KARACHI: Bullish trend remained continued in cotton market. The spot rate after increasing by Rs 400 per maund reached at the highest level of Rs 19,000 per maund. Pakistan Cotton Ginners Association, textile sector and farmers are protesting against imposition of sales tax. Production of industry goes affected due to power crisis. It is feared that exports will also be affected. Strategy needs to be evolved for increasing the production of cotton, immediately.
The local cotton market during the last week remained stable due to the cautious buying of quality cotton by textile and spinning sectors. Trading volume remained low because of the availability of cotton in a limited quantity. One international trader is selling cotton from his stock on daily basis. As many as 2000 bales of quality cotton were sold at Rs 19500 per maund while few ginners had some quantity of quality cotton available for which they were demanding Rs 19500 to Rs 20,000 per maund which means that market sentiment is stable.
The rate of future trading of New York Cotton is from 117 to 118 American cents per pound. The demand of cotton from mills exists because the commodity is available in cotton market in sufficient quantity while the rate of cotton in international cotton market is stable. Moreover, the issue of shipments and containers still exists while there is uncertainty in the rate of dollar, as Omicron variant is spreading very fast.
Although, many textile groups were importing cotton but it looks that financial crisis is increasing in the market due to increase in the prices of cotton. On the other hand import agreements were signed with Afghanistan for the import of cotton. As per the reports, six lac bales were prepared in Afghanistan out of which agreements were signed for the import of more than three lac bales of Afghani cotton. There are problems of payment in Afghanistan; however, Federation of Pakistan Chambers of Commerce and Industry is demanding that trading volume should be increased. Federal Finance Minister Shaukat Tarin has said that they are trying that trade with Afghanistan should be carried out in local currency.
The rate of cotton in Sindh is in between Rs 15500 to Rs 20,000 per maund. Phutti is not available while the rate of Khal is stable.
The rate of cotton in Punjab is in between Rs 17000 to Rs 20,000 per maund. The rate of Phutti as per quality is in between Rs 6000 to Rs 8500 per 40 kg. The cotton is not available in Balochistan. The Spot Rate Committee of the Karachi Cotton Association increased the spot rate by Rs 400 per maund and closed it at Rs 19000 per maund.
Chairman Karachi Cotton Brokers Forum Naseem Usman told that mixed trend was witnessed in international cotton markets. The rate of future trading of New York Cotton after increasing reached at 119 American cents. According to the weekly sales report of USDA more than four lac bales were sold which were 85 percent more as compared to the sale of last week. China was number one with more than one lac thirty nine thousand bales, India was the second with more than seventy four thousand bales, Turkey was on number third with more than fifty three thousand bales while Pakistan was on number fourth with more than thirty eight thousand bales.
The rate of cotton remained stable in Brazil, Africa and Central Asian States while in India the rate of cotton remained overall stable while mills were involved in buying cotton on high rates. The reason behind it is that they face difficulty in making parity with the rate of yarn.
Chairman Cotton Association of India Atul Ganatra in an interview said that 2021- 22 proved to be fruitful for Indian textile industry. On the other hand according to the WASDE report the production of American cotton, as well as, the stock is reduced.
However, Ministry of Commerce (MoC) said on Wednesday that issue of gas prices for the textile and apparel sectors, assumed in the Textile and Apparel Policy 2020-25 including Captive Power Plants (CPPs), is yet to be resolved.
This was revealed by Secretary Commerce, Sualeh Ahmad Faruqui during a meeting of Senate Standing Committee on Commerce when Deputy Chairman Senate, Mirza Muhammad Afridi stated that he has received information that Commerce Ministry has withdrawn Textile and Apparel Policy from the Cabinet.
The meeting was presided over by Senator Zeeshan Khanzada. Secretary Commerce replied that the policy stands approved by the Cabinet but the issues related to tariffs of electricity, gas and CPPs are unresolved. “We have taken up the issue with the Ministry of Energy to change the language of the decisions. The draft of language is near finalization and the issue will be settled,” said Secretary Commerce.
Sualeh Ahmed argued that Ministry of Energy had agreed on a price of RLNG at $9 per MMBTU for Textile and Apparel sector but due to frequent fluctuations in LNG prices at the international level, this has become an issue, and the other issue is CPPs. He further contended that only two lines are to be adjusted in the already taken decision, after which this issue would be sorted out.
However, official documents reveal that on December 16, 2021, the ECC discussed the revised draft of Textile and Apparel Policy 2020-25 and approved it with the following amendments: (i) electricity and RLNG rates, indicated for fiscal year 2021-22, will be substituted, with regionally competitive energy rates;(ii) the regionally competitive RLNG rates will be applicable on processing industry;(iii) for the captive and the cogeneration units, a separate policy will be formulated by the Ministry of Energy, in consultation with the Ministry of Commerce, which will cover the benefits; and (iv) comments of the Finance Division shall be made part of the proposed Textile and Apparel Policy 2020-25.
The sources said, the Federal Cabinet, on December 21, 2021 also ratified the decision.
Separately, Korangi Association of Trade Industry (KATI) President Salman Aslam has expressed concern over the 61% decline in textile exports at the beginning of the new calendar year. He said a 290 million dollars’ drop in textile exports in the first 10 days of January would hit the economy hard, which will further increase the trade deficit.
President KATI welcomed the notice taken by the Finance Minister on the reduction in export volume. He said that all the problems faced by the textile sector including gas and electricity should be rectified. He said that industrialists are facing difficulties due to a significant increase in production cost and freight charges. The export sector is under pressure due to fears of further new taxes in the budget. The government should immediately address the concerns of the industrialists and announce a clear policy.
President KATI further said that concrete steps should be taken to reduce the production cost and uninterrupted supply of gas and electricity.
Salman Aslam feared that if timely steps were not taken, the volume of the export sector would shrink to alarming level by the end of the year.
Chairman Pakistan Cotton Ginners Association Sohail Mahmood Harl said that government should start work on war footings to increase the production of cotton in the next season. He said government had imposed seventeen percent sales tax on all cotton-related products. Farmers will be directly affected with this tax and it is expected that this will also affect the cotton production. Country will have to import cotton of two billion dollars to meet local demands. He also said that we are importing edible oil worth six billion dollars a year, adding that if the cotton production will increase we can reduce our import bill of edible oil. He also demanded that government should give incentives to the farmers.
Copyright Business Recorder, 2022
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