KARACHI: Domestic cotton prices have shown a mixed trend recently, influenced by the fluctuations in New York cotton prices. This fluctuation has resulted in low business volume within the sector.
However, All Pakistan Textile Mills Association (APTMA) has strongly condemned the recent 223% increase in gas rates. They have demanded relief from the government, citing the detrimental impact on the textile sector. APTMA has warned the Special Investment Facilitation Council (SIFC) about the potential decline in exports due to this hike.
The Federal Committee on Agriculture (FCA) has been urged to promptly announce cotton estimates. Additionally, stakeholders have called on the government to establish an intervention price for cotton. It is suggested that the Trading Corporation of Pakistan (TCP) initiates preparations from the beginning of the season to mitigate potential challenges.
Stakeholders emphasise the importance of a viable national cotton policy for Pakistan’s economy to demonstrate positivity. They stress the need for reduced energy rates to facilitate growth within the sector. Furthermore, a decision is required on whether industries should operate without subsidies or with government support.
Gohar Ijaz said refunds of worth Rs 65 billion has released, but refunds of Rs 250 are still outstanding in terms of taxes and other dues.
The price of cotton in the local market last week was affected by fluctuations in the price of New York cotton.
By the end of the week, there was a decrease of 500 to 1000 rupees compared to last week, attributed to the government’s continuous increase in energy, gas, and petrol prices, as well as, unsustainable rises in production costs due to high interest rates, etc.
According to APTMA, several mills have already closed their operations, and others are partially operational. There is a severe financial crisis in the markets due to recession in both domestic and international markets for cotton yarn and textile garments.
According to a report of the Pakistan Cotton Ginners Association (PCGA), approximately eighty four lac bales will be produced this year. There are rumours circulating in the market that if approximately 15 lac bales of unregistered cotton are included, the production will be around 1crore bales. Meanwhile, it is estimated that textile spinners need approximately one Crore thirty lac to one Crore thirty five lac bales. About 800,000 bales are expected to be imported from Afghanistan, while in the case of imports from foreign countries, the need for textile spinners will be fulfilled with approximately 20 lac bales.
For the next season, the government will have to prepare a strategy to increase cotton production. Every year, the Federal Committee of Agriculture (FCA) sets the cotton production target in the month of March. The news of a relatively significant increase in cotton cultivation is circulating. The FCA should immediately set a cotton production target. The previous government had announced the intervention price (MSP) of Phutti at Rs 8500 per 40 kg and a promise to buy 10 lac bales of cotton through the TCP if the cotton price falls below that, which encouraged cotton farmers. They cultivated more cotton, but the government didn’t fulfil its promise, not buying a single bale through TCP.
This has shaken the trust of farmers in the government’s commitments. Immediate intervention is needed to announce MSP rates for the next year and TCP should be prepared to purchase cotton from the beginning of the season to restore farmers’ trust.
The rate of cotton in Punjab and Sindh is in between Rs 19,000 to Rs 21,500 per maund. The rate of Phutti is in between Rs 8,500 to Rs 10,000 per 40 kg. The rate of Khal, Banola and oil remained stable.
Chairman Karachi Cotton Brokers Forum Nasim Usman said that international cotton, especially New York cotton, is experiencing fluctuations in prices. Initially, after reaching a high of 103 cents per pound, it subsequently dropped to 94 to 95 cents per pound. Then, it rose again to 101 cents before closing at 95.38 cents.
An increase of Rs 4,00 to Rs 5,00 per maund was witnessed in the rate of cotton.
The Spot Rate Committee of the Karachi Cotton Association closed the rate at Rs 21,500 per maund.
According to the weekly income and sales report from the USDA, a total of 52,000 bales were sold for the year 2023-24. Bangladesh remained at the top by purchasing 34,300 bales, followed by Vietnam with 24,300 bales, and Turkey with 23,100 bales. For the year 2024-25, a total of 15,100 bales were sold. Indonesia led the purchases with 13,200 bales, followed by South Korea with 5,300 bales, and Mexico with 2,400 bales.
In addition, the All Pakistan Textile Mills Association (APTMA) South Zone stated in a statement said that recent increases in gas prices have rendered the textile sector, which relies on exports, non-competitive in the international market and forced many mills to shut down.
APTMA’s Chairman, Zahid Mazhar, said, “The tax-based industry is rapidly deteriorating, and Pakistan is losing market share in the global market due to dangerously high increases in energy rates.”
In Pakistan, the textile industry has issued a precautionary message to the Special Investment Facilitation Council (SIFC), highlighting the potential decrease in revenues without access to financially viable energy sources. The APTMA has proposed various measures at the global level to enhance competition in textile exports, including the elimination of cross-subsidies and the activation of Competitive Trading Bilateral Contract Market (CTBCM).
Former Minister of Commerce, Gohar Ijaz, says that to save industries, energy rates need to be reduced by 9 cents. They are providing subsidies to industries and domestic consumers on electricity. Industries are providing employment through exports. The decision needs to be made whether to run industries or provide subsidies. Gohar Ijaz asks, should we give a subsidy of 500 rupees per month or provide a job worth 35,000 rupees? Do we need to increase exports to repay loans? Do we need to take external loans for revenue? These fundamental decisions will have to be made by the next government.
The energy rates in Pakistan are higher than in regional countries. This expensive energy will shut down industries, and an increase in revenue is impossible with industrial closures. To make domestic manufacturing competitive, Pakistani products must be made marketable in global markets, and it is essential to make fundamental decisions for $100 billion in exports.
Sajid Mahmood, Director of the Department of Technology Transfer at the Central Cotton Research Institute Multan, says that we can only escape from the IMF through the cultivation of cotton. The establishment of a National Cotton Policy is the only practical solution to deal with all the requirements and current challenges of stakeholders related to cotton cultivation and cotton value chain, including the Pakistan Central Cotton Committee, APTMA, PCGA, FPCCI, PBS, PCSIR, and other public and private sector entities.
All stakeholders should jointly prepare a draft on this matter and initiate discussions with government representatives for its implementation. It is crucial to establish a National Cotton Policy to promote and develop cotton cultivation in Pakistan, stabilize the national economy, and reduce dependence on IMF loans. Current challenges such as expensive electricity, gas, and the imposition of indiscriminate taxes by the IMF are major obstacles to the productivity of the entire cotton chain, leading to reduced industrial production and growing disillusionment among cotton growers. Without a viable national cotton policy, Pakistan cannot progress, nor can it be free from IMF constraints.
However, textile exporters have expressed gratitude to Prime Minister Pakistan Mian Muhammad Shehbaz Sharif for acknowledging the payment of refunds worth 65 billion rupees, considering it a significant step towards the development of the revenue sector.
Chief Patron of the Pakistan Textile Exporters Association, Khurram Mukhtar said this move will not only restore exporters’ confidence but also aid in promoting revenues.
He expressed hope that under the leadership of Prime Minister Shehbaz Sharif, the government will take priority measures for economic reforms, as well as the advancement of industry and trade, for the prosperity of the economy.
He mentioned that currently, approximately 50 billion rupees are obligatory under the textile policy for duties drawback of taxes and levies, technology upgradation, and marketing support, while roughly 250 billion rupees are obligatory for sales tax deferment, customs rebate, income tax, and income tax credit.
Copyright Business Recorder, 2024