KARACHI: The cotton market remained stable, with a notable increase in business activity. Favourable rainfall has had a positive impact on the crop. Cotton production has reached to 4,42,041 bales. However, to curb tax evasion, the Track and Trace system will be implemented in the cotton ginning industry.
The textile industry has vehemently protested the imposition of taxes on exports under SRO-350. All Pakistan Textile Mills Association, Textile Exporters Association have demanded that an urgent review of agreements with Independent Power Producers (IPPs) is necessary.
Following the Muharram holidays, the local cotton market resumed trading last week and has since remained generally stable.
However, the quality of cotton has been impacted by rainfall. Despite this, business activity has picked up, with textile mills demonstrating a keen interest in purchasing cotton.
Volume of business improves on cotton market
The cotton price in Sindh Province is in between Rs 17,800 to Rs 18,300 per maund, depending on quality. In Punjab Province, the price of cotton is in between Rs 18,900 to Rs 19,100 per maund. The price of phutti (cotton seeds) in Sindh Province was in between Rs 7,400 and Rs 8,200 per 40 kg, while in Punjab Province, it was between Rs 7,800 and Rs 8,500 per 40 kg. The prices of cotton and phutti in Balochistan Province are almost same in Sindh and Punjab Province.
Nevertheless, the market is experiencing a severe financial crisis. The textile sector continues to complain about the unbearable cost of energy, while industrialists, business chambers, and the FPCCI are specifically opposing huge capacity payments to Independent Power Producers (IPPs) and are constantly demanding that the government take action against them. However, there has been no progress on this issue from the government’s side. The industry sources say that due to IPPs factor and unaffordable energy prices, it is not only difficult but also impossible to run industries.
Separately, widespread rainfall is impacting cotton crops in multiple regions. While the present rainfall is beneficial, excessive rainfall can be detrimental. Farmers are complaining that the cultivation cost of cotton is increasing day by day whereas the price of cotton seeds (phutti) remains relatively low. As a result, farmers may be reluctant to invest more in cotton cultivation; ultimately it will affect cotton production.
It looks difficult that cotton production target will be achieved. At present, the general consensus among experts is that the crop yield will likely range between 75-77 lakh bales, but it is premature to make any definitive predictions. The Spot Rate Committee of the Karachi Cotton Association decreased the spot rate by Rs 3,00 per maund and closed it at Rs 18,000 per maund.
Naseem Usman, Chairman of the Karachi Cotton Brokers Forum, reported that the global cotton market has maintained overall stability. The price of New York cotton futures is currently fluctuating between 70 and 73 US cents per pound.
As per the weekly USDA export and sales report, a total of 27,200 bales were sold in the 2023-2024 period. Vietnam emerged as the top buyer, purchasing 7,400 bales, followed by China with 5,600 bales, and Pakistan with 5,500 bales. For the 2024-2025, over one lac and sixty five thousand bales were sold.
China led the pack by purchasing 34,400 bales, followed by Pakistan with 13,700 bales, and Vietnam with 11,900 bales.
Seed Cotton (Phutti) equivalent to over four lac (4,42,041) bales have reached ginning factories across Pakistan till July 15, 2024. According to a fortnightly report of Pakistan Cotton Ginners Association (PCGA) issued to media on Saturday, Punjab ginning factories recorded cotton arrival figures of 1,14,375 bales while arrivals to ginneries in Sindh recorded at 3,27,666 bales including 2,63,282 reaching ginneries in Sanghar district alone. Arrivals in Balochistan were recorded at 11200 bales. Out of the total arrivals, seed cotton converted into bales was recorded at 3,95,695 bales.
Exporters/ traders didn’t buy cotton bales while textile sector bought total 3,74,889 bales. Trading Corporation of Pakistan (TCP) has also not yet started procuring cotton in 2024,25, says the report. As many as 67152 unsold bales stock was present. Total 215 ginning factories are operational in the country.
Naseem Usman Chairman of the Karachi Cotton Brokers Forum while commenting on the report said cotton sowing this year has been relatively delayed compared to last year’s more extensive planting.
He said excessive heat damaged the cotton flowers, resulting in lower production. Analysts predict that Pakistan’s cotton output will likely range between 75-77 lakh bales this year. However, it is premature to make any definitive statements.
As per government estimates production of cotton will be more than one crore bales, while experts anticipate that suitable rainfall will have a positive impact on the cotton crop.
Further More, Federal Minister for Industry and Production, National Food Security and Research Rana Tanveer Hussain has said the government has decided to introduce a track and trace system in the local cotton and ginning industry aimed at avoiding tax evasion.
Talking to a delegation of the Pakistan Cotton Ginners Association that called on the minister, he said the cotton industry has a pivotal role in the rural economy and the potential to provide employment opportunities for a large portion of the skilled and semi-skilled workforce in the country. The meeting discussed matters relating to additional taxation measures on seed cotton and cotton seed cake in the current budget, said a ministry statement.
The minister said a track and trace system will be implemented on locally produced cotton bales in order to avoid tax evasion to protect local farming communities as well as the industrial sector of the country.
Hussain said the Cotton Control Act will be implemented in real terms in collaboration with the provincial governments and assured the delegation that their proposals regarding sales tax on seed cotton and cotton seed cake will be considered.
The minister also assured the delegation that the matter of new taxation measures will be taken up with the Finance Division and the Federal Board of Revenue (FBR) for consideration to address the issues faced by the local ginning industry.
Speaking on the occasion, the representatives of the Cotton Ginners Association apprised the minister about the additional taxation on cotton products and said that heavy taxes were affecting the production of the cotton ginning industry. They urged the need for rationalisation of taxation on these commodities for the benefit of the local industrial sector as well as promoting cotton crop output in the country.
Furthermore, the Pakistan Textile Exporters Association has urged an immediate review of the agreements with Independent Power Producers (IPPs) to reduce electricity tariffs. According to Patron-in-Chief Khurram Mukhtar, the persistent increase in electricity prices attributed to capacity charges is having a devastating impact on the country’s exports and economy.
Copyright Business Recorder, 2024
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