Trading Corporation of Pakistan (TCP) scrapped its fifth cotton tender, as not a single bidder submitted bid for procurement of the commodity mainly due to 10 percent advance tax. Sources told Business Recorder on Wednesday that the imposition of 10 percent advance tax on cotton procurement from TCP was a major hurdle in offloading of the cotton stocks. As per TCP tender condition, the successful bidders are required to pay advance tax to the Federal Board of Revenue (FBR) and the amount of the tax would be adjusted in their (buyers) annual tax returns.
"Although, TCP''s cotton quality is better than market, however, the imposition of advance tax is restricting the millers and traders from participating in the tender," said a leading cotton trader. He said that there was no advance tax on cotton buying from the market; therefore most of the traders were reluctant to buy cotton from the corporation.
In addition, offloading of the cotton stocks at the time of arrival of new crop had created some challenges for the state-run grain trader, as domestic buyers or textile millers prefer to procure new cotton crop instead of TCP''s stocks procured during the last season on the directives of the federal government.
In order to stabilise cotton prices in the domestic market, a year back, the federal government decided to procure cotton from ginning factories to support the farmers and stabilise the prices in the domestic market. Although, the procurement improved the cotton rates in the local market, however, presently TCP is facing difficulties to offload these stocks. TCP issued fifth tender on September 2, 2015 for sale of 84,600 cotton bales and accordingly opened it on September 14, 2015 at its head office. In response to the TCP''s tender, not a single buyer showed interest in cotton procurement from the state-run grain trader. The nil participation forced TCP to scrape the tender, sources said.
In order to attract the buyers, the TCP even announced reserve price two days before the tender. According to TCP, average KCA spot rates from September 3 to September 12, 2015 was Rs 4,741 per maund and despite that even not a single bids was received. Overall, the state run grain trader procured some 95,400 cotton bales from ginners at Rs 6,864 per maund in November 2015 and so far it has issued some five tenders for sale of the procured cotton. Out of the five tenders, three have been scrapped as bids were less than reserve price. While, some 10,800 cotton bales were offloaded through two tenders. Some 6,800 cotton bales were sold through first cotton tender and some 4,000 cotton bales in the fourth cotton tender.
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