The Karachi Cotton Association (KCA) in a press release has expressed its serious concern on the demand of the Pakistan Cotton Ginners Association (PCGA) asking the Government to direct the Trading Corporation of Pakistan (TCP) to procure one million bales of cotton to stabilise cotton prices.
The KCA is of the view that any intervention by the Public Sector Organisation in the cotton market would negate the policy of free trading in cotton being followed very successfully since past 16 years in order to safeguard the interest of all the stockholders of the cotton economy including the cotton growers.
The KCA has always advocated free trading policy in cotton ie free export and import of cotton without any quantitative or tariff restrictions in order to ensure international price of cotton to the grower and provide a level playing field to all sections of the cotton economy of the country.
The KCA recalls that the President of Pakistan, in a meeting held with the Spinners on 20-10-2010 at Islamabad, firmly assured that the Government would continue to allow the existing Free Trading Policy of Cotton across the Textile chain ie from Raw Cotton to its value-added finished products with a view to safeguard the interest of all sections of the Cotton Trade. The KCA believes that the market forces themselves determine the price mechanism, exportable surplus and demand and supply situation.
It may be noted that as per latest figures of the PCGA, 11.036 million bales of cotton have already arrived in the ginning factories out of which 8.591 million bales have so far been purchased by the Textile Mills and 0.4222 million bales by the cotton exporters respectively. Hence, it is not correct to say that there is only one buyer of cotton in the market ie the Textile Mills. From the position stated above, it establishes that the exporters of raw cotton, being a second buyer, are actively buying cotton at international prices and exhorting stabilisation effect on the cotton prices.
In fact, the ginners have accumulated a considerable stocks of rain affected cotton at cheaper prices and now desire to sell the same cotton to the TCP at higher price to safeguard their own interests.
In view of the above, the KCA strongly urges the Government not to make any intervention in the cotton market through Public Sector Organisation and continue the existing free trading policy of cotton in the interest of all sections of the cotton trade and economy of the country. Otherwise, the operations of Public Sector Organisation in the marketing of Cotton would involve huge losses, as was the case in the past, to the Government which would ultimately be borne by the Tax Payers. It would also cause disruption in the cotton market /economy of the country.
In order to stabilise the prices of cotton and ensure fair return to the cotton growers/ginners, the KCA suggests the Government to resume Hedge Trading in Cotton under the aegis of the KCA so as to provide cover against the risk of fluctuations in price, thereby facilitating smooth flow of national and international trading in cotton. The KCA advises the Government that any decision regarding the Cotton Policy should be taken after adequate consultation with all the stakeholders including the KCA.-PR