KARACHI: Positive measures related to agriculture in the budget will be beneficial for the cotton crop as the cotton prices have been increased in international market. If the budget is business friendly, business activities can be increased. Different views on cotton production estimate.
Indication to exempt 5 percent sales tax imposed on Khal in the budget. Cotton trade in the local market has been sluggish during the last week. Textile mills showed no interest in buying cotton while ginners are waiting for the buyers of their stock of 5 lac cotton bales.
Partial arrival of new cotton crop from lower areas of Sindh has started. Initially, deals of Khal and Banola were made on the promise, while a deal of 600 cotton bales from Sanghar was made on the condition of delivery from June 5 to 10.
The office bearers of Pakistan Cotton Ginners Association have directed the ginners of Sindh and Punjab to postpone business till July 1. They were of the view that their demands should be accepted by the government in budget which is to be presented on June 12. After that they will decide their line of action.
Although the rate of Phutti was circulating in the market but there was no business. However, some buyers of old stock of cotton which was lying with the ginners were seen in the market. In the last few days 1200 bales of cotton were sold at Rs 8600 per maund while 400 bales of cotton from Shuja Abad were sold at Rs 8700 per maund.
The low quality 1229 cotton bales from Mirpurkhas were sold at Rs 5400 per maund. It is learnt that some ginners in Sindh are trying to start factories but PCGA ban is stopping them.
The rate of cotton in Sindh and Punjab is in between Rs 6500 to Rs 8600 per maund. The Spot Rate Committee of Karachi Cotton Association has decreased the spot rate by Rs 100 per maund and closed it at Rs 8400 per maund because all the big deals were on lending. Usually KCA reports the spot rate from July 1st because the new crop of cotton in the country is determined from July to June.
Normally, Pakistan Cotton Ginners Association releases final report of cotton production by May 31, but this year because of lockdown and Covid-19, the final report has not been released yet. It is expected that report may be released by June 15.
Karachi Cotton Brokers Forum chairman Naseem Usman told that there is a lot of speculation about the country's cotton production during the upcoming 2020 -21 season.
Although cotton sowing is still going on in Punjab, the main reason that cotton growers have to sow cotton two or three times this year, is poor seed quality.
The germination of cotton seeds was usually 70 to 90 percent but this year due to irreparable damage to the cotton crop, the quality of seeds deteriorated.
Seed Corporation has confirmed that seed germination is low and the seeds having low germination level are also being sold. As a result, cotton growers have to use almost twice as many seeds per acre.
Naseem Usman said the next cotton crop will face three types of threats, one is poor seed the other is severe locust attack and now the meteorological department has forecast that the rains will continue in the country from July to Sep this year.
Usually in our country, cotton is sown mostly with canal water and rains start when the crop is at flowering stage which damage the standing crop of cotton. Last year also cotton crop had been damaged by untimely rains and unfavorable weather. That's why the month of Sep is considered to be detrimental for the cotton crop.
Federal committee on agriculture this year till now has not submitted its report on cotton sowing area and production estimates. Earlier, the committee announced it in late Feb and the first week of March which was considered inappropriate.
This year, after receiving the information at the district level, the committee should submit a proper report keeping in view the ground realities. There is no problem if there is further delay for some time in submitting the report.
It is too early to say anything about the cotton crop, but market sources and some farmers, especially in the Punjab, are hinting at a significant reduction in the crop.
Meanwhile, Punjab Agriculture Minister Malik Noman Ahmad Langarial in a statement issued in Multan said that at present cotton cultivation in Punjab has been completed at 41 lakh acres of land while sowing is still going on.
Regarding the locust attack on the cotton crop, he said war-based measures are being taken to control it and hope that it will not cause much damage to the cotton crop.
Naseem Usman told that an overall bullish factor was seen in the price of cotton in the markets.
The New York Cotton Market was up during the week due to low rainfall and drought in the US cotton producing state of Texas.
Correction was witnessed in the Rate of Promise (Waday Ka Bhao) of New York cotton due to the confrontation between China and the US and the decrease in export as compared to previous week in the US weekly export report.
Unexpectedly, the Department of Labor released positive figures for the country's jobs which showed a dramatic increase in 2.5 lakh jobs and a 13.3 percent drop in the unemployment rate. After which the Dow Jones Exchange recorded a huge increase of one thousand points as well as all the commodity markets, including cotton, are witnessing a bullish trend. Like all markets in America bullish trend is witnessed in New York Cotton Market. The Rate of Promise (Waday Ka Bhao) of New York Cotton witnessed an increase of two cents and crossed 62 cent. In the same way Rate of Promise (Waday Ka Bhao) of New York Cotton is in between 59.25 cents to 62.32 cents. According to the experts, the rate of cotton may reach 64 cents to 65 cents.
Increasing trend was witnessed in the rate of cotton in both China and India.
In the local cotton market the business of new cotton crop will be started from July 1. However, if some of the demands of ginners are met in the budget, the ginners will end the current strike.
Meanwhile, the textile sector and other industries have put forward their demands for the June 12 budget. There are limited resources for the budget this year due to Covid-19 and there is a long list of demands.
Prime Minister Imran Khan and hi Adviser on Finance Dr Abdul Hafeez Sheikh have hinted at presenting a business friendly budget. Everything will be clear when the budget will be presented.
Recently, a delegation of Pakistan Cotton Ginners Association led by its chairman Mian M Sohail Javed Rehmani along with PCGA vice chairman Hafiz Abdul Latif and former vice chairman Ch Waheed Arshad met with Adviser to the Prime Minister on Finance and Revenue Affairs Abdul Hafeez Sheik and Adviser to the PM on Industries and Commerce and Textile Abdul Razak Dawood, Hamid Atteq Sarwar (Member Inland Revenue-Policy) and Sohail Rajput (Add. Sec. Finance Division) and discussed the issues faced by cotton industry.
The issue regarding matters related to State Bank of Pakistan, issues of exemption of 5 percent Sales Tax on cotton seed oil cake (Khal), 1 percent WHT as final tax liability instead of minimum tax, clearance of refunds of ginning industry, exemption of Sales Tax on cotton lint, waiver of mark-up of first two quarters, lifting of unsold cotton stock, recovery of outstanding amount from spinning industry and electricity tariff equivalent to other exportable industries.
PM's Adviser on Finance Abdul Hafeez Sheikh said government will exempt Khal from 5 percent sales tax in the upcoming budget. He also said decision regarding buying of 5 lakh cotton bales through Trading Corporation of Pakistan will be taken later after consideration the ground realities.
FBR chairperson Nosheen said refund will be released to ginners as early as possible. She also said no tax notice will be issued to ginners adding that they will pay only one percent final tax. On the issue of waiving off mark-up of two quarters on the loans of ginners, additional secretary finance Sohail Rajput said the issue will be raised with the Stake Bank of Pakistan.
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