Akber Sheikh, chairman, All Pakistan Textile Mills Association (Aptma). Punjab, has expressed serious concern of the textile industry at the move of 'vested interests' to have futures trading in cotton restarted. The following unhappy experience cotton hedge trading was stopped in 1976, he added.
Aptma along with other stakeholders is opposed to futures trading in cotton on grounds of principle, he said in a statement here. The disadvantages of cotton hedge trading far outweigh the ostensible logic of futures trading, namely the coverage of price fluctuation risk in raw cotton. "We are dependent on imports to cover more than 20 percent shortfall in cotton production, which makes it explicit that the rationale for futures trading in cotton is non-existent", said Akber Sheikh.
A few traders taking control of the cotton market and manipulating prices is a scenario that is fraught with dangerous consequences for the textile industry, he said, adding: "Even our stock exchanges have not been immune from volatility and turmoil on account of absence of proper and adequate regulatory mechanisms and monitoring. With a fiber-mixed ratio of 80 to 20 in favour of cotton and that too with a consumption of 15 million bales of cotton, we can ill-afford to be subjected to the uncertainties of a speculative market."
Such a move portends ill for the textile industry that would be ruined if subjected to the vagaries of speculation and manipulation, he observed.
Akber Sheikh highlighted that freely operating market forces were imperative for a futures market to operate credibly. Shortage interventions and manipulations are not conducive to the credible operation of futures contract.
Cautioning governmental quarters, Akber Sheikh said that profit-driven manipulations skewed the proper functioning of even the well-regulated New York Futures Market, the largest in the world. The textile industry of Pakistan was operating on tenterhooks and needed to be protected from speculative uncertainties and unscrupulous operators.
He apprehended that hedge contracts in cotton trade will create a third buyer that would adversely affect the smooth functioning the textile industry all along the value chain and is bound to dent country's competitiveness further in the international market.