KARACHI: The local cotton market remained stable on Thursday. Cotton Analyst Naseem Usman told that market volume remained a little bit low. Naseem also told that government has reduced the electricity prices for the export oriented industry reduced from 9 cents to 7.5 cents per kwh by cabinet from December 1. While the government said they are unable to provide cheap gas to fertilizer and textile industry.
Naseem also told that Prime Minister Imran Khan has instructed the ministries of commerce and industries to ensure the provision of necessary support to the textile industry in Faisalabad.
"As the Faisalabad textile industry sees a massive rise in demand and export orders," he wrote on Twitter early Wednesday. "I have instructed the Commerce and Industries Ministries to ensure all necessary support to the textile sector to enable them to meet their growing demands."
PM Khan also added that the textile sector represents one of the positive developments in Pakistan's economy despite the spread of COVID 19. Known as the textile hub of Pakistan, Faisalabad currently has the operational capacity of 50,000 power looms and expects the opening of another 30,000 units.
For the first time since 1990, the city is eyeing massive economic growth with the rising demand in export. The government's recently announced decision to provide electricity to the industrial sector at reduced rates has also given the industry a boost.
Naseem further told that the textile sector continues to be an export cash cow for Pakistan, the national share in the global textile trade has experienced an incessant contraction. This paradox is evidenced by the fact that the textile sector has limped behind Bangladesh, India, China, and Vietnam in the wake of various bottlenecks, including an overvalued rupee and exorbitant power tariffs.
The former was addressed when the currency could not sustain its artificially uplifted value. However, the cost of electricity remained elevated. For instance, the local textile players were coerced to consume electricity at 11.5 cents per kWh at the start of the year when the same was available at 7.5 cents per kWh in China, 9 cents per kWh in Bangladesh, and 8 cents per kWh in both Vietnam and India. This made it onerous for them to compete for market share against these counterparts.
The odds were swayed so badly in favour of others that the government had to withdraw surcharges in February. This culminated in the provision of electricity at 7.5 cents per kWh for the sector until it was increased to 9 cents per kWh in September. The tariff is again costlier than what the exporters in other countries pay. It amplifies the industry's woes that had already been limited to operating in off-peak hours because of further high peak hour's rate.
Amidst this storm, the incumbents promulgated a relief package for all industries. The government calls it an economic masterstroke that will foster productivity and employment. In that case, the package must effectively reduce the energy burden on manufacturing units of the country's prime export, textile. Let us find out if this assumption is valid.
At this time, Pakistan is savouring a heap of international textile orders due to an economic head-start. Besides, many textile orders from America are being rerouted to Pakistan due to the excessive duties levied on imports from China. Thus, the exporters will look to fetch new orders and operate double shifts. The energy cost for the shift during off-peak hours remains the same. However, the quashing of additional electricity tariffs across the board during peak hours means that the second shift will prove propitious.
Meanwhile, the demand for Pakistan's textile products has reached an all-time high, which has caused a demand-supply gap of approximately 700 million meters of cloth.
The Faisalabad textile industry is facing the highest supply shortage in its history. The normal production capacity for the textile sector is 90 crore meters. However, despite the mills being operational around the clock, currently, there is a shortage to meet demand.
Cotton Analyst Naseem Usman told that Karachi Cotton Association (KCA) is extremely perturbed over the drastic decline in cotton production from 15 million bales to 6 million bales, as reported, in the current cotton season 2020-21.
The KCA understands that decline in cotton production again in cotton season 2020-21 is mainly due to (i) reduction in yield per acre (ii) cultivation of sugarcane in the areas earmarked for cotton cultivation (iii) supply of uncertified Cotton Seed & Pesticides etc. Hence, there is a considerable gap in cotton production and local mills consumption.
The local textile industry is, therefore, compelled to import raw cotton from abroad to meet its requirement of basic/primary raw material and to ensure its contribution towards achieving the target of exports fixed by the Government through exports of valued added products as well as earning much needed foreign exchange for the country.
The KCA, therefore, urges upon the Government to declare emergency and evolve necessary Plan of Action on war footing basis to increase cotton production in the coming years to meet the rising requirements of the local textile industry and leave adequate surplus for export in order to ensure the presence of Pakistan Cotton in the international market to earn valuable foreign exchange for the country through export of cotton and its value added products.
Cotton is seen to be the backbone of the exporting and related production industries like a textile in Pakistan. Pakistan stood at 4th position in producing cotton in 2012-13 with some 11 million bales but before that, the period in between 1980-90 is considered as the golden period for Pakistan regarding cotton production in which rapid growth was seen. Earlier in 2014-15 the production increased 11 per cent and holds the record of 15 million bales.
The Better Cotton Initiative (BCI) says it provided training on more sustainable farming practices to more than 2.3 million cotton farmers in 23 countries during the 2018/19 cotton season. The figures are revealed in the BCI's annual Farmer Results report which includes data on a range of social, environmental and economic indicators over the 2018/19 cotton season.
"The government will make all-out efforts to promote the textile industry and increase exports. Faisalabad is not only the third largest city in Pakistan but also Manchester in terms of textile industry. Every effort will be made to alleviate the difficulties faced by the industry."
These views were expressed by the Provincial Minister for Industries Mian Muhammad Aslam Iqbal during a meeting with a delegation of All Pakistan Textile Mills Association (Aptma).
The Minister for Industries promised to provide solutions to the delegation's proposals regarding provision of infrastructure, environmental issues and social security notices during corona.
ICE cotton futures extended losses for the second straight session on Wednesday as speculators liquidated positions ahead of the US Thanksgiving holiday amid harvest progress and favourable weather conditions.
The cotton contract for March was down 0.38 cent, or 0.5%, at 72.60 cents per lb by 11:36 a.m. EST (1636 GMT) after falling more than 1% in the previous session.
"Some of the speculators are liquidating long positions ahead of the holiday and month-end," said Jack Scoville, vice president at Chicago-based Price Futures Group.
"The harvest is coming up well and the weather is also good, so there are not much factors to lift the cotton market higher at the movement."
Naseem told that 600 bales of Rahim Yar Khan, 600 bales of Sadiqabad, 400 bales of Kot Sabzal were sold at Rs 9600 per maund, 200 bales of Lodhran, 400 bales of Fort Abbas, 400 bales of Bahawalpur, 200 bales of Faqeerwali, 200 bales of Yazman Mandi were sold at Rs 9550 per maund and 1000 bales of Layyah were sold at Rs 9200 per maund.
He told that rate of cotton in Sindh was in between Rs 8800 to Rs 9300 per maund. The rate of cotton in Punjab is in between Rs 8800 to Rs 9700 per maund. He also told that Phutti of Sindh was sold in between Rs 3500 to Rs 4500 per 40 Kg. The rate of Phutti in Punjab is in between Rs 3600 to Rs 5000 per 40 Kg.
The rate of Banola in Sindh was in between Rs 1650 to Rs 1800 while the price of Banola in Punjab was in between Rs 1700 to Rs 1900. The rate of cotton in Balochistan is in between Rs 8600 to Rs 9000 while the rate of Phutti is in between Rs 3800 to Rs 4900. The Spot Rate remained unchanged at Rs 9450 per maund. The Polyester Fiber was available at Rs 158 per Kg.
Copyright Business Recorder, 2020
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