In a bid to offload year-long cotton stocks, the Trading Corporation of Pakistan (TCP) is attracting buyers with a 10 percent advance tax exemption. The TCP''s move/offer follows the Economic Co-ordination Committee''s (ECC) nod to retail the whole stockpiles on prices that Karachi Cotton Association (KCA) determines on a daily basis in a bid to offload the stored commodity without further delays and losses.
Previously, despite giving all possible facilities to the bidders, the TCP was unable to offload cotton stocks as buyers were required to pay 10 percent advance tax on the procurement of cotton through tendering/auction process. After continuous poor response in the tenders issued for the sale of cotton, state-run grain trader, last month, proposed to the Ministry of Commerce for retail sale of cotton on daily basis as there is no advance tax on retail sale. Accordingly, the ministry presented the same in the ECC meeting, held on Wednesday, for appropriate approval and the meeting allowed the TCP to sell cotton stock on retail daily basis at minimum KCA sport rate through commission agents. The TCP has also been asked to hire the services of commission agents through an open tender process as per the PPRA Rules.
Sources said that the approval of the Ministry of Commerce''s summery by the ECC would allow the millers, exporters and other buyers to procure commodity on retail without paying 10 percent advance tax. "Previously, millers/buyers were reluctant to procure commodity through auction as the imposition of advance tax was increasing cost of commodity, however, now they will not be required to pay advance tax on retail cotton," a TCP official said.
It believed that retail sale of cotton would be a comfortable way to offload stocks and avoid losses as previously advance tax was a major hurdle to the sale of commodity, he added. He said that as per proposal the TCP would appoint commission agents, who would market procured cotton and make efforts for the sale of commodity. A tender for the appointment of commission agents would be issued shortly, he added.
The sources said that during the last three months, the TCP conducted some nine tenders for the sale of 95,400 cotton bales, however, hardly it can sell 10,800 cotton bales in two tenders, while remaining all were scrapped on technical grounds as the bidders/ buyers were not willing to pay 10 percent advance tax on procurement of cotton through tendering/ auction process.
Out of nine tenders conducted by the TCP, so far some 6,800 cotton bales have been sold through the first cotton tender and some 4,000 cotton bales in the fourth cotton tender. In addition, there was nil participation in four tenders and three tenders'' fetched bids less than reserve price. It may be mentioned here that in order to stabilise cotton prices in the domestic market, the federal government, in November 2014, directed the TCP for the procurement of cotton from ginning factories to facilitate the farmers. Accordingly, the TCP spending some Rs 3 billion, procured some 95,400 cotton bales from ginners at a support price of Rs 6,864 per maund.
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