and cleaning equipment and adequate covered storagespace for seed cotton, cottonseed and baled lint.
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1.23 The increase in cotton production to 8.4 million bales by 1985, asnow projected in the FAO Cotton Policy Study, would require upgrading andreplacement of existing gins and the establishment of new gins. Assuming aseasonal ginning capacity of 20,000 bales with each gin operating 16 hoursper day, 275 of the existing gins would have to be modernized and 150 newgins constructed. Both modernized old gins and new gins should be equippedwith dryers and lint cleaning equipment. In the case of the new gins theyshould be equipped with universal density bale pressure, now being utilizedin other exporting countries. The estimated cost of modernizing and expand-ing the capacity of the 275 existing gins would be on the order of $60 mil-lion. The installation of 150 new ginning plants would cost about $90 mil-lion. The total cost for the program over the 10-year period, based oncurrent prices, would be $150 million, of which 25 percent, or $37,500thousand, would be in foreign exchange. These estimates assume that ginsmanufactured in Pakistan will be used. But there will still be substantialforeign exchange requirements for importing materials used in the fabrica-tion of gins and other necessary equipment such ad dryers, lint cleanersand bale presses that are not produced in Pakistan.
C. Storage and Handling
1.24 There is very little definite information available to indicatethe storage space available for seed cotton and baled lint at gins andcountry concentration points. The cotton ginners have supplied some dataon storage space broken down according to godown and platform storage.However, it is not possible to accurately interpret these data. It appearsthat the so-called platform space is open uncovered storage in gin yards.The covered space listed as godowns is evidently a combination of storagefor seed cotton, cotton seed and baled lint.
1.25 The director of the Cotton Export Corporation states that allbaled lint cotton Pakistan is stored in the open subject to weather damageand quality deterioration. Personal observations of cotton stored inKarachi support this statement. This lack of protective storage also ap-plies, for the most part, to up-country producing areas and concentrationpoints for shipment to the ports and domestic mills. The Export Corpora-tion is beginning to lease some additional storage space up-country andsome expansion is underway in Karachi. However, the corporation does nothave the financial resources to undertake the development of an adequatestorage space program.
1.26 The time available in Pakistan for this survey did not permitgathering of information on existing storage facilities and the losses inquality of seed and lint cotton due to both inadequacy and the lack ofsuitable storage space. Such losses are, however, believed to be substan-tial and further work should be undertaken to determine the need for im-provement and the construction of new storage to meet requirements for
expanding cotton production including estimated costs. Based on observationsand discussion with the Director of the Cotton Export Corporation duringthe Mission's visit to Pakistan, it would appear that during the next fiveyears the cost of needed warehouse and storage space at country concentra-tion points and in Karachi would be about $5 million of which $1 millionwould be foreign exchange.
D. Cottonseed Processing
1.27 Cottonseed is the major source of vegetable oil and high proteinfeed produced in Pakistan--accounting for about 75 percent of total oilseedproduction. Cottonseed production has risen significantly since 19,67/68from the level of 973 thousand tons to 1.3 million tons in 1971/72. Sincethat time, production has not been below 1.2 million tons. Unlike other crops,cottonseed is a byproduct of cotton grown to supply domestic and export mar-kets for raw cotton and textile products.
1.28 Since cotton ginners buy cotton from producers in seedcotton form,the marketing channel for seed is direct from ginners to oil mills that areusually located nearby. The crude oil then moves directly to refiners andhydrogenation factories for making into vanaspati.
1.29 The Government nationalized the vanaspati industry in 1973. Onlytwo manufacturing plants remain in private hands. The Government controlsthe price of vanaspati to consumers currently at Rs. 9 per seer 1/ l(US$0.44per pound). The price paid for domestic cottonseed oil by vanaspati manu-facturers is fixed at Rs. 200 per maund (US$550 per long ton 2/). Currentlyworld market prices for cottonseed and soybean oil are much above thefixed price for domestic cottonseed oil. The Government price policy resultsin subsidizing the price of vanaspati to the consumer with a substantialportion of the cost coming from the national budget. Under this poLicy themargin for cottonseed oil to the private oil miller is relatively low andmust be offset by profits made on the sale of cottonseed cake. Furthermore,the policy also depresses the price paid to ginners for cottonseed and isreflected back to the producer in the price paid for seed cotton.
Existing Cottonseed Oilmills
1.30 There are two types of cottonseed crushing mills in Pakistan.The traditional expeller mills comprise 81 percent of the present dailycrushing capacity and solvent extraction mills 19 percent.
1/ 1 seer - 2.057 lbs.
2/ 1 long ton = 1.016 tons.
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Pakistan - Cottonseed Crushing Mills by Type and Capacity /
/a Source: Draft Report of the FAO Commodity Policy Study Mission onOilseeds, Edible Oils and Meals, May 1975.
/b Estimates by Pakistan Industrial Development Board
tc Estimates by Sind Marketing Board
1.31 The FAO study mission found that the vast majority of the cotton-seed crushing mills now in place are locally made Lahore expellers with arated capacity of 7.5 long tons of seed per day. After these mills havebeen in use long enough for the screws to become worn, the capacity is saidto drop to 5 long tons per day. The Sind authorities estimate the averagedaily capacity in that Province to be 3.0-3.5 long tons. This low level ofoutput could be closer to the rad capacity by better maintenance and re-placement of worn parts. The lower figures are used in arriving at totaldaily capacity above.
1.32 There are 11 solvent extraction mills operable in Sind and Punjab.The five mills in Sind were erected to handle 900 long tons of seed per day.But under current operating practice they are consuming only about 660 tonsper day. In Punjab the solvent mills appear to be capable of producing atrated capacity.
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1.33 The total combined daily capacity of expeller and solvent inills
is about 9,300 long tons per day. The 1974/75 estimated quantity of cotton-seed to be crushed is 1,070,000 long tons. Based on the daily crushingcapacity, it would take 115 days to process the crop. This number ofworking days, assuming 20 days' operation per month, would require about6 months. According to the findings of the FAO mission there is suflficientcrushing capacity to take care of the crop at present. But the incrieasesprojected by the Planning Commission, if realized, would result in 1,730,000long tons of cottonseed for crushing in 1977/78 and 1,950,000 long tons in1979/80 1/. With the current crushing capacity it would require 185 daysto process the projected 1979/80 crop or from 9 to 10 months. The longerworking season, while economically advantageous, would require considerableexpansion in storage space. (In determining the current level of co#ttonseedcrushing cpacity, the FAO Study Mission deliberately used the lowest esti-mates of daily capacity, which are below rated capacity.)
1.34 These estimates, made on the basis of 1973/74 cottonseed produc-tion, indicate that 82 percent of the volume crushed was on expeller typemills and 18 percent on solvent extraction mills. The oil extraction ratesnow obtained by type of mill are assumed to be 12.3 percent for expellersand 15 percent for solvent plants.
Expeller Mill Extraction
1.35 Under current practice all of the seed processed by expeller millsare crushed just as they come from the gins without delinting and decorti-cating. In Pakistan un-delinted cottonseed commonly contains 13 percentlinters and 87 percent seed.
1.36 In the United States, and for a few solvent mills in Pakistan, de-linted seed contain 6 percent linters and 94 percent seed. Under the mostadverse crushing conditions in Pakistan, oil recovery using un-delinted seedis about 11 percent leaving about 7 percent oil in the cake. Taking intoaccount refining losses, this rate of recovery reduces the amount of oilthat could be used for human consumption by about 39 percent. Crushing welldelinted seed on a high performance expeller mill increases crude oil re-covery to 17.4 percent, leaving only 3.7 percent of oil in the cake. Thereare about 9 mills in Pakistan that are capable of such high performance.But for the average Lahore expeller mill the oil recovery rate is 12.3 per-cent. Taking into account average refining losses the oil.lost for|humanconsumption processed on Lahore expellers is about 33.2 percent as comparedwith 19.5 percent for imported high performance expeller mills. A c:ompari-son of the performance of expeller and pre-press solvent extractioniof cot-tonseed oil can be seen:
1/ Calculated on the basis of projected production less 10 percent forseed and waste.
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Pakistan - Cottonseed Oil Production UnderExisting Operating Practices 1973/74 /a
Conversion Quantity inItem Unit Quantity Factor Thousand long tons
oil long tons 111.0Solvent washed oil long tons 30.0Total washed oil 141.0
/a Source: Draft Report of the FAO Commodity Policy Study Mission onOilseeds, Edible Oils and Meals, May 1975.
Pre-Press Solvent Extraction
1.37 The superior efficiency of cottonseed processing by pre-presssolvent extraction is illustrated in the FAO Mission Study at two levels:top efficiency and average efficiency. Clean whole cottonseed contain20.5 percent crude oil, 46.5 percent fat free meals and 33 percent hulls.Before extracting the oil the seed are delinted and de-hulled. With efficientsolvent (hexane) extraction, crude oil recovery is 19.9 percent leaving only1.27 percent oil in the meal. This process results in the recovery of 97.07percent of the oil content of the seed and the oil lost to human consumptionis only 2.93 percent. Under average efficiency, solvent extraction recovers95.12 percent of oil content, leaving 2.11 percent oil in the meal andloses 4.88 percent oil to human consumption.
1.38 In order to illustrate the magnitude of cottonseed oil now beinglost to human consumption in Pakistan because of inefficient processing,the following comparison is made of 1973/74 performance with two levels ofpre-press solvent extraction.
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Long tons
Gross cottonseed production 1973/74 1,293,000Deductions for seed, feed and waste 10% 129,300Available for crushing 1,163,700Deduction for delinting 13% 151,300Net delinted seed 1,012,400
Oil lost under current processing:Top efficiency solvent process 60,500Average efficiency solvent process 56,400
1.39 The calculated loss under existing conditions as compared withpotential production from pre-press solvent extraction is 30 percent at topefficiency operation and 28.6 percent at average efficiency operation. Theselosses have to be offset by importing crude oil for use in vanaspati manu-facturing. In past years most of the imports have been soybean and, cottonseedoil from the United States under PL-480 with concessional financing,. Nowthat world prices have sharply increased and U.S. oil under PL-480 islimited in quantity, Pakistan has turned more to importing palm oil atprices below imported cottonseed and soybean oil. The foreign exchangevalue of these losses based on imported oil from the United States at 1974prices (US$750 per ton) would be US$45 million on the basis of top effi-ciency processing and US$42 million on the basis of average efficiencyprocessing. The values calculated on the basis of imported palm oil atUS$450 per long ton would be US$27 million based on top efficiency process-ing and US$25 million for average efficiency processing.
1.40 Another measure of the magnitude of the losses in oil to humanconsumption in Pakistan due to poor processing efficiency is the raltio ofoil lost to imports. In 1973/74 edible vegetable oil imports were 1155thousand long tons. Oil lost from poor processing was equivalent tb 39percent based on top efficiency solvent extraction and 36.4 percent basedon average efficiency solvent extraction.
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Economics of Processing Cottonseed
1.41 An analysis made by the FAO Mission on fats and oils shows thatthe economics of cottonseed processing under current conditions is notfavorable to solvent extraction. On the basis of costs and value ofproduction (ex-cotton oil mills), the pre-press solvent processor would haveto receive US$96.00 per ton for meal to break even while the expeller millprocessor would have to receive US$79.50 per ton to break even. This givesthe expeller mills an advantage of US$16.50 per long ton. Under presentpolicy, fixing the price of washed oil at Rs. 200 per maund, there is noincentive to utilize existing solvent capacity at maximum extraction ratesand to develop new capacity. A shift to pre-press solvent extraction appearsto require raising the washed oil price and to allowing a premium for solventextracted cottonseed oil when exported. Lower priced imported palm oil couldbe used to offset the premium paid on exported oil. On balance, it shouldbe noted that the existing solvent extraction mills have a combined capacityadequate to process a bulk of the cottonseed output, but only a small fractionof this capacity is utilized. Consequently, it remains to be ascertainedwhether this situation is attributable to distorted price policies or whetherthe respective technology is unsuited in the context of the technical,financial and economic state of Pakistan's cotton industry. Since investingin a substantial import substitution opportunity is at stake, that questionalone warrants a review of the cotton industry.
1.42 Another important constraint to be overcome is the traditionalstrong preference by farmers for high oil context expeller cake for cattlefeeding. An intensive educational and demonstration program based on re-search and practice in other countries is needed to remove this restraint.There is no reason why the livestock and animal nutrition specialist cannotdevelop a cheaper and better cottonseed meal by adding back the cottonseedhulls (a by-product of solvent precessing), molasses and cheaper oil. TheFAO Mission proposes this approach and the Bank Mission concurs.
Improving Cottonseed Processing Efficiency
1.43 The FAO policy study on fats and oils and the conclusion of thisMission is that Pakistan should proceed to develop a program to convertits oil processing industry to large pre-press solvent plants. The pro-duction of efficient expeller presses to service the solvent plants appearsto be within the competence of the Pakistan engineering industry. Thisdevelopment would reduce the foreign exchange cost of the conversion pro-gram. But in the early stages it would be necessary to import expellerpresses as well as solvent extraction equipment and hexane.
1.44 The FAO policy study indicates that by adding 6 new-press solventmills with 500 metric ton capacity per day to the 11 solvent mills now inoperation, it would be possible to process 1.5 million tons of cottonseedover a period of 315 days. This volume of seed is equivalent to 5 millionbales of cotton. Each of the 500 ton per day solvent mills should produce25,000 tons of crude oil per year working on cottonseed. If higher oilbearing seeds such as sunflower and rape are processed, the oil production
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would be higher. The cost of the new mills would be about US$5 milliLon each,totaling US$30 million. The FAO study indicates that only about 40 percentof this cost would be in foreign exchange. This figure appears to be toooptimistic and it is more likely that the foreign exchange will be at least60 percent, about US$18 million. These estimates do not include any'allow-ance for constructing seed storage facilities which would be approximatelyUS$5.5 million. This estimates provides for storing a 1-month supply.Based on 60 percent fabrication in Pakistan, the foreign exchange cost ofthe storages would be about US$2.2 million. Delinting equipment would berequired at each storage facility at a cost of about US$110 thousand permill, all of which would be imported. The total for delinting equipimentwould be US$670 thousand. The combined program cost for 6 new solvent millswould be US$36 million of which US$21 million would be in foreign exchange.The installation of these new mills should be phased in accordance withexpanding seed production to efficiently handle the output of gins in eachproduction district or area.
1.45 Some capital outlay will be needed to bring existing solvent ex-traction mills up to full efficiency and operating capacity. Seed storagefacilities will also need to be expanded and improved. The Mission,. inthe time available, was not able to obtain sufficient data to provide abasis for estimating the cost of this phase of the program.
Refining Losses
1.46 These losses from existing low processing efficiency are basedon crude oil and do not reflect refining losses which are substantial andcould be greatly reduced by better cottonseed handling and quality control.The FAQ Study Mission estimates that in 1973/74 about 47,000 long tons ofcottonseed, as the result of bad storage, had risen to 8 percent free fattyacid content. The refining loss due to this deterioration was about 10,000long tons. This increased the total loss of oil to human consumption toabout 155,000 tons. Refining losses under ideal processing conditions isusually 3 percent and can be achieved if cottonseed are properly stored andhandled to prevent deterioration.
CotonseedStorage
1.47 At present cottonseed are stored in the open at gins and at oilmills without much protection from moisture and contamination by dust anddirt. The seed are bagged at the gins and moved to mills where adequatestorage is not available. The bagging also entails extra cost as comparedto bulk handling. As has already been noted, about 10 thousand long tonsof oil was lost in 1973/74 because of deterioration of cottonseed from thefarms to gins and oil mills valued at about US$5.5 million dollars. Theinitial outlay for bags to hold 66,000 long tons of cottonseed to servicea 500 ton per day mill for a crop season is US$178,000. The annual replace-ment cost to maintain the bag supply amounts to about US$100,000. 'rhis bagreplacement cost in three years would be sufficient to build suitablepermanent storage at the mills to hold two weeks' working stocks.
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1.48 The FAQ Study Mission concluded that a Muskogee-type seed storagebuilding with bulk handling and ventilating equipment is ideally suitedfor Pakistani conditions and that such storages should be located at theoil mills. Facilities for holding a two weeks' supply for a 500 ton perday mill would cost about US$495,000, Doubling the capacity to one month'ssupply would increase the cost to about US$910,000. It is estimated that20 stores with a capacity of 12,000 tons each would cost approximatelyUS$18 million. The value of the oil lost in 1973/74 due to bad storageconditions was about US$5.5 million, which in about 3.5 years would equalthe initial cost of the 20 storage facilities. Pending the time when ade-quate storage buildings can be constructed at oil mills, it is possible togreatly improve the current storing and handling of cottonseed at much lesscost. Drainage, ventilation and covers can be provided for the groundstorage areas that would significantly reduce seed spoilage. The cost ofthese improvements could be borne by existing oil mills.
Delinting at Seed Storage
1.49 Most of the cottonseed crushed in Pakistan are unr-delinted. Themajority of the small expeller mills cannot afford to install delintingequipment. The weight added by leaving the lint and hulls in the cake plusthe preference for cake as now processed gives no incentive to crushers todelint and decorticate cottonseed. It is quite clear that delinting anddecorticating seed would significantly increase the quantity of crude oilavailable for human consumption. But until price policies on crude cotton-seed oil are adjusted and farmers are convinced that lower oil content cakeand meal can be fed to cattle successfully, it will not be economicallyfeasible to install delinting equipment. The estimated cost of delintingmachines to process 28 tons of seed per day is Rs 61,000 cif Karachi orUS$6,200. At this rate 18 machines would be required to service a 500 tonper day solvent extraction mill which would cost about US$112,000. Thedelinting equipment would need to be installed as a part of the seedstorage facilities.
E. Recommendations for Improving Cotton and CottonseedMarketing and Processing
1.50 The findings of the Bank Agricultural Sector Survey Mission indi-cate the need for the development of a comprehensive improvement programover the next 5 to 10 years. There is also a need for a concurrent programon production to improve cultural practices, fertilization, insect and di-sease control, planting seed, harvesting practices and the quality of seedcotton to support the implementation of the marketing and processing improve-ment program. It is recommended that the Government of Pakistan give urgentconsideration to the development of the marketing program including thefollowing elements:
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(a) Establishment of uniform grade and quality standards forseed cotton, lint and cottonseed.
(b) Cotton lint and staple length standards should be accomplishedthrough the adoption of the Universal Standard for Americanupland cottons under the Universal Standard Agreement betweenthe United States Department of Agriculture and cotton tradeassociations in Europe and Asia.
(c) Improvement of existing cotton quality testing laboratoryoperated under the auspices of the Pakistan Central CottonCommittee to facilitate the marketing of raw cotton todomestic mills and in export trade.
(d) Adjustment in Government price policy to assure better economicreturns to producers as an incentive to follow better produc-tion and harvesting practices.
(e) Strengthen research and extension programs to support andencourage improvement in cotton production, ginning,marketing and cottonseed processing.
(f) Undertake a comprehensive program to upgrade the efficiencyof the cotton ginning industry through the elimination ofoutmoded roller gins, improving existing saw gins and con-struction of new gins as needed to meet requirements ofexpanding production.
(g) Adopt marketing practices that will permit farmers to sellseed cotton the basis of uniform grades and quality factorssuch as variety, foreign material content, moisture contentand staple length.
(h) Construction of adequate storage facilities at gins,country concentration points and in Karachi to protectseed cotton, cottonseed and baled raw cotton from weatherdamage, excessive moisture content and deterioration inquality.
(i) Development of a comprehensive program to improve thehandling and processing of cottonseed, to maximize oilrecovery and upgrade the quality of cottonseed oil, cakeand meal through the replacement of outmoded expeller millswith pre-press solvent extraction equipment or with modernexpeller mills as and if justified by vigorous economicanalysis.
(j) Installation of adequate cottonseed storage facilities atoil mills equipped with forced air ventilators, bulk handlingequipment and delinting machines.
1.51 The improvement program should be phased over the next 5 to 10years in such manner as to assure successful construction and operation andto spread the cost within available financing. The following cost estimatesare only rough approximations to indicate the magnitude of the financialrequirements,Ithe gradual refinement of which is an essential feature ofphased development:
(a) Strengthening cotton grading development and quality testingin the Institute of Cotton Research and Technology in Karachi.
Total Cost US$ 1,000,000Foreign exchange cost US$ 500,000
(b) Research and extension programs to support improvement inmarketing, ginning and oil processing.
Total Cost US$ 5,000,000Foreign exchange cost US$ 1,000,000
(c) Upgrading and expanding the cotton ginning industry.
Total Cost US$150,000,000Foreign exchange cost US$ 37,500,000
(d) Construction warehouses and storage space for baled rawcotton at country concentration points and in Karachi.
Total Cost US$ 5,000,000Foreign exchange cost US$ 1,000,000
(e) Construction of 6 new pre-press solvent extraction oilmills including storage facilities for cottonseed anddelinting equipment.
Total Cost US$ 36,000,000Foreign exchange cost US$ 21,000,000
(f) Grand total for the entire program.
Total Cost US$197,000,000Foreign exchange cost US$ 61,000,000
2. RICE MARKETING AND PROCESSING
2.01 Rice is the second most important food crop in Pakistan, exceededonly by wheat. Currently the second most important export crop and earnerof foreign exchange behind cotton, the percentage of rice exports is ex-pected to rise relative to cotton.
A. Production Situation and Outlook
2.02 The provinces of Punjab and Sind produce 96 percent of Palkistan'srice crop. Production has been increasing moderately over the past fiveyears. By 1979/80 total production is expected to rise to 3.9 million longtons of milled rice as compared with the five year (1969/70 to 1973/74)average of 2.3 million tons. This increase would be equivalent to 170 per-cent of the five-year average and 161 percent of 1973/1974 production.
2.03 For the three years, through 1974/75, domestic food consumptionof rice has averaged 1.5 million tons, which is 60 to 74 percent of totalproduction. At two ounces per day per capita this is a low level of con-sumption in comparison with other countries in Asia. Seed and wastage iscalculated to be 6 percent of total production.
2.04 Pakistan produces three major varieties of rice: basmati (20percent, IRRI varieties (50 percent) and other varieties (30 percent).Since 1967/68, the proportion of basmati production has declined (from about30 percent), and other varieties declined (from 66 percent).
2.05 In the past, Pakistan's rice exports have been mainly basmati tothe Middle East; production is expected to remain steady to meet the limitedexport market for 200 to 250 thousand tons in the Middle East countries.The f.o.b. export price of Basmati during the past two marketing years hasbeen exceptionally high as compared with IRRI and other varieties. Exportsof coarse rice, mainly IRRI varieties, are expected to continue increasingto supply a potential market for 1 to 1.5 million tons in Ceylon, EastAsia and other markets that may be developed. The following table indicatesthe recent trend in rice exports which is highlighted by the sharp increasein world prices during the past two years.
Pakistan - Rice Exports by Types, Quantityand Value 1970/71 to 1973/74 /a
Basmati Other TypesFOB FOB
Value price Value priceQuantity million per ton Quantity million per ton
Year 000 tons dollars dollars 000 tons dollars doliars
/a Source - Pakistan Yearbook of Agricultural Statistics
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Future Trends in Pakistan
2.06 Total rice acreage is expected to rise to a total of 4.45 millionacres by 1979/80 according to the Planning Commission of the Government ofPakistan. As indicated below, total rice production has shown a moderatebut steady upward trend since 1969/70. Yields have increased from 1,308pounds per acre in 1970/71 to an estimated 1,481 pounds per acre in 1974/75.This 12% increase is attributable to use of a greater proportion of IRRIhigh-yielding varieties.
Pakistan Rice Acreage, Production and Yield1969[70 to 1974/75 and Projections to 1970/80 /a
Acreage Production YieldYear 1,000 acres 1,000 tons Pounds
/a Source - Pakistan Yearbook of Agricultural Statistics -Projections by Pakistan Planning Commission
By 1980 total production is expected to rise to 3.9 million long tons ofmilled rice--a 170 percent increase over the 1969/73 average and a 161 per-cent increase over 1973/74 production. With improved cultural practices,more efficient use of water, optimum quantities of fertilizers, sufficientinsecticides, and improved seed stocks, there exists long term potential forattaining the projected production of 3.9 million tons. But the Missiondoes not believe that this target can be reached by 1980. The projectedproduction expansion is based on increasing exports to 1,750 thousand tonscomprised of 250 thousand tons of Basmati and 1.5 million tons or IRRIvarieties. This level of exports would be 156 percent above the averagefor the two years 1973 and 1974. The Basmati export target appears to befeasible, but the Mission considers that the development of export marketsfor 1.5 million tons of IRRI varieties by 1980 to be an unattainable goal.Given the current low level of production efficiency, poor rice millingand marketing practices, low quality rice and Government pricing policiesthat do not encourage producers and millers to do a better job, the Missionbelieves that it will require at least 10 years to develop rice productionand marketing of IRRI varieties in Pakistan to match the projections madefor 1980. If Pakistan is to achieve the expansion in the production,marketing and exports of rice as now envisioned by the Planning Commission,the Government, farmers and the processing industry will have to mount a
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sustained improvement program that will provide incentives to produce andprocess quality rice at a cost that will make it possible to compete withother exporting countries in world markets. In the meantime the recommenda-tions of the Mission for improving and expanding marketing and processingfacilities should be undertaken and phased in such manner as to meet thecurrent needs and scheduled to meet the requirements of expanding productionand marketing as it develops.
B. Marketing Methods and Practices
2.07 In 1973, the Government established the Rice Export Corporationand instituted compulsory procurement of milled rice that applies to totalproduction except in the tribal areas of Baluchistan, North West FrontierProvinces (NWFP), and other minor producing areas. Provision is made forfarmers, their tenants and certain others to retain fixed allowances ofmilled rice for their personal use.
2.08 The Government controls the price of rice by fixing the procure-ment price for milled rice. Procurement prices for the crop years 1971/72through 1974/75 were:
Pakistan - Government Procurement Price /aof Rice by Types 1971/72 to 1974/75 /b
/a Procurement price is for milled rice. One maundequals 82.286 pounds.
/b Source: Yearbook of Agricultural Statistics, Ministryof Food, Agriculture and Rural Development.
2.09 In the case of basmati rice the Government requires thelprocure-ment of 91 percent of unbroken milled rice allowing the miller tolretain9 percent for sale in the open market. The Government procures 66-2/3 per-cent of total rice milled both broken basmati and unbroken coarse rice oiother varieties, provided that unbroken rice plus broken rice sold in thefree market does not exceed 30 percent of the total quantity milled. The
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free-sale quota earned by Authorized Rice Dealers must be sold under per-mits issued by District Food Controllers in areas designated by theGovernment.
2.10 Under the Government monopoly marketing system the farmer haslittle incentive to follow better production practices and to deliver goodquality paddy to the mills. As the system now works, gross returns tofarmers per acre are considerably less than Government trading profit perton of rice exported as illustrated:
Pakistan - Analysis of Rice Export and Procurement Prices /a(Rs)
Export price per ton 4,703 2,831 7,920 3,456Price Government could pay farmer
per maund 88 38 167 49Price actually paid to farmer
exclusive of milling charge 41.3 18 60 26.7Export duty per ton 683 851 683 1,040Trading profit per ton 1,910 859 4,417 953Percent profit per ton, export
duty and trading profit 55 60.3 64.4 57.5Gross returns to farmer
per acre 529 378 846 563Gross returns in equivalent US$ 54.0 38.6 86.3 57.4Yield per acre, maunds 12.8 21.0 14.1 21.1
/a Current Economic Situation in Pakistan - World Bank February 1975.
2.11 Under the current Government rice procurement policy, the Rice Ex-port Corporation makes exceptionally high trading profits. Expressed aspercentages of export price, the trading profits for the 1974/75 crop were55.8 for basmati and 27.5 for coarse varieties. Total profits were 64.4percent for basmati and 57.5 percent for coarse varieties if export dutiesare included. Price and export trading policies as such offer little in-centive to farmers and millers to produce and deliver high quality rice.The gross returns per acre to the farmer on coarse rice are provided insuf-ficient incentive to use substantial quantities of fertilizer of the highyielding IRRI varieties or maintain good seed stocks. Consequently, yieldsare very low and showing no significant increase. Similarly the Governmentprocurement and pricing policies for milled rice offer no incentive to ricemillers to improve handling, storage and processing or reduce the percentageof broken and undermilled rice.
2.12 If the price policy was changed from a fixed price on milled riceand applied to paddy with appropriate differentials for quality the in-centive to farmers would be greatly increased. The allowance of adequate
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margins to millers to cover the cost of their services would also encouragebetter milling efficiency.
2.13 The paddy rice dealer plays an important role in rice marketing.In most cases the dealers are food grain merchants and commission agentsin the various villages and towns. Dealers purchase paddy from farmersand sell to mills for conversion into finished rice, and assist thelmillersin arranging for the transport of paddy to the rice mills and of milledrice to the railway stations for shipment. Larger producers sell theirpaddy direct to the mill but this is not practical for the average smallfarmer.
Rice Export Corporation
2.14 The Rice Export Corporation, headquartered in Karachi, hasauthority to handle all rice exports from Pakistan. Prior to its estab-lishment international trade was handled by the Trading Corporation ofPakistan, a government agency. Under the Monopoly Procurement Schemne, riceis purchased by the provincial governments of Punjab and Sind after millingand shipped to Karachi. The milled rice arriving in Karachi containsexcessive amounts of broken grains and foreign material. This necessitatesemptying the bags to separate the broken and foreign material and re-millingto meet grade requirements, followed by re-bagging. The Export Corporationdoes not have adequate storage space for proper handling or for protectionfrom insect infestation and weather damage while awaiting export shipment.With improved milling in the country production areas the extra handlingand processing costs in Karachi could be eliminated.
Rice Milling, Storage and Drying
2.15 In 1973/74 the Ministry of Agriculture, Food and Rural Developmentreported a total of 1,989 rice mills in Punjab and Sind Provinces, where96 percent of total rice is produced. Numbers are not reported for the re-maining Provinces.
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Pakistan - Number and Capacity of Rice Mills 1973/74 /a
Types of Mills Punjab Sind Total
Sheller Mills
Number 90 111 201Capacity per hr, ton 129 62 191Capacity per day, tons 1,029 497 1,526
Huller Mills
Number 495 1,293 1,788Capacity per hr, tons 625 220 844Capacity per day, tons 4,968 1,757 6,755
/a Source: Yearbook of Agricultural Statistics, Ministry ofFood, Agriculture and Rural Development.
2.16 Ninety percent of the mills are huller type and 10 percent shellertype. The traditional huller type mills are very small with an averagecapacity of 3.8 tons of milled rice per day. The average capacity per millin Sind is one half that in Punjab. The huller mills in Sind produce anaverage of only 1.3 tons per day as compared with 10 tons per day in Punjab.According to a study made in the Larkana District of Sind in 1973, thetypical huller mill produces 60 to 70 percent broken and under-milledgrain. The so-called whole rice kernels have the ends broken off and therice lacks uniformity. Not only does the rice contain bran and polishparticles that should have been removed but also the absence of pre-cleaningequipment results in part of the dirt and other foreign matter in the paddycarrying over to the milled rice. Moreover, approximately 5 percent ofthe small broken grains are lost through mixing with the husk and bran.
2.17 The sheller mills are much superior to the huller type. Thepercentage of broken grains milled on these units ranges from 20-24 percent.Though most of the sheller units are operated without pre-cleaning or dryingequipment, the bran and husk contain less foreign material. Nevertheless,under existing practices quality is still sub-standard.
2.18 The conversion of huller mills to sheller mills would reduce thepercentage of broken rice from approximately 75 to 25 percent under efficientoperating conditions. Based on 1973/74 production of milled rice at 2.4 mil-lion tons, the recovery of whole grain rice could have been increased from
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846,000 long tons to 1,912,000 tons or by about 125 percent. Such improve-ment would greatly increase the competitive position of Pakistani rice inexport markets and export earnings and provide a higher quality productfor domestic consumption. It is evident that the monetary value of thepotential increase in whole grain rice would be substantial and would fullyjustify conversion to a more efficient milling operation.
2.19 Sheller mills are manufactured in Pakistan and could readilyreplace the outmoded and inefficient huller mills. The Larkana study indi-cates that in 1973 the range in cost of sheller type units was fromRs. 65 to 80 thousand. This is equivalent to US$7 to US$8 thousand at cur-rent exchange rates. Current cost would probably be US$10 - US$15 thousand,still within reach of most rice millers.
2.20 The milling season in the Larkana District usually starts inOctober and runs through the following April. The rice mill normally oper-ates for 150 to 180 days during a season on a single shift. The averagerates charged for milling rice during the past two marketing seasons wasRs 1 per maund. The milling charge by sheller mills is about 20 percentmore than huller mills. The milling season and charges are approximatelythe same in Punjab and Sind.
2.21 Rice millers are faced with difficult problems of drying andstoring paddy prior to milling. Farmers and rice dealers move the paddyto the mills as soon as after threshing as possible. Most of the thresh-ing is done from December to February. Consequently a substantial propor-tion of the paddy is delivered with high moisture content which necessitatesthe mills having to sun dry the stock on open plastered ground. This is acostly process and is often interrupted by rains which causes further lossin quality. On the other hand farmers and dealers also deliver paddy thathas been over-sundried which results in excessive breakage in milling. Themills have no artificial drying equipment or covered storage that wouldpermit better paddy quality control and improved milling efficiency.
2.22 A considerable portion of the rice crop is parboiled beforemilling. In many countries this process is used to produce a specialtyproduct; e.g., with quick cooking properties and a special flaVor. InPakistan, parboiling is done mainly to harden the kernels to decrease brokengrains in milling and to control insects. The former East Pakistan pre-ferred parboiled rice for its taste and cooking qualities but this marketis not now open. Parboiling rice not only increases processing costs butoften the special properties are not realized because poor parboiling equip-ment and techniques in Pakistan result in substandard quality rice thatcannot be exported and so must be sold in domestic markets at lower plrices.It would appear to be more practical to improve the handling of paddyI andmilling so that the parboiling process could be discontinued except toproduce quantities necessary to meet the demand for this kind of rice.
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C. Rice By-Products
2.23 Under current handling, milling and processing methods only par-tial use is being made of rice by-products, hulls and bran. The disposalof rice hulls is a problem. In some instances they may be used as fuelbut most of the volume is hauled away and dumped or burned.
2.24 Although rice bran under optimum milling practices contains about15 percent good quality oil suitable for use in vanaspati production, noprocessing is now being done. Leaving the oil in the bran results in therapid formation of free fatty acids, causing rancidity that reduces itsfeeding quality for livestock. If too rancid, the bran becomes toxic andunfit for feed purposes. Prompt extraction of the oil from the bran wouldstabilize its keeping quality for feed and it could be used more extensivelyfor poultry, dairy cattle and bullocks. The oil itself would reduce sig-nificantly the importation of vegetable oils.
2.25 Based on the Larkana District study of Rice Milling in Sind, riceprocessed by up-to-date sheller mills will yield 20 percent bran. Assuming15 percent oil content this bran would yield a substantial quantity of oilfor human consumption as these projections for 1969/70 through 1973/74illustrate:
The projections of production in 1977/78 and 1979/80, based on the estimatedincrease in rice production as envisioned by the Government Planning Com-mission, are likely to be over optimistic. Under optimum processing methodsrice oil could replace imported crude soybean and cottonseed oil about tonfor ton. On the basis of current prices cif Karachi the replacement valueof rice oil would be US$56 million. If production should rise to 170thousand tons by 1979/80 the replacement value would be about US$95 million.These replacement values are calculated on the basis of current prices forimported cottonseed and soybean oil. If the replacement value is based oncurrent palm oil prices cif Karachi the savings in foreign exchange wouldbe US$35.8 million for 100 thousand tons and US$61 million for 170 thousandtons.
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2.26 Edible oil requirements in Pakistan in 1974/75 are calculated tobe about 420 thousand tons; by 1979/80, 680 thodsand tons. On the'basis ofcurrent projections imports in 1974/75 are estimated to be 145 thousandtons, rising to 250 thousand tons by 1979/80. Though realization o'f thefull potential for rice bran oil will take several years 48 percent: of 1974/75 import requirements could have been eliminated had three-fourths of thepotential been realized. With further increases in rice productioil, ricebran oil could make a significant contribution to lowering vegetabie oilimport requirements.
2.27 There are problems, however, that would have to be overcome. Therapid deterioration mentioned earlier greatly increases refining lossesunless controlled by prompt extraction of the oil using the solvent processunder well controlled conditions. The keeping quality of the bran canalso be enhanced by heating at 90 to 105 degrees centrigrade either bytoasting or steaming and drying. This process, however, is costly andtends to darken the oil. Extraction of the oil while the bran is stillfresh is the more practical alternative. This can be done, as has beendemonstrated in Japan and Burma.
D. Recommendations
2.28 In the light of this preliminary study it is quite clearithat acomprehensive program of improving rice marketing, processing and [the utili-zation of by-products in Pakistan would be quite beneficial. To beginwith current price and export policy must be adjusted to allow rice pro-ducers to realize higher economic returns as opposed to remaining more orless at the mercy of the local dealers and millers as to the price receivedfor paddy. The trading profit and export duty on rice handled by,the RiceExport Corporation should be carefully reexamined and adjusted to increasereturns to growers, thus permitting greater use of fertilizers and insecti-cides and better preparation of paddy for market. The price policy andmonopoly procurement scheme should be adjusted to fix prices for paddy onthe basis of quality differentials rather than for milled rice at procure-ment centers.
2.29 Currently all of the rice produced is sun dried on farms and atmills. The typical drying floor is a mud plastered area with no provisionfor protection in-case of rain. This system of drying is inefficient andresults in a wide variation in quality. In many instances long periods ofsun drying in shocks on farms result in checking of the grain that increasesthe proportion of-broken grains in milling. There is need to establishdrying and storage facilities at the mills so that the paddy can ie receivedimmediately after threshing, dried to a uniform moisture'content of 12-14percent, and stored in weather proof storage bins until milled. The pro-vision of the drying and storage equipment would facilitate the ptirchaseof paddy from farmers on the basis of uniform grades and permit storagein bulk according to type and quality.
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2.30 The predominance of small antiquated huller mills results intremendous losses of whole grain rice and excessive costs from extrla haAd-ling and re-milling of rice sold in export trade. To eliminate theselosses and added costs, the rice milling industry should be modernized bythe installation of larger sheller mills with capacities from 15-25 tonsper day on single shift. To insure full utilization of milling capacity,these larger mills should include the auxillary equipment needed to producehigh quality whole grain rice, better quality bran and better bulk hand-ling equipment.
2.31 Rice by-products, hulls, bran and oil are not being fully utilizedbecause of the lack of adequate milling machinery, rancidity in rice branand the total absence of extraction of rice bran oil. The modernizationof rice milling should be organized such that it facilitates the installa-tion of solvent extraction oil mills which can process the bran for a groupof mills within twenty-four to forty-eight hours after milling. The sizeof the solvent extraction plant would need to be geared to the group ofmills to be served. The oil mills would also need to be equipped withstorage and bagging equipment to properly prepare the rice bran for feedafter removal of the oil. Investigations should be undertaken to developeconomic uses for the rice hulls that are now largely going to waste.
2.32 It is recommended that the Government of Pakistan consider under-taking the development of an integrated program of rice marketing and pro-cessing improvement. Such a project would require the input of technicalassistance and investment capital to provide the new milling and processingequipment. Since Pakistan now produces good quality sheller rice mills,the foreign exchange requirements would be limited to the import of ma-terials used in fabrication. The greater portion of the foreign exchangeneeded would be for the importation of solvent extraction equipment forprocessing rice bran oil and other equipment and materials not availablein the country. The technical assistance component for this project wouldrequire the following specialized personnel from outside the country: a
marketing specialist, a milling engineer, an oil processing engineer andan industrial production economist. Pakistan should supply an equal numberof counterpart personnel. Adequate data are not now available to indicatethe aggregate cost of improving the rice milling industry and to establishsolvent extraction plants to recover rice bran oil. The Pakistan PlanningCommission in its preliminary draft of the Development Perspective (1975/80)projects an investment target for rice milling through 1979/80 at Rs 320
million which is equivalent to about US$33 million. There is no indicationthat any oil extraction plants are included in these estimates. On the
basis of this preliminary study it appears that at least US$100 million wouldbe required to make a substantial start in improving the rice milling indus-try and to develop the production of rice bran oil and improvement in thequality of rice bran for feed. About $10 million of this amount would beneeded in foreign exchange to construct two solvent extraction mills toprocess rice bran oil. Further study of the size, type and location of newrice mills integrated with solvent extraction mills for rice bran oil shouldbe made as a basis for considering a full fledged investment improvement
program. It is suggested that the program be first initiated on a pilotbasis in one selected area in Punjab and Sind. Based on experience gainedfrom these pilot projects the program should be expanded to other areas asrapidly as possible.
3. SUGAR MARKETING AND PROCESSING
3.01 In 1973/74, Pakistan produced about 589 thousand tons of whitesugar and some 1.3 million tons of gur, a form of lumpy brown sugar pro-cessed by farmers for direct consumption and sale in local markets, from atotal of 1.57 million ac of sugarcane. This acreage was distributed amongthe provinces as follows: Punjab, 1.1 million; Sind, 251 thousand, andNorth West Frontier, 222 thousand. In the North West Frontier Province about35 thousand ac of sugar beets are grown and processed by existing mills atthe tail end of the sugarcane processing season.
A. Sugar Milling
3.02 A recent study by FAO 1/ indicates that the factory processing ofwhite sugar in Pakistan is reasonably efficient and compares favorably withother cane producing countries. However, the production of cane is charac-terized by the lowest yield per acre amont the main producing countries inthe world -- 14 lg tons as compared with 19 lg tons in India, 25 lg tons inMauritius and 36 lg tons in the United Arab Republic and the United States.Likewise the sucrose content is among the lowest in the world at less than9 percent. These low yields are attributable to a combination of poor pro-duction practices and climate -- sugarcane is mostly grown in tropical zoneswhereas Pakistan is wholly in the temperate zone and the crop is irrigated.
B. Price Policies
3.03 Under existing conditions the Government fixes the price paid forcane delivered to mills on a weight and average sucrose content basis varyingby province without regard for the actual sucrose content of a loadldelivered.Prices are also fixed for white sugar ex-factory and at retail. This pricingpolicy provides no incentives to farmers to cultivate varieties yieldingincreased quantities of sugar per ac. This practice also reportedly encouragesthe diversion of higher quality cane to the production of gur which|can be soldlocally, often at prices more advantageous to the farmer. The mills oftensuffer losses in cane deliveries because of the diversion to gur, especially
1/ Commodity Policy Study on Sugar, Food and Agriculture Organization,Rome 1974 No. TA3257.
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in years when gur prices are more favorable. The large number of producersdelivering very small quantities of cane discourages the mills and the Gov-ernment from undertaking to link the cane price to sucrose content.
3.04 Cane producers reportedly vary volume of cane delivered to millson the basis of relative prices for gur and sugarcane, seasonal variationsin production, and controlled prices for white sugar. This creates widefluctuations in the quantity of cane received by mills from year to yearalthough farmers are obliged to deliver all cane grown in the mill zonesto the mills.
C. FAQ Sugar Policy Study
3.05 The FAQ study contains a number of recommendations for improvingthe production and marketing of sugarcane and sugar products. These recom-mendations include provisions for (a) improving production practices (b) es-tablishing a Pakistan Sugar Research Institute on a national basis; (c) re-search and development of improved cane varieties; (d) strengthening theeffectiveness of the Central Sugar Board in dealing with needed sugarlegislation and price policy; (d) economic research and statistics on sugar;(f) developing a system of purchasing cane on the basis of sucrose contentand (g) gradually improving the efficiency of white sugar processing byconverting the mills to the defecation remelt boiling system of processing.
3.06 The FAO recommendations for improving sugarcane processing providefor expansion of existing factories to optimum capacity and the buildingof new mills to handle future increases in production. For the 24 existingfactories the FAQ study proposes expanding the daily average cane crushingcapacity to 64,160 tons, 20,550 tons per day above the 1973 level. Takinginto account the new equipment and other costs, the expansion program forexisting factories would amount to about US$75 million.
3.07 The demand for refined sugar is expected to rise to about 1.5million tons by 1985/86. This would require the building of new mills witha daily cane crushing capacity of 35,740 tons. However, if existing millsare not expanded as suggested in the FAQ study, additional new mills wouldbe required. Assuming that the old mill expansion program will be carriedout, about 10 new mills would be required at a cost of about US$40 millionper mill, based on imported equipment--a grand total of US$400 million.
D. Substitution of Sugarbeets for Sugarcane
3.08 A study of the Sugar Industry in Pakistan made by the PakistanIndustrial Credit and Investment Corporation of Karachi in 1964 indicatesthere is good potential for substituting sugarbeet for sugarcane productionin the NWFP and in northern Punjab. Experimental work on sugarbeet pro-duction started in 1912. In 1951 the Sugar Cane Research Station at Mardan
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proved that sugarbeets could be successfully grown in the Peshawar area asa Rabi crop planted from September to the middle of November and hlarvest dfrom April to the middle of July. As a result of these findings sugarbeetproduction has developed in NWFP and the 1974/75 crop covers about 35,000ac.
3.09 In 1961/62 a sugarbeet production project was undertaken nearMultan in the Punjab. About 6,000 tons were produced and shipped by rail toCharsadda near Peshawar for processing. The long haul resulted in considera-ble loss in sugar content. But the experiment demonstrated that beets canalso be produced in the hotter areas of Pakistan. Another survey by JohnBrown Limited of Canada indicated that sugarbeets can be grown successfullyin Baluchistan, around Quetta, and east of Quetta on the Loralai Plain.These studies and the level of production now in NWFP indicate that beetscan be grown successfully in the northwest part of Pakistan. FAO, in its1974/75 Perspective Study of Agricultural Development in Pakistan, includedthe possibility for substituting sugarbeet for sugarcane.
Advantages and Restraints in Sugarbeet Production
3.10 There are significant advantages in sugarbeet production over sugar-cane. The water requirements for growing beets is about 1/3 less than forsugarcane. Being an annual plant beets can be followed by a second crop,e.g., maize, pulses or vegetables. The beet crop is remarkably frlee fromattack by insects, pests and diseases. The yield per acre is comparableto that in many countries. The average yield per acre on a worldwide basisis 12.4 lg tons per acre. The current per acre beet yield in NWFP rangesfrom 10 to 12 tons. Another advantage is that all of the sugarbeett molassescan be recovered and both the beet tops and beet pulp can be used -for feed.The molasses can also be used as an energy feed for cattle and bullocks mixedwith cottonseed and other roughages. Under proper growing conditions theyield of beets could, no doubt be increased to around 15 tons per acre.
3.11 Two unfavorable factors, however, need to be overcome. First,sugarbeet seed production has not been successfully developed in Pakistan.A team of German plant breeders and agronomists are now working on the seedproduction problem and hope to determine by the end of 1975 if seed can beproduced in NIWFP and Baluchistan. The prospects are reported to b,e en-couraging. If, however, it is determined that good seed cannot be grownlocally, imported seed can be used. Second, deterioration, causing exces-sive losses in sugar content, results from high temperatures prevailing atthe end of the harvesting season if the beets are not moved prompt~ly to millsand processed. This problem can be handled by using special equipment toconvert the beets into juice immediately upon delivery to the mill, and storeit in tanks under -controlled temperature for later processing. Such equip-ment is available in the United States and probably other countriels.
3.12 There are two possibilities for processing beets into sugar. TheCharsadda mill in Peshawar has already demonstrated the feasibilitly of azddngslicing equipment and making other necessary modifications to existing canemills for processing of beets in May and June, following the close of the
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cane processing season. However, the Director General of the Charsadda Millstated that he thinks the alternative of establishing mills solely for beetprocessing is more desirable, provided the planting and harvesting seasonscan be scheduled to allow a three to four month processing season. Thiswould require planting to start early September and extend through November,so that processing could begin in April and run through July. Both ofthese approaches appear possible. Choice between them would depend on thevolume of beets available in a given area and the length of the processingseason.
E. Recommendations
3.13 In view of these findings it is recommended that the Governmentof Pakistan consider undertaking the establishment of a sugarbeet processingmill in NWFP with a capacity of 6,000 long tons of beets per day. Allowing120 days operation this size mill would handle about 50,000 acres of beetsat a production rate of 13 tons per acre. It is suggested that a demonstra-tion mill be located in an area where 50,000 acres of beets can be placedunder contract. The estimated production of 650,000 tons of beets wouldyield about 78,000 tons of sugar, 32,500 tons of molasses and 5,200 tons ofdried beet pulp. In addition to sugar and by-products, the beet tops wouldbe usuable as feed for cattle. The estimated cost of a mill of this sizeis about US$50 million. In addition to the mill and auxiliary equipmentprovision should be made for a technical assistance input and transportationfacilities to move the beets from local concentration points to the mill-at a cost of about US$1 million. Since the mill machinery and storage equip-ment is not available in Pakistan the cost would break down between foreignexchange and rupees about as follows:
Foreign Exchange US$40,000,000
Rupee cost US$11,000.000
Total US$51 000,000
3.14 The recommendations in the FAO study for improving existing sugarfactories and building new factories involve funding requirements of aboutUS$475 million. It is not considered advisable to undertake a financingprogram of this size prior to a comprehensive feasibility study and withoutdefinite knowledge as to what extent sugarbeets can be substituted for sugar-cane in NWFP and Northern Punjab. A more reasonable approach than the FAOrecommendation would be consideration of conversion of sugarcane mills to thedefecation re-melt boiling process in those areas where there are no prospectsfor substituting sugarbeets. It is therefore recommended that in consideringany investment project for up-grading sugarcane mills as proposed in the FAOstudy and planning their cane supply areas, the first phase program be limitedto about US$150 million rather than the US$475 million suggested by FAO. Thepossibility of locating sugar production increasingly in Indus delta shouldbe given special atrraction in feasibility studies. This size project, combined
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with the US$50 million for the pilot beet mill in NWFP, would add up to apossible US$200 million program for sugar during the next 5 years. Sincethese questions are of fundamental importance to sugar industry, a sectorreview is warranted.
4. MARKETING FRUITS AND VEGETABLES
4.01 Pakistan grows a variety of fruits and vegetables. In 1972/73the major vegetable crops were:
4.02 The acreage and location of the import fruit crops 1/ are as fol-lows:
Acres
Apples 10,000 Baluchistan and N.W.F.P.Apricots 5,000 Baluchistan and N.W.F.P.Grapes 6,000 Baluchistan and N.W.F.P.Peaches 3,000 Baluchistan and N.W.F.P. &
PunjabPears 8,000 Baluchistan and N.W.F.P. &
PunjabPlums 8,000 N.W.F.P., Punjab & BaluchistanDates 50,000 /a Sind and BaluchistanPomegranate 5,000 Sind and BaluchistanBanana 16,000 SindMango 133,000 Punjab, Sind & BaluchisitanCitrus 122,000 N.W.F.P., Punjab & Baluchistan
/a Acreage reported by Baluchistan Department of Agriculture in1974/75 is 21,000 acres.
4.03 Vegetable and potato production are widely distributed all'overPakistan and are usually concentrated around the urban areas. The leading
1/ Yearbook of Agricultural Statistics, 1969.
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vegetable crops, excluding potatoes and chillies, are tomatoes, carrots,peas, cauliflower, okra, cabbage, turnips, spinach, eggplant and melons.The more important tree nut crops are almonds, walnuts and pistachio inBaluchistan and NWFP.
A. Production Mainly for Domestic Consumption
4.04 The current production of fruit and vegetable crops is primarilydomestic consumption. Cultural practices, fertilization and plant protectionare traditional and yields are quite low in comparison with commercial pro-duction in other countries. Varieties are mixed and pruning and other or-chard management practices are not given much attention. Nevertheless, evenunder these conditions substantial quantities of fair quality are produced.
B. Processing Fruits and Vegetables
4.05 Fruit and vegetables are produced mainly for fresh market. Thevolume of processing is small relative to total production. In 1972/73 therewere 27 vegetable processing plants with a total output of 184,000 tons. Thedata shows a steady growth in production rising from 98 thousand tons in1968/69. The products are mainly canned tomatoes, carrots, peas, tomatoketchup, and vegetable soups and fruit purees for beverages. There is littleor no quick freezing of fruits and vegetables.
C. Exports of Fruits and Vegetables
4.06 Although fruit and vegetable production is mainly for domesticmarket there are some exports. In 1973/74 about 18 thousand lg tons wereexported at a value equivalent to US$4.3 million. The leading exports prod-ucts are oranges, bananas, mangoes, walnuts, dried apricots, dried grapes,other dried fruits, dehydrated vegetables and chillies. Minor exports weregarlic, dried figs and pine nut. There were no potato or onion exports in1973/74 because of an embargo due to short domestic supplies, though in pre-vious years these products as well as tomatoes, dried pulses, fresh dates,melons, and apples have been exported in varying quantities.
D. Marketing and Gradings
4.07 The marketing structure of fruits and vegetables begins withharvesting, includes assembling, grading, packing, storing and transportingand currently involves the services of middlemen between the farmer and theconsumer.
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4.08 The traditional methods of marketing have shown little improvementduring the past 25 years. Most of the larger cities have central fruit andvegetable market places, consisting of open-air spaces where farmerd bringtheir produce for auction or private sale. These markets are mostly uncoveredand the products are piled on the ground or concrete floors for sale. Thesales and display areas are unsanitary and have the minimum of facilities forhandling and packing for local sale and for shipment to urban markets. Thereare no grades or standards except for exported citrus. Some sizing is donefor fruits such as oranges and apples but more commonly products are soldjust as delivered from the farms.
4.09 In the larger cities marketing facilities for handling fruits andvegetables have been improved to some extent. The wholesale market inKarachi was rebuilt on an expanded basis several years ago. Some coldstorage space is available but further improvements are needed and bettermarketing practices should be adopted.
4.10 The producer has little or no market information on prices ormarket demand to guide him in selling his produce. Fruit crops producersmake sales contracts with dealers before harvest, sometimes when the treesare blooming and setting fruit. The contractor then harvests and packsthe fruit. Because the farmer is generally at the mercy of the local dealerwhen selling his crops he receives very low prices.
4.11 The markets in the towns and cities are operated under the direc-tion of marketing committees established by law. However, the committeesare usually dominated by dealers to the disadvantage of producers.
4.12 The Agricultural Produce Grading and Marketing Act of 1937 authorizesthe establishment of grades and standards for agricultural commodities. How-ever, no grading standards have been promulgated under this Act except forsome commodities sold in export trade. By 1973 grades had been establishedfor only 21 commodities and livestock products. Of this number, grading forexport is compulsory for only 13 commodities: raw wool, animal hair, cori-ander seed, sann hemp, hides and skins, eggs, potatoes, oil cakes, driedfish, shell fish, citrus fruit, animal casings, lamb skins and fish meal.No grading is required for domestic trading or these products for other com-modities sold in export markets.
E. Recommendations
4.13 There is a potential for expanding and further developing fruitand vegetable marketing of both fresh and processed products for domesticand export markets. Per capita consumption in Pakistan is comparatively low,especially in urban areas. The development of an expansion program shouldbe undertaken for local market in areas around the larger cities such asKarachi, Lahore, Rawalpindi, Multan and Lyallpur. NWFP and Baluchistanoffer the best prospects for expanding commercial production for processing
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and export. Moreover, the pumping lifts are high in Baluchistan. Theaverage size farm is small. Therefore, the available irrigation watercould be used to better economic advantage on high value fruit and vegetablecrops instead of cereals. Producers and dealers in these areas should alsotake advantage of the demand in the larger domestic markets. There appearsto be potential markets for both fresh fruits and vegetables in nearbyPersian Gulf countries. Processed and dried fruits as well as nuts can bemarketed in more distant markets. Possible products are dates, raisins,pistachios and almonds.
4.14 A successful program of fruit and vegetable marketing and pro-cessing must begin with the better organization of the production of suitablevarieties, including improved cultural and harvesting practices. Bettertransport, grading and packing equipment, and adequate cold storage facili-ties are required. Processing facilities for dried, canned and frozen prod-ucts must be developed to take full advantage of domestic and export demand.
4.15 The short time available for this survey did not permit sufficientstudy and analysis to form the basis for a detailed project proposal withspecifications and estimated costs. However, limited observations indicatethat there is an excellent potential for expanding the marketing and pro-cessing of fruits and vegetables in the Baluchistan and NWFP.
4.16 Currently the city of Quetta in Baluchistan is in the process ofbuilding a new central market with adequate space outside the center of thecity. This facility will have permanent space for dealers, areas for farmersto deliver their product for sale and facilities for grading, packing andstoring perishable products. This new center should be the nucleus for de-veloping a coordinated program of production, marketing and processing inthis area. The important products are deciduous fruits, fresh grapes,raisins, dried apricots nuts and vegetable crops such as tomatoes, onions,potatoes, cauliflower, peas, okra, carrots, chillies, beans, etc.
4.17 Fresh and processed dates also offer an opportunity for development.The 1974/75 acreage in dates in Baluchistan is estimated to be 21,000 acresproducing about 75 thousand tons, 35 thousand tons of which are for homeconsumption. The Baluchistan Province Planning Commission and the ProvincialDepartment of Agriculture believe there is good opportunity to further de-velop the date industry in the areas around Turbat, Pangur and Khuzdar.Dates, especially processed dates, should be considered in a fruit andvegetable development program in Baluchistan.
4.18 In the NWFP the program would be centered around citrus, vegetablecrops and deciduous fruits. Considerable quantities of oranges are nowbeing exported to Afghanistan and there appear to be opportunities fordeveloping additional export markets in Iran and Persian Gulf countriesin addition to expanding the domestic market. Existing marketing andprocessing facilities in Peshawar are most elementary. The fruit andvegetable crops are sold and packed in open market areas under unsanitaryconditions which results in heavy losses from spoilage.
4.19 It is recommended that the Government of Pakistan consider an interimprogram for fruit and vegetable marketing and processing in BaluchLstan andNWFP. It is estimated that the cost of the initial projects will be aboutUS$15 million dollars. The program will have to be phased over a periodprobably as long as ten years. It will also be necessary. to underitake aconcurrent program on production improvement and development includingcultural practices, irrigation, disease and insect control and selectionof varieties and crops best suited to domestic and export demand. Therewill also be need for intensive extension education and demonstrat:Lonprograms to aid producers in planning and managing production.
4.20 The UNDP/FAO Project on the Development of Agricultural FoodMarketing in Pakistan now in process should provide considerable informationthat will be useful to the Government in developing the fruit and vegetablemarketing program.
5. FOODGRAIN STORAGE AND HANDLING FACILITIES--1/
5.01 Recent trends in wheat and rice production in Pakistan, plans forfuture expansion of these crops to meet domestic requirements, and exportdemand for rice indicate the need for undertaking a program of grain storageand handling to take care of expanding production. With the introductionof the new high yielding Mexipak wheat in 1967/68 and that year's favorablegrowing season, the harvest was much greater than in any previous year.Existing storage facilities were wholly inadequate to handle the volume ofgrain that flooded the markets. It was necessary to store grain in schoolrooms, workshops, stadiums and in many cases just piled up in the open,sometimes with a tarpaulin cover.
5.02 Under these conditions fumigation against insects was impossibleand extremely high losses occurred in weight and food value. Weight lossaffects the nutritional and energy value of wheat. Such loss in 1967/68was estimated to be between 20 and 50 percent.
5.03 Farmers and local grain dealers store a very high proportion offoodgrains produced in Pakistan. The Canadian study indicates that about70 percent of the wheat produced never leaves the village areas. 'Smallfarmers store wheat and paddy rice in small rectangular structures attachedto the side of the house or in small bins about 8 ft high. The walls are
1/ This analysis and recommendations are based on the study of food grainstorage and handling made by R. G. Watson Co. Ltd., ConsultizngEngineers under the auspices of the Canadian International DevelopmentAgency 1969/70.
made of mud and roofs of either mud or concrete. Each type can be fumigatedbut these prinitive structures should be replaced with small cast reinforcedconcrete bins with concrete roof and floor.
5.04 Market storage of many private dealers in local areas consists ofwalled, open-end enclosures with leaky, insecure roofs. These small dealersshould be encouraged to build small concrete silos suitable for fumigationwith protection from rodents and birds.
5.05 The Pakistan Government Food Department which handles the procure-ment program uses three types of grain storages: The Lahore shed, handling6 percent of the volume, is a steel-frame, corrugated metal clad structure.These Quonset shaped buildings cannot be made airtight and are not suitablefor fumigating grain. Ventilation is inadequate. Use of this type ofstructure, however, is declining. Warehouses, or godowns, are the mostpopular, constituting about two-thirds of the Government owned space. Thesestructures are a combination of precast concrete and masonry with concretefloor and roof. Windows or ventilation openings are set just below ceilinglevel and access doors are made of solid metal. Fumigation can be done inthese godowns but its effectiveness is reduced or, in some instances, com-pletely lost by faulty areation methods. Birds, insects and rodents havefree access to the building when ventilators are opened for areation pur-poses. Bin godowns, representing about 27 percent of the Government storage,are essentially a cluster of concrete framed, hopper bottomed, hexagonalwalls of bricks forming interconnected bins holding approximately 500 tonseach. This is the best type of storage available. However, the roofhatches are the only means of ventilating each bin. These hatches are leftopen during the day without screening which allows access by birds andinsects.
5.06 Flour mills store grain in godowns attached to or adjacent to themill building. These are generally satisfactory as the rate of turnoveris approximately two weeks.
5.07 Grain storage facilities in the port of Karachi are under thejurisdication of the Central Government Food Department. They are housetype godowns and in 1973/74 had a capacity of 705,000 tons. Governmentstorage capacity in the provinces in 1973/74 was distributed as follows:
5.08 The combined total port and inland storage is 1,980,000 lg tons.With increasing requirements for grain storage, the Federal Government hasrecently initiated a crash program of constructing 620,000 tons of addi-tional storage capacity in the Punjab and Sind. Plans are also under dis-cussion for building additional storage in N.W.F.P. and Baluchistan tomaintain reserve stocks for release when needed.
5.09 The Canadian Team study (1969) referred to laid out a programproposed for foodgrain storage in two phases. The first phase program(1970/1975) was designed to increase total capacity from 1 million tons in1969 to 2.2 million tons in 1974/75. By the end of the second phase (1975-1980) an additional 200,00 tons would be needed to bring the total up to2.4 million tons. These projections made provision for transferring grainto former East Pakistan. Now that this area is no longer a part of Pakistanand the re-establishment of trade is not foreseeable, some adjustment instorage requirements is necessary. The annual transfer to East Pakistanwas estimated at 500,000 tons at the end of the first phase and at 990,000tons by 1980. However, at the end of each program phase the space neededfor distributing wheat in the deficit areas of Pakistan is about two-thirdsof the total projected in the Canadian Team Study, according to currentprojections.
5.10 The recommendation is for silo type storage with auxiliary equip-ment for bulk handling.
5.11 The proposed locations, capacity and estimated cost are shown inthe following table.
Pakistan - Estimated Costs of Silos and AuxiliaryFacilities for Seven Recommended Locations - 1970/75
5.12 No cost estimate is given for the additional 200,000 tons recom-mended for installation by 1980. However, using the estimates for thefirst phase of the program and making allowance for the grain that was tobe transferred to East Pakistan plus the increase in prices since 1969, thetotal program would be in the range of US$100 to US$125 million roughlydivided equally between foreign exchange and local costs.
5.13 Currently there are no modern elevator storage facilities at theport of Karachi. The requirements for wheat will not be as large as wasenvisioned in the Canadian study, because of the cessation of the formerEast Pakistan trade. But the expansion in rice exports may offset a size-able proportion of the reduced requirements for wheat.
5.14 It is recommended that the Government in Pakistan proceed withthe development of the storage and handling program proposed by the CanadianTeam Study with such alterations as are necessary to meet the needs forthe next 10 years. Among these alterations will be consideration of thelevel of reserve stocks needed to meet consumption requirements in yearswhen production may fall short because of drought and other adverse weatherconditions.
5.15 In addition to the need for improving storage and handling ofwheat, the whole marketing system needs to be streamlined. A simplifiedsystem of wheat grading taking into account damaged kernels, foreign ma-terial and insect infestation needs to be developed as a basis for marketingon the basis of quality. Such a grading system would offer incentive toboth producers and handlers to do a better job from the farm to mill. Tofacilitate such a grading and quality control program Government pricepolicies should be adjusted accordingly.
