KCA underscores need for safeguarding interests of all segments of cotton trade

LAHORE: The Karachi Cotton Association (KCA) on Friday urged upon the government that the policy of free trading in cotton should be continued in the coming years without any change or modification to safeguard the interests of all segments of the cotton trade. In its budget proposals sent to finance ministry KCA also urged upon the Government to direct the Commercial Banks to open necessary Letters of Credit (L/Cs) expeditiously on the request of importers of raw cotton i.e local textile mills so that they may be able to meet their requirement of imported raw cotton timely.

Government has been following the policy of free trading in cotton i.e. free export and import of cotton without any duty and quantitative or qualitative restrictions for the past several years. This policy has been designed to safeguard the interests of all segments of the cotton trade.

Due to acute shortage of cotton resulting in drastic decline in cotton production in the country, the local textile industry is compelled to import raw cotton from abroad to meet its requirement of basic/primary raw material but the necessary Letters of Credit (L/Cs) are not being opened timely by the Commercial Banks.

The KCA, therefore, urges the Government that export of Raw Cotton should be allowed zero rated by withdrawing 18% GST at ginning stage. In order to ensure efficient marketing of cotton crop and safeguard the interest of the cotton growers as well as the economy of country otherwise export of cotton would be seriously hampered in anticipation of good crop in 2023-24 and the exports earnings of the country would be badly affected which could not be afforded in the economic circumstances prevailing in the country.

For exporters at present, 18% GST on raw cotton is levied at ginning stage that is refundable at exports stage to the exporters of raw cotton The exporters of Raw Cotton make their shipments within four to six weeks of the procurement of raw cotton from the ginneries and are thus in a position to rollover their capital several time in a year.

Due to considerable delay in refund of Sales Tax amount to the exporters of raw cotton, considerable working capital of exporters of raw cotton gets stuck-up for a long period that not only restrict their turnover but it also affects their ability to make further exports.

The KCA, also urges upon the Government to issue necessary instructions to the authorities concerned to expedite settling the Sales Tax Refund Claims of the Cotton Exporters. The Association also proposed to allow import of certified cotton seed from abroad. The exporters of raw cotton are facing serious liquidity problems due to considerable delay in refund of Sales Tax to them thereby adversely affecting their capability to export raw cotton further due to liquidity crunch resulting in loss of valuable foreign exchange for the country. In some cases, the claims of cotton exporters regarding refund of Sales Tax are pending for 02-03 years. Due to stuck-up of huge finances of the exporters of Raw Cotton with the Government’s treasury, the ability of the cotton exporters to make more export Sales contracts of raw cotton with the foreign buyers is badly affected. The government should allow import of cotton from the African continent including Mali, Chad, Mozambique and Senegal.

Copyright Business Recorder, 2023