KARACHI: Significant decline in cotton prices. Spot rate decreased by Rs 1700 per maund. Mills make cautious purchases amid oversold market. Business volume improves. International cotton market also sees a decline. Industrialists strongly protest against excessive taxes.
All Pakistan Textile Mills Association and Pakistan Cotton Ginners Association, flour mills, and other industries reject the new taxes and electricity tariff hike, terming it ‘devastating’.
PCGA calls an emergency meeting, considering a strike and possible closure of ginning factories.
After the Eid-ul-Azha holidays, the market that reopened on Thursday witnessed an increase in cotton supply due to the efforts of cotton traders, leading to better sales. Additionally, more ginning factories have resumed operations. Textile mills have started making cautious purchases. However, the market continues to experience a downturn due to excess supply compared to demand.
As a result, the cotton prices remained sluggish. Before Eid, the cotton price per maund was ranging from Rs 19,500 to Rs 19,700, which immediately after Eid fell by Rs 300 to Rs 500 per maund, reaching Rs 19,000 to Rs 19,200 per maund. Later, the cotton price further decreased to Rs 17,800 to Rs 18,500 per maund, resulting in a significant decline of Rs 1,000 to Rs 1,500 per maund in cotton prices.
Ginners, were over sold due which they increased their Phutti purchases on Saturday, resulting in a rise in Phutti prices to Rs 700 per 40 kg, stabilizing the cotton market.
The Karachi Cotton Association also started announcing the spot rate for the new crop 2024-2025, which was Rs 19,000 per maund lower than by Rs 7,00 per maund as compared to previous rate and later decreased by another Rs 1,000 to Rs 18,000 per maund. The cotton supply continues to increase.
Ginners, Phutti traders, and wholesalers started panic selling because of the excessive tax burden imposed on ginning factories in the annual budget. The PCGA has called a meeting of ginners in Sukkur to protest against these taxes, where sources saying that ginners will strongly protest against the taxes and may even go on strike for a few days, probably lead to closing of ginning factories.
This situation may cause unrest among cotton traders and farmers, who may start selling their cotton stock before the strike is announced. This will probably lead to a further decrease in cotton prices.
On the other hand, the budget has also increased the tax burden on the textile sector, despite the Prime Minister’s announcement of relief on energy. However, the increase in taxes and the lower-than-expected decrease in interest rates. More over, refunds of billions of rupees being stuck in sales tax. The textile sector is also protesting against this. Due to the unbearable financial crisis in the market and the slow demand for cotton yarn and textile products, the textile sector is highly disturbed. They will be very cautious in buying cotton. Additionally, the international cotton market is also dominated by bearish trends. The price of Future Trading of New York cotton is ranging from 70 to 73 American cents per pound.
In the province of Sindh, the cotton price is ranging from Rs 18,000 to Rs 18,500 per maund, while the phutti price is in between Rs 7,800 to Rs 8,500 per 40 kg. In the province of Punjab, the cotton price is ranging from Rs 18,500 to Rs 19,500 per maund. The Karachi Cotton Association’s Spot Rate Committee has reduced the spot rate by Rs 1,700 per maund and closed the spot rate at Rs 18,000 per maund.
According to Naseem Usman, Chairman of the Karachi Cotton Brokers Forum, there has been a relative decrease in international cotton prices, with the price of New York cotton futures ranging between 70 to 73 American cents. According to the USDA’s weekly export and sales report, one lac and eight nine thousand bales were sold for the year 2023-24.
China purchased 82,200 bales, ranking first. Vietnam purchased 38,600 bales, ranking second. Pakistan purchased 33,800 bales, ranking third.
A total of one lac and eleven thousand and eight hundred bales were sold for the year 2024-25.
Guatemala is on the top by purchasing 24,600 bales. Turkey is on number second with 15,400 bales and Pakistan is on number third after purchasing 12,800 bales.
Moreover, All Pakistan Textile Mills Association leaders have strongly protested against the proposed tax in the budget 2024-25, stating that the budget will only serve to destroy the textile industry.
According to details, the textile industry has vehemently opposed the regressive and harsh tax measures and customs-related actions proposed in the Finance Bill 2024-25, which pose an existential threat to the country’s textile industry. The textile sector contributes more than 50% to the country’s total export earnings and employs 40% of the industrial labour force.
Asif Inam, Chairman of the All Pakistan Textile Mills Association (APTMA), former Chairman Amir Fayyaz, and Chairman North Kamran Arshad, said in a joint press conference that the closure of this industry will result in massive job losses, which will further exacerbate the already high unemployment rate.
The decrease in export earnings will increase the trade deficit, put additional pressure on the country’s foreign exchange reserves, and pose a risk of balance of payments crisis.
Moreover, the proposed measures will discourage new investment in production and exports, leading to a further decline in industrial capacity. There will be a flight of capital from the formal to the informal sector. Meanwhile, the fixed charges in electricity bills will increase by approximately Rs 5 lakh per month and Rs 50 lakh for closed cotton factories, and the cost of electricity usage will be Rs 2,000 per kilowatt, which is an additional Rs 28 per unit compared to last year’s rates. Taxes were already imposed on cotton, and now taxes will also be levied on Khal.
In this regard, an important and emergency meeting of the PCGA has been called in Sukkur. Moreover, the imposition of new taxes on the ginning and textile sector in the federal budget, along with the increase in existing tax rates, has created a wave of concern across the entire cotton sector.
There are reports of a 20% decrease in cotton cultivation.
After that Pakistan Cotton Ginners Association and APTMA rejected the recent federal budget, the PCGA has decided to convene an emergency general body meeting, which may decide to suspend cotton purchases and shut down factories immediately. Chairman Cotton Ginners Forum, Ehsan-ul-Haq, stated that the ginning industry is already burdened with a record GST, but despite this, an additional 10% GST has been imposed on oil cake, making it almost impossible for cotton ginners to continue their business.
Copyright Business Recorder, 2024
Comments
Comments are closed.