TCP barred from indicating floor price: body formed to evaluate cotton tenders

The federal government has barred the Trading Corporation of Pakistan (TCP) from indicating floor price while inviting tenders for cotton, and constituted a committee to evaluate the bids, it is official learnt. The decision was taken by the Economic Co-ordination Committee (ECC) of the Cabinet in its meeting on April 12 when it considered the summary of the commerce ministry on disposal of cotton purchased by the TCP. The ECC was informed that the TCP had purchased 1.61 million bales of cotton in 2004-05 to bring stability in prices, and exported 30,000 bales till preparation of the summary.
TCP Chairman Masood Alam Rizvi told Business Recorder that another new tender of 20,000 bales of cotton would be opened on May 7, however, the process would take a couple of months to finalise the process.
In order to avoid any negative impact of the TCP stock on seed-cotton prices of the new crop or discounting of its old stocks, it was considered advisable that these stocks may be disposed of at the earliest, and this may be done through combined open tenders for exports and domestic sale.
The commerce ministry, however, suggested that floor price may cover TCP''s purchased cost as well as cost incidentals and financing, but one of the ECC members opined that floor price need not be fixed and left to the market, besides fixed price could be relevant to domestic sales, but not for exports.
It was also opined that these stocks needed to be exported as domestic sales could benefit the ginners, as they need cash to pay the farmers for the new crop and plummet the price of new cotton, they added.
Sources said the Committee was informed that price of cotton in international market was 49 cents per pound, while carrying cost of stocked cotton to the TCP was Rs 2,200 per 40-kg.
"The ECC emphasised that the stocks need to be tendered very diligently to avoid cartel formation or fall in prices and eliminate discretion and malpractices," the sources added.
Sources said it was suggested that a committee may be set up under the TCP chairman, comprising representatives not below the level of joint secretary from the ministries of finance, commerce, textile industry, and Minfal to evaluate and approve bids. Secretaries concerned would ensure the attendance of their representatives to the meetings of the committee, whenever called.
They said the ECC directed the TCP not to indicate floor price at the time of inviting tenders, adding that stocks should be tendered to the market in a way that no cartel should take advantage of this situation. The committee also eliminated discretionary powers of the official to avoid malpractice.