KARACHI: Irreparable damage to the cotton crop was witnessed due to continuous torrential rains and floods. The price of quality cotton is Rs 24,000 per maund and the price of high quality Phutti is Rs 11,000 to 13,000 per 40 kg and the spot rate of Karachi Cotton Association is Rs 23,000 per maund, the highest level in the history of Pakistan cotton.
Due to high price of cotton and significant disparity of by-products, many small mills are closed or forced to run partially. Cotton consumption will also be relatively low. Still, cotton will have to be imported in a large quantity. Textile sector also faces severe energy problem. Along with the expansion of the textile sector, an integrated strategy to increase the cotton crop is also essential.
In the local cotton market, rains and water-logging continued in almost all the cotton producing regions of the country during the past week; especially in Sindh and in Balochistan provinces, where standing cotton crop was more affected. Ginning factories remained closed while walls of many factories collapsed due to accumulated water. Flood water in the fields causes irreparable damage to the crop. Almost half of the crop has been destroyed in Balochistan. There has been a lot of crop damage also in Sindh province.
In the province of Punjab, many cotton producing areas were damage due to stormy rains. Dera Ghazi Khan, Rajanpur, Fazilpur and Taunsa were badly affected due to flood and rains.
The quality of cotton was more affected then the quantity due to rains.
It is too early to assess the damage as many areas are waterlogged. The damage could be assessed in the second week of September. The Cotton Crop Assessment Committee of Pakistan Cotton Ginners Association (PCGA) had summoned meeting of the committee for the assessment of cotton production but later the meeting was postponed. Now this meeting will be held on September 3. PCGA will release the first weekly report of cotton production in the country by August 31.
However, due to the damage to the cotton crop, the price of cotton has increased significantly. The price of cotton in Sindh province is Rs19500 to Rs 22000 per maund. The floods and the rains have damaged both quality and quantity of the cotton crop.
There is also a problem with the quality of cotton in the province of Punjab, where the price of cotton is Rs 22,500 to 24,000 per maund and the price of Phutti Rs 8,000 to Rs13,000 per 40 kg.
In Balochistan province, the price of cotton is Rs 18500 to Rs19000 per maund and the price of Phutti is Rs 9000 to Rs 12000 per 40 kg.
There is an increasing trend in the prices of Banola, Khal and Banola oil.
The Spot Rate Committee of Karachi Cotton Association increased the spot rate by Rs 3,000 per maund and closed the spot rate at Rs 23,000 per maund.
Cotton prices have continued to rise despite quality issues, while demand and prices for cotton yarn is relatively low, causing textile spinners to face difficulties.
The rate of dollar is increasing along with the rate of Future Trading of New York Cotton. The import of cotton is also not viable. Many mills are partially running their operations while some mills are also reported to be closed.
The trend of increasing international cotton prices also continues. There are reports of stormy rains after severe drought in the US cotton-producing regions of Texas and Okalahoma, which according to experts will damage the cotton crop. According to the USDA report, there is a shortfall of about 30 lac bales in the production of cotton in the United States, due to which the countries that import cotton from the United States will face difficulties.
Naseem Usman, chairman of Karachi Cotton Brokers Forum, said that the trend of overall increase in cotton prices in the international cotton markets continues. The rate of Future Trading of Cotton after increasing closed at 1.18 American cents.
However, the Pakistan Hosiery Manufacturers and Exporters Association (PHMA) has “shocked” over the cancellation of regionally competitive power tariff of 9 cents per KWH for the value-added textile export sector, and has expressed fears that discontinuation of the facility will hurt the economy.
In a letter to the prime minister, the PHMA said that the exporters are “shocked” over the Cabinet Division’s corrigendum issued on Aug 19, 2022, stating that the federal government has withdrawn its decision of July 27, 2022 to provide the export-oriented industry with a tariff of 9 cents per KWH till end of 2022-23.
The cancellation of the approved regionally competitive power tariff will lead to further decline in textile and the total national exports, the letter said, a copy of which was also provided to Business Recorder.
The government’s decision to facilitate exporters through the regionally competitive rates for RLNG tariff at $9 MMBTU and power at 9 cents per KWH to augment export was appreciated, it said.
Keeping in view the tariff approval, exporters of value-added textile sector negotiated their future deals, accordingly.
PHMA called the withdrawal decision a “very alarming” and “unfortunate” to have a “disastrous” impact on the cost of manufacturing of goods meant for exports.
The existing manufacturing cost is already higher in Pakistan as compared to the competing countries. Pakistani exporters’ deals fetch a very narrow margin of 2 to 3 percent, according to the letter.
The country’s competing nations like Bangladesh, India, China and Vietnam strike contracts with the global buyers about 15 percent less rates comparing to Pakistan, it pointed out.
The cancellation of the approved power rates of 9 cents per KWH will be “highly unwise” and “disastrous” for the exports, it said and urged the government to continue the concessional tariff for the industries.
The PHMA called upon the premier to intervene in the matter and help continue the regionally competitive power tariff for export-oriented industries.
Meanwhile, Patron in Chief All Pakistan Textile Mills Association Dr Gohar Ejaz announced launching an ambitious programme namely ‘Road to $50 billion Exports’ to help mend the country’s threadbare economy.
“The group aims to achieve the aforementioned goal] by moving to stitch sector and conversion of $3 billion yarn and fabrics of the country into value-added garments for exports fetching additional export of $10 billion,” said Dr. Gohar Ejaz.
Gohar Ejaz further said textile exports of the country were stagnant at $12-13 billion till 2018-19 owing to multiple issues especially energy tariffs and non-availability of energy for the textile industry. “Consequent to hectic efforts made by his Group, the Regionally Competitive Energy Tariff was approved by the Government for export-oriented sectors both for electricity and gas,” Ejaz said.
“Energy tariff costs not more than 2.67 percent to the country but they contributed to expanding textile exports to $19.33 billion during 2021-22, registering a growth of 26 percent over the preceding year and over 54 percent in the short span of three years.”
He added that a new investment of $5 billion, made in the textile sector, had the potential to fuel exponential growth in textile exports, provided the government continued to extend the business-friendly environment to textile and other export-oriented sectors.
Gohar also announced establishing a Garment Training Centre under the auspices of APTMA to train manpower for employment in the vast as well as expanding garments sector. “Extending of soft term loans of Rs250-300 million to trained men and women would inflate exports to more than $50 billion in less than five years leaving no requirement for borrowing loans from foreign donors.”
He also shared the group’s plans to set up the ‘Pakistan Economic Forum’ comprising professional experts from all fields of the economy to analyze the economic woes of the country and to prepare a blueprint for economic revival and development of an economic vision for the next ten years.
Ejaz reiterated that sustainable export-led economic growth is imperative for the development of the country in order to create additional jobs in the country and to earn more foreign exchange for the economic stability of the country.
Copyright Business Recorder, 2022