KARACHI: India has abolished eleven percent import duty on cotton till September 30 due to the bullish trend in international cotton markets. The rate of cotton remained stable in local cotton market. Trading activities remained stagnant. Sowing of cotton was affected due to acute water shortage. Business community is protesting against increase of 2.5 percent in the interest rate by the State Bank of Pakistan. Increase of 14.26 billion dollars in the exports of textile was witnessed during the last nine months.
In the local cotton market during the last week trading volume remained low. Textile mills don’t show any interest in buying due to high rates while the stock of cotton in the country is almost over. Some ginners had very limited stock but they are demanding higher rates due to which the trading volume is very low.
However, unprecedented bullish trend is prevailing in the international cotton market. On Wednesday Indian government ordered to abolish 11 percent import duty on cotton due to which the rate of cotton in international market witnessed a further increase.
The rate of Future Trading for the month of May reached at 146.14 American cents and the rate of Future Trading for the month of July reached at 144 American cents which is highest in eleven years after that it closed at 141.98 cents.
In the same way during the trading of last four days of the last week an unprecedented fluctuation of 20 cents was seen in the rate of Future Trading of New York Cotton. The rate of Future Trading which started at 131 American cents after increasing by 15 cents reached at 146 American cents and after that decreasing by 5 cents closed at 141.98 cents.
The rate of cotton in India per candy (356 per kg) after increasing reached at the historic level of Rs 95000. It is hinted that it will increase further.
The production of cotton in India for the year 2021-22 decreased due to floods, rains and attack of Pink Ball worm while the demand of cotton increased due to which the rates were increased. Keeping in consideration all these factors Indian government had abolished 11 per cent import duty on cotton till September 30. World’s largest fibre producer has abolished agriculture Infrastructure Development Cess from its import.
In the current season it is expected that India will produce 33.51 million bales. It is pertinent to mention here that last year production of cotton in India was 35.3 million bales. After abolishing of import duty by India a bullish trend prevails in the international cotton market. It is expected that India will import 25 lac bales.
In Pakistan local cotton market remained stable, overall. There is uncertainty among the businesses community due to prevailing political unrest. It is not certain about what the next plan of action is and what will be the new economic policy. It is expected that new general elections will be held in next seven to eight months. How budget will be prepared as per schedule. State Bank of Pakistan had already fixed interest rate at 12.25 percent. The rate of the US dollar decreased after increasing the interest rate and after decrease reached at Rs 181 per a US dollar. It is expected that bullish trend will prevail in the Stock Exchange. However, there is a big question on future economic situation.
Local farmers are concerned that no body will address their issues as all will be busy in the preparation of next election. There will be changes in the concerned departments. There is an acute shortage of water which will affect the production of cotton.
However, the rate of cotton in Sindh and Punjab is in between Rs 18,000 to Rs 21,000 per maund. The rate of Banola, Oil and Khal remain stable.
The Spot Rate Committee of the Karachi Cotton Association kept stable the rate of cotton at Rs 20,500 per maund.
Chairman Karachi Cotton Brokers Forum Naseem Usman told that after abolishing import duty on cotton by India, a bullish trend prevails in international cotton markets, especially in the New York Cotton Market.
According to the weekly USDA export report more than fifty nine thousand bales of cotton for the year 2021-22 were sold which was six per cent less as compared to last week. Turkey was on number one with more than twenty seven thousand bales; India was on number two with more than twenty four thousand bales while Indonesia was on number three with more than six thousand bales. One lac thirty two thousand bales of 2022-23 were sold, overall.
Pakistan Textile Exporters Association (PTEA) has congratulated the PML-N leadership on formation of the federal government and expressed the hope that the new government would forge export-oriented policies to stabilize the crumbling economy and lead the country towards an economic prosperity.
Congratulating the Prime Minister Shehbaz Sharif, here on Wednesday, Chairman Pakistan Textile Exporters Association Sohail Pasha urged the government to give top priority to boost economy as Pakistan could not make a sound progress without turning around its sagging economy. He was optimistic that country’s new leadership would live up to the expectations of the people in achieving national goals and our beloved country will record tremendous achievements in its economy, democracy and foreign relations. He said that all stakeholders should be taken on board to make viable and prudent economic policies to accelerate growth and speed up industrialization across the country. The country needs a serious and talented leadership that can address the challenges and trigger economic revival for a long time, he said.
Reposing full confidence in the new leadership, he expressed the hope that PML-N government would gather a team of economic experts from all sectors of the economy to formulate business-friendly policies and bring economic reforms to boost the trade and industry. Prime Minister Shehbaz Sharif has the ability to face challenges and lead Pakistan towards economic prosperity, he said.
Vice Chairman PTEA Ameer Ahmad was of the view that country desperately needs to boost exports to narrow its ballooning trade deficit, which has surged to US$ 35.4 billion in nine months of the current fiscal. There is a need to work out a methodology to explore new markets and increase export volume. Pragmatic policies in consultation with stakeholders need to be formulated to reduce the cost of doing business by fixing rates of inputs in line with competing countries in the global market to create a level playing field, he suggested. Textile industry is unable to tap its potential in accordance with capacity; whereas regional peers are rapidly multiplying their exports just because of the edge they have in the cost of doing business. High cost of production and lack of competitiveness are major irritants in export growth, and pragmatic policies need to be implemented to reduce the cost of production and create a level playing field. He stressed for switching the focus towards value-addition in textile industry as sustainable growth hinges on value addition. All emerging economies have done the reforms by removing impediments, which have helped them increasing their exports. We need to follow their footsteps and take our industry into the right direction to achieve our national goal, he said.
PTEA leadership is optimistic that all the challenges hindering the export growth will be addressed and exports would flourish in the coming months. Economic managers of the new government would keep industry operational and boost the exports. PTEA urged the new leadership to draw a comprehensive line of action for revival of the economy and to boost exports and industrial development in the country.
However, Saqib Naseem, chairman of Pakistan Yarn Merchants Association (PYMA), and Muhammad Junaid Teli, Vice Chairman of Sindh and Balochistan Region, have said increase the higher interest rates will significantly increase the cost of industries threatening the survival of SMEs.
They urged the Governor State Bank Reza Baqir for immediate reduction of interest rates in the best economic interest of the country and further urged to formulate a policy that promotes business and industrial activities not destroyed.
“The Covid-19 epidemic already had a devastating effect on business and industries, the recent political crisis in the country has also troubled the business community as no one at the government level cared about saving businesses and industries from destruction and they are busy only in politics, while now the 250 basis points increase in interest rates by SBP will sink the economy”, they pointed out.
They further said that due to the increasing business costs, it was becoming difficult to do business and run industry. Therefore, the governor SBP should take decision keeping in view the political situation and the economic condition in the country so as not to affect the business and industrial activities.
In order to avoid anti-economic decisions, they urged the Governor SBP to consult with the business community before making any future decisions regarding the interest rate.
Saqib Naseem and Junaid Teli also demanded of the governor SBP to announce a significant reduction in interest rates that is also imperative for the development of the country.
Copyright Business Recorder, 2022
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