Soaring cotton prices: towel exports fall 36.27 percent

The soaring prices of cotton yarn and export refinancing issues are believed to have brought down the export of various kind of towels by 36.27 percent during August 2007 as compared to the same period of the last fiscal year 2006, said industry sources on Monday.
According to the exporters lack of a proper system in the local market to maintain the price level of cotton yarn steady, the cost of production had reached its peak in recent years, which is thought to be a core factor behind the decline of towels export.
The other issue for such a slump in export was the unavailability of the export refinancing by the banks. The official figures said that during August 2007, the total export of towels was 41 478 million dollars as compared to 65.079 million dollars during the same period of the last financial year 2006, recording a decline of 23.601 million dollars.
Similarly, during the first two months of the current fiscal year ie July-August 2007, the export stood at 85.089 million dollars against 115.972 million dollars during the same period of the last fiscal year 2006. This shows a slump of 27 percent or 30.883 million dollars.
On month to month basis, export of towels witnessed a decrease of 5 percent or 2.133 million dollars during August 2007 as compared to 43.611 million dollars during July 2007. "Increasing cost of production and unavailability of soft loan for export are rapidly reducing the towel export in the world markets," said, Chairman Towel Manufacturers Association (TMA) M. Muzzammil Hussain.
Expressing disappointment, he said that in spite of State Bank of Pakistan's clear directions to all banks to provide the exporters with soft loans for export purposes, they were not able to acquire them for various reasons, which badly discourages them.
He further said that "banks are already earning 13 percent profit on loans, but were reluctant to provide it on seven percent to exporters despite State Bank's directions. He added that this issue should be resolved at the earliest before export of towels comes down to mere few percent. Chairman TMA maintained that banks were reluctant to provide them with soft loans but do not refuse directly, however, taking the plea that their loan capacity limit.has exhausted.
Talking about the shortage of the cotton yarn and its increasing prices, Muzzammil said that government should chalk out a proper plan to keep their rates stable in the local market ahead of fresh buying. He expressed apprehension that continued declining trend of the towel export would make its fiscal export target unachievable at least by 30 percent.