Credible estimates put cotton out-put this season between 11.0 and 11.5 million running bales which equates to 10.25 and 10.70 million 170-Kg. bales while the US estimates of November, 08 put production figures at last season's level of 9.0 million 480-bales equal to 11.52 million 170-Kg bales.
Our domestic cotton consumption is estimated around 13.175 million bales down 15 % from last season's consumption of 15.5 million bales whereas US estimates put our consumption at 12.0 million 480-lb bales equal to 15.36 million 170-Kg bales almost equal to last years consumption. General perception is that US has estimated Pakistan cotton consumption very optimistically.
The impact of global recession and effect of Pakistan's local deteriorating economic, financial, power crisis, and deteriorating border security situations are adversely effecting our industrial production and as such the cotton consumption has been estimated around 13.0 - 13.5 million running bales. We cannot increase our cotton productivity and production without adopting new technologies in seed-breeding, irrigation, morphology, farm management and cotton quality.
In coming years, competition in textile goods exports would increase and countries who would offer better quality, good performance and lower price would win the race. Pakistan's textile industry does not appear so efficient as to compete the world textiles on imported cotton. Pakistan will have to increase its cotton production at least to the level of its domestic consumption and also reduce our cost of production to a reasonable level for staying competitive in textile export market.
The instable and deteriorating business conditions of textile mills is posing a great threat to the health of banks as there are reports of possible huge amount of Non-performing-loans from textile industry. Reportedly, some 200 textile units are fighting against high cost of borrowing, utility bills, power crisis and poor off-take of products. Recently, the Government taking cognisance of the difficulties of the textile sector, has announced some measures including moratorium of debts for one year and a committee for rescheduling of loans has been formed.
As a matter of fact, the main problem of the textile industry is high interest rates, power crisis, high cost of power and utility facilities and restoration of payments against R & D which should directly be tackled wisely so as to provide the textile mills to stay competitive in the export market.
Lint prices in the local market were found steady in the last week and bargained prices ranged between Rs 3,000 and 3,400 per maund of 37.324 Kg ex-gin. Better grade cotton is getting scare and is commanding premium. TCP is reported to have received some 150,000 bales against their contract of more than 600,000 bales, Understandably, the sellers are reluctant to deliver against their contracts in view of better price in the market.
As such, the contracts would perhaps be deemed settled at par after expiry of a fixed delivery period. The TCP is reported to have floated two local tenders for purchasing 100,000 bales each. The basic purpose of the Government to enter into cotton market through Trading Corporation of Pakistan is to arrest the decline in cotton prices and maintain its level above Minimum Support Price irrespective of the amount of cotton it procures. When this aims appears to have been achieved then why the TCP is floating tenders for purchase of cotton.
When TCP has fixed Minimum Support Price of Rs 3,202 per maund then it should stick to this rate only. However, procuring cotton over and above MSP would entail huge losses to TCP and it would be detrimental to the interests of the spinning industry as our cotton crop is already short of our requirements by 15 to 20 % and our spinning industry would spend costly foreign exchange on cotton imports. Normally, the Government comes to the rescue of the growers when due to glut of production cotton prices decrease below the MSP but this time , cotton prices have crashed due to weakness of the spinner-buyers. As such, the Government should strengthen the spinners to buy cotton at reasonable price so as to mitigate the sufferings of the growers. The Government should reconsider their decision to purchase cotton through tenders, of course at higher rates and scrape the tenders considering them unnecessary.
Prominent economists now agree that the slow-down in US economy had taken start soon after 2007 and its impact on financial and economic matters was seen by the middle of 2008. In 2008, the US Government pumped some US $700 billions into market for countering the effects of recession in business, industry and services sectors but the situation further deteriorated and now the Government is considering to spare US $825 billions to bail-out their economy. Unemployment ratio has gone high, bankruptcy case are increasing fast, confidence of the buyers has shaken, housing and pledging industries are at low level and retail sales going down. This situation is posing a great threat to the present free-market capitalistic system. The capitalistic system generated over-consumption through easy and fast credit availabilities in the west which prompted the East to go for over-production. Thus the pace of flow of money and investments from West to East accelerated. The other day, opposition leader of UK reportedly indicated that their resources to fight this global recession are at the brink of exhaustion and they might ask for assistance from IMF but IMF is reported to be having only US $150 billions in its basket which may not be sufficient to match the requirements of large economies. By the end of September, 08, China had some US $1,800 billions in its reserves. US spinning industry is coming to an end.
In 10 years period, US cotton consumption has crashed from peak 11.349 million 480-lb bales in 1997-98 to mere 4.4 million bales in 2008-09 whereas in this period Chinese cotton consumption jumped from 19.150 million 480-lb bales to 51.0 million bales, in the same period, Indian cotton consumption rose from 12.675 million 480-lb bales to 18.0 million bales and that of Pakistan from 7.187 million 480-lb bales to 12 million bales. The growth of textile industry in the East specially South East has shown tremendous growth which led to over-production of textile products to meet the over-consumption of the West specially US and EU countries.
Now, it appears certain that in next few years, US would cease to be the engine of world economy and would be replaced by China for which China has almost completed its homework for taking over as the driver of the global economy train. Thus, a couple of centuries old supremacy of the US and EU countries in textile industry and the exploitation of the East as supplier of raw material to the West would come to an end and the East would play the role of textile manufacturing house and West would specially US would become a source of raw material supply.