KARACHI: Cotton prices remained stable during previous week though trading volume was low. Ginning factories are operating at a reduced capacity due to limited cotton supply. Prices are varying according to quality. Mills are showing increased interest in exportable cotton. All Pakistan Textile Mills Association (APTMA) and industrialists are strongly protesting against huge capacity payments to Independent Power Producers (IPPs).
APTMA has demanded restoration of sales tax exemption on supplies. Industrialists have sent an SOS to the government regarding the closure of mills due to very high electricity costs. Moreover, a nationwide strike has been called by business and industrial circles on August 28.
Federal Minister of State for Finance and Revenue Ali Pervaiz Malik has said that measures have been initiated to resolve the issues of the textile industry.
The local cotton market experienced overall stability in cotton prices during the past week. Textile mills made cautious purchases, while the supply of rainy cotton or cotton affected by rainfall remained limited. Ginning factories are also operating partially. Quality issues in cotton have led to fluctuations in prices, with a difference in prices between quality cotton and rainy cotton. Two types of prices are prevailing in the market.
On the other hand, conflicting data is being presented regarding cotton production, with estimates ranging from 5.5 million to 7 million bales. However, it is premature to say anything in this regard till the end of rainy season.
The situation of textile sector is continuously deteriorating due to energy issues, IPPs’ capacity charges, and high interest rates, making it difficult, if not impossible, to run industries in the country.
Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and trade bodies, including chambers of commerce consider it challenging to operate industries in such circumstances. Continuous appeals are being made to the government to resolve energy issues; otherwise, industries in the country will shut down, leading to further increases in unemployment, which is already on the rise. This could lead to anarchy in the country, and according to them, the situation is heading towards creating civil war like conditions.
On the other hand, Pakistan Cotton Ginners Association (PCGA) has released data on cotton production in the country up to August 15th, which shows a 50% decrease in cotton production compared to the same period last year, which is alarming. Importers of cotton say that there is increase in import contracts, attributed to better quality, relatively lower prices, benefits of the Export Facilitation Scheme (EFS), and ease of payments. According to importers, contracts for approximately 15 lac bales have already been made, with more contracts being signed.
In Sindh province, the prices of cotton per maund are in between Rs 17,800 to Rs 18,200, while the price of phutti per 40 kg is in between Rs 6,000 to Rs 7,400.
In Punjab province, cotton prices are in between Rs 18,000 to 18,500 per maund and phutti prices in between Rs 6,700 to Rs 8,200 per 40 kg. In Balochistan province, cotton prices are in between Rs 17,700 to Rs 18,000 rupees, and phutti prices were in between Rs 6,500 to Rs 7,500 per 40 kg. The Spot Rate Committee of the Karachi Cotton Association increased the spot rate by 500 rupees per maund, closing it at Rs 18,000 per maund.
According to Naseem Usman, Chairman of the Karachi Cotton Brokers Forum, there has been a relative improvement in international cotton prices. The price of New York cotton futures ranged from 69 to 71 American cents per pound.
According to the USDA’s weekly export and sales report, 93,000 bales were sold for the year 2024-25. Pakistan ranked first after purchasing 24,900 bales, followed by India with 18,300 bales, and Bangladesh is on number third with 16,800 bales. For the year 2025-26, 4,900 bales were sold. Mexico ranked first, purchasing 3,300 bales, followed by El Salvador with 1,200 bales, and Japan ranked third with 400 bales.
However, the industry sector says it cannot run on expensive electricity. Over 100 units have already closed down. Millions of workers are unemployed. Industry is the country’s asset and it should be saved at any cost.
After consultations with the PIAF Group of the Lahore Chamber of Commerce, the Patron-in-Chief of the Federation of Chambers of Commerce and Industry, former Minister S M Tanveer, sent an SOS to the government on behalf of the country’s industrialists and industry during a press conference.
Former Minister of Industry Dr Gohar Ejaz, along with S M Tanveer during a news conference urged the government to put aside political differences and work for the country’s benefit. Later, a press conference was also held in Faisalabad regarding the same issue addressed by prominent industrialists, including Misbahur Rehman, Zafar Iqbal, Shehzad Malik and S M Tanveer.
Tanveer stated that over 100 industrial units in Faisalabad have already been shut down due to the excessive increase in electricity prices. He demanded that the government must reduce electricity costs.
Mian Misbahur Rehman said that the high cost of electricity is a significant obstacle to the industry’s operation. The closure of industries is leading to increased unemployment. They expressed hope that the government would address the issues of the business community with seriousness.
Meanwhile, APTMA has urged the government to immediately withdraw the “regressive tax policies” severely impacting the textile sector. The association warned that these policies are leading to permanent closures of factories and widespread unemployment.
APTMA expressed deep concern over the harmful effects of SRO 350(1)/ 2024 and the recent abolition of sales tax exemptions for local supplies for export manufacturing. The association believes these policy changes are crippling the industry, with far-reaching consequences for employment, economic stability, and the broader economy.
APTMA criticised the Federal Board of Revenue (FBR) for implementing the policy despite repeated appeals from industry stakeholders and assurances from high authorities. The association noted that operational difficulties created by SRO350 (1) 2024 have exacerbated the challenges faced by the sector.
APTMA urged the government to fulfil its commitments and make swift amendments to SRO 350(1)/ 2024 in consultation with affected industry stakeholders. The textile sector cannot afford further delays in resolving this issue, which has already caused significant and lasting damage.
Additionally, the association demanded the restoration of zero-rating for local supplies used in export manufacturing, which was withdrawn under the Finance Act 2024. It argues that removing zero-rating is not a revenue-generating measure but a reaction to the misuse identified in FBR audits involving a small number of firms out of approximately 1,900 beneficiaries.
APTMA urges the government to restore zero-rating for local supplies used in export manufacturing under the Export Facilitation Scheme (EFS). Instead of punishing the entire industry, the government should implement strict checks and balances to prevent misuse,” the statement concluded. APTMA warned that the survival of Pakistan’s textile industry, the livelihoods of millions and the country’s economic stability depend on an immediate response to these harmful policies.
Meanwhile, the government has taken notice of the issues faced by the textile industry and has initiated measures, including assurance of payment of pending sales tax within a week. In this regard, a high-level meeting was held under the chairmanship of State Minister of State for Finance, Revenue, and Energy, Ali Pervez Malik, where Khurram Mukhtar, Patron-in-Chief of the Pakistan Textile Exporters Association, represented the textile exporters.
He said that the government has assured to address the issue of capital shortage on a priority basis due to increased production costs caused by the energy tariff hike and delays in refund payments. He emphasised the need for immediate comprehensive reforms to address the significant challenges faced by Pakistan’s export sector. He stated that the immediate release of pending refunds, rationalization of energy tariffs, access to capital, reduction in interest rates, and swift restoration of the export facilitation scheme are essential.
Exporters are under severe financial pressure due to pending refunds related to deferred sales tax, duty drawback, DLTL (local taxes and levies drawback), TUFT (Technology Upgradation Fund), mark-up subsidies, and income tax. The government should ensure payment of refunds within the stipulated 72-hour timeframe to reduce the financial burden on exporters and improve liquidity.
Copyright Business Recorder, 2024
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