KARACHI: Overall stability was seen in cotton prices during previous week, having an improved business volume. The supply of quality cotton is decreasing day by day. An alarming decrease in cotton production has raised an alarm for ginners; moreover, there is a threat of whitefly attack on the cotton crop.
All Pakistan Textile Mills Association (APTMA) has demanded reduce interest rate by 500 basis points. However, textile exporters demand that refunds should be paid immediately.
In the local cotton market, there was overall stability in prices during the past week. Textile spinners are making cautious purchases, while cotton growers are selling Phutti in small quantities, resulting in stable Phutti prices.
However, the quality of Phutti is decreasing day by day, leading to a decrease in the availability of high-quality cotton. Large textile spinners are focusing on purchasing quality cotton, resulting in a price difference of Rs 1000 to Rs1500 per maund in the market based on quality.
According to market sources, there will be a further decrease in high-quality cotton supply after November 15. The total production of registered cotton is expected to be between 60 to 65 lac bales. The production of unregistered cotton sector in not included in this figure.
Last year, the total cotton production was approximately one Crore bales, while this year’s production is estimated to be around 80 lac bales, indicating a decrease of approximately 20 lac bales compared to last year. However, the government’s estimate is one Crore and eleven lac bales, which means that the actual production will be approximately 30 lac bales less than the government’s estimate.
The local textile mills require approximately one Crore thirty lac bales of cotton. To meet this demand, around 50 lac bales of cotton will need to be imported. According to cotton import agents, contracts for the import of 30 lac bales of cotton have already been signed, and more contracts are being made. Sources say that if the imported cotton arrives from late November, the mills will prioritise paying for the imported cotton, leading to further delays in payments for local
cotton. This will exacerbate the financial crisis in the market.
Anyway, the textile sector is facing numerous challenges, which are continuously increasing, particularly due to the highest energy prices and approximately Rs. 365 billion stuck in refunds of various kinds. Gas companies have indicated an additional 53% increase in gas prices, whereas already almost 450% increase has been made in the past few months. Due to these reasons, there has been a significant increase in the cost of textile products. Although there is an indication of a 2-3% decrease in interest rates in monetary policy but trade and industrial organisations consider it insufficient and are demanding a 5% decrease.
The rate of cotton in Sindh as per quality is in between Rs 16,800 to Rs 18,000 per maund. The rate of Phutti is in between Rs 7,200 to Rs 8,400 per
40 kg.
The rate of cotton in Punjab is in between Rs 17,500 to Rs 18,200 per maund. The rate of Phutti is in between Rs 7,400 to Rs 8,600 per 40 kg.
The rate of cotton in Balochistan is in between Rs 17,000 to Rs 17,500 per maund and the rate of Phutti is in between Rs 7,600 to 9,000 per 40 kg.
The Spot Rate Committee of the Karachi Cotton Association increased the spot rate by Rs 2,00 per maund and closed it at Rs 17,800 per maund.
Nasim Usman, Chairman of the Karachi Cotton Brokers Forum, informed that after fluctuations in the international market, cotton prices settled at 70 US cents per pound. According to the USDA’s weekly export and sales report, one lac eighty nine thousand and four hundred bales were sold for the year 2024-25. Vietnam topped the list by purchasing ninety one thousand and two hundred bales, followed by China with thirty two thousand and six hundred bales only and Pakistan is on third with twenty four thousand bales.
Meanwhile, Ehsan-ul-Haq, Chairman of the Cotton Ginners Forum, stated that Pakistan’s cotton crop has been severely affected by unexpected adverse weather conditions over the past few years, including heavy rainfall and record temperature increases. He explained that these factors have not only reduced the overall national cotton production but also affected the quality of cotton and seeds. As a result, import activities have increased, and seed cultivation has also been effected. He added that in some areas, farmers are cultivating cotton multiple times, which can lead to further issues.
In the major cotton zones of Punjab, including Rahim Yar Khan, Bahawalpur, Bahawalnagar, and Sahiwal, and in Sindh’s cotton zones including Sanghar, Hyderabad, Mirpurkhas, Nawabshah, and Ghotki, a record increase in temperature has been observed over the past few days. In some of these districts, the temperature has risen above 40 degrees Celsius, severely affecting the cotton crop. They stated that the rise in temperature has caused early opening of cotton flower which effects growth of cotton.
Agricultural experts are advising landowners to reduce the irrigation duration and increase the water quantity in such areas to protect the cotton crop from adverse weather conditions. Additionally, as soon as the whitefly attack begins, they should spray the best agricultural medicines on it.
They say that due to the non-upgradation of the Meteorological Department in Pakistan, local farmers have been deprived of timely and accurate weather forecasts for several years, resulting in crop losses and causing the economy to suffer losses
of several billion dollars every year.
According to reports, several Pakistani textile mills have decided to suspend or reduce their production processes due to the impact of adverse weather conditions on cotton quality and delays in importing cotton, which may further affect the Pakistani economy.
The Pakistan Textile Exporters Association (PTEA) has raised concerns over prolonged and indefinite delays in disbursing outstanding refunds totalling Rs328 billion across multiple categories, despite repeated assurances from the government.
Furthermore, the recent withdrawal of Export Financing Scheme (EFS) on domestic trade has placed additional pressure on exporters who are the driving force behind the country’s value chain.
According to the PTEA, approximately Rs55 billion are owed in Sales Tax Refunds, Rs105 billion in Deferred Sales Tax Refunds, Rs25 billion in Duty Drawback, Rs100 billion in Income Tax Refunds, Rs35.5 billion in DLTL/ DDT, Rs4.5 billion under the TUF and Rs3.5 billion in Mark-up Subsidies. The PTEA has highlighted that by law, Sales Tax Refunds carrying a high rate of 18% are to be disbursed within 72 hours under Rule 39F of the Sales Tax Act of 2006. However, the refund cycle currently stretches beyond 200 days, far from the intended swift processing.
The All Pakistan Textile Mills Association (APTMA) has proposed to the Monetary Policy Committee that it reduce interest rates by 500 basis points in the November 4th meeting. According to APTMA, this drastic measure is necessary to alleviate the current economic pressure on industries and will also send a strong signal to investors to invest in industrial projects, allowing the government’s debt reduction efforts to be balanced with growth-oriented expenditures.
APTMA Chairman Kamran Arshad said that with inflation declining to 6.9% by September 2024 and remaining between 6-7% in October, inflation has reached a manageable level.
However, the nearly 50% decline in Pakistani cotton production has sounded an alarm bell for the ginners, as textile exporters are forced to import yarn, and farmers are considering alternative crops for the next season. However, government agencies are already showing their traditional negligence in addressing this issue, which appears to be unfolding into a full-blown crisis in the future. And all this is happening at a time when the sector is also facing a decline in trade with Bangladesh and India, and is flooded with foreign orders, while the national political and economic turmoil in Pakistan has made it clear that both changing global trends and local agricultural sector issues are being neglected by relevant government authorities, resulting in exporters facing severe capital shortages due to billions of rupees being stuck in sales tax and duty drawback refunds, and farmers complaining that cotton cultivation has become too costly compared to competing crops like sugarcane, maize, rice, and sesame.
Sajid Mahmood, Head of the Technology Transfer Department at the Central Cotton Research Institute, Multan, has emphasised that the continuous decline in cotton production and cultivated area has led to a crisis in agricultural sector. He remarked that the story of Pakistan’s cotton crop has now become a sorrowful tale, as each year sees the dreams of our farmers fading. Once a globally recognised and crucial pillar of our economy, Pakistani cotton now faces serious challenges.
He said the primary factor contributing to this decline is the absence of sound policies. Rising agricultural costs, seed shortages, expensive pesticides, and limited access to modern technology have severely impacted production.
Rather than investing in local cotton, the textile industry has increasingly turned to imported cotton, exacerbating the decline of domestic production. This shift has limited opportunities for research and development, stifling progress in the cotton sector. In the face of global challenges like climate change, Pakistan lacks a cohesive framework to support cotton production against these external threats, leaving both farmers and researchers without adequate resources or funding.
Sajid Mahmood urged that without swift and decisive action, the cotton sector will risk a permanent loss, adding immediate reforms are essential to safeguard this vital sector and secure the livelihoods of those who depend on it.
Copyright Business Recorder, 2024
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