The Commerce ministry has decided to recommend to the Economic Co-ordination Committee (ECC) not to allow export of cotton at this stage, otherwise the national exchequer and the textile industry will suffer heavy losses, official sources told Business Recorder here on Monday. A summary prepared by the Commerce ministry will be presented in the next meeting of the ECC some time this week, to take a final decision on an issue whose pros and cons are under constant discussion and review.
According to the sources, the ministry has listed a number of reasons for not allowing the cotton export which include:
1. If the Trading Corporation of Pakistan (TCP), which has two million bales of cotton in stock, was allowed to export one million bales the nation will suffer a loss of Rs 2 billion at the current international rates.
The TCP has purchased cotton at a higher rate of Rs 2314 per 40 kg ostensibly to protect the interest of the growers who were not getting the government support price of Rs 925 per 40-kg seed cotton (Phutti) from the ginners.
However, the highest bid in the first international tender of TCP opened at 39.5 cent per pound, which was much lower than the PTC purchase price.
2. If the TCP retains two million bales as a buffer stock, it will only pay a mark-up of around Rs 400 million as compared to the loss of Rs 2 billion in case of its sale.
The stock will also give a psychological edge to our local industry over its international competitors and stabilise the domestic lint cotton prices. This year's bumper crop should benefit the local industry on long-term basis.
3. By exporting cotton at such a low rate, and even not allowing the local participation, the government would be creating very aggressive competitors of Pakistan's textile industry under the aegis of WTO regime as they have cheaper electricity, low wages of workers, and other incentives for the textile industry in their respective countries as compared to the Pakistan.
4. It is not clear as yet what will be the total requirement of the country's textile industry after 1st January 2005 in a challenging post-WTO quota free era. They said that it is good to be on a safer side to preserve this natural raw material for our sole well-established industry, which is economic lifeline of the nation.
5. The cotton futures in New York trading are rising; it is apprehended that if Pakistan decides to sell its cotton now, it would further depress the international market.
6. By stocking two million bales as buffer, the country will make up for any environmental damage to our cotton crop of 2005-2006.
LONG TERM POLICY AND THE TEAM SPIRIT: The official sources who have been dealing with the Textile trade and industry in the Commerce ministry suggested revamping and reorientation of the entire sector vis-à-vis growers, ginners spinners, weavers, textile mill owners, and exporters of all categories of textile products in view of future projections and trading scenarios.
They said that the government earnestly wanted to pay the growers minimum support price of their produce and hard labour but, regrettably, they are not getting it despite involvement of TCP as the second buyer and player to stabilise the cotton prices.
They said that the ginning is a service industry everywhere in the world but in Pakistan instead of ginning of seed cotton, it has become a medium for change of ownership of Phutti.
The official sources said that the owners of about 500 ginning factories in the country have almost become a cartel and the middlemen in the Textile industry as the growers are totally dependent on them because of their inability to retain their produce for better times.
They opined that ginners were the main beneficiaries of huge purchase of two million bales by the TCP at the higher rates than the prevailing market rates from the ginning factories.
They suggested that to ensure payment of minimum support price to the growers, the TCP should buy seed cotton (Phutti) directly from the growers as is done in India and many other countries.
The TCP can have its seed cotton ginned from the private parties instead of buying lint from the ginners.
The official sources further suggested that there should be public-private partnership to set up 15 to 20 state of the art ginning factories in the main cotton growing areas like Ghotki, Nawabshah, Rahimyar Khan, Bahawalpur, Multan, Vehari, etc so that the grower has a choice to sell its produce.
The government has spent billions of rupees on cotton purchase therefore; it would not be a bad bargain if a few hundred million rupees are provided to private sector as seed money to set up such ginning factories.
The professional management and operations of these ginning factories should remain with the private sector partners.
INTERACT AND PLAY AS A TEAM: These sources advised the growers, ginners, spinners, owners of textile mills, and exporters of all categories to function as a team and look after each other's interests instead of manipulation of the market forces and prices if they were to survive and prosper in the post-WTO regime.
The sources said that all the stake holders of cotton-related industry and trade must formulate their common strategies on long and short-term basis as Pakistan, with abundant raw material, has the potential to become a major player in the nearly $370 billion annual global textile trade.
However they were of the view that despite very timely $4 billion investment for the upgradation and modernisation of textile sector under the textile vision 2005 programme, our industry still needed modern production technology infusion for the value-addition to take maximum benefit of the new opportunities.
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