Cotton yarn makers have threatened to go on a strike unless the government removes the ceiling on yarn exports. "We have a set up a business here and if we are getting a good price in international market, then so be it," said one miller. Apparently their argument makes sense.
Global cotton prices have been on a steady rise throughout this fiscal year, enabling millers to earn a margin that they couldn have earned in the local market.
But if international prices were really that attractive, shouldn yarn maker have produced more to increase their sales volume? Data released by the Federal Bureau of Statistics shows that total yarn production during the first half of current fiscal year saw no improvement in production volume.
Despite a bumper crop at home and substantially lower domestic cotton prices some months ago, millers failed to produce more yarn. A straight answer to that, however, is shortage of basic utilities, which constrained the millers production capabilities. Simply put, the whole cotton crop this year has been poorly managed.
With exports of raw cotton and cotton yarn rising exponentially in the recent months, domestic prices have surged phenomenally. According to the Karachi Cotton Association, prices in the local market are currently hovering around Rs5,500~Rs5600 per maund, as against Rs4600~Rs4800 a quarter ago.
Millers meanwhile failed to capitalize on the opportunity in terms of volume, as production remained limited due to gas and electricity load shedding. Likewise, the countrys value added textile sector was unable to achieve price competitiveness on the back of bumper output as domestic prices raced higher.
Understandably, this can be a complicated public policy case; should one let yarn makers export all they can on the premise that they are suffering from bad loans and the free market mechanism. Or, should one support the value added sector on the evidence that value added products add more value to the overall GDP than raw or semi-finished goods.
But mediating between the industries to resolve such complex situations is an essential part of governance - something which the government officials have so far not managed to do.
If the textile ministry cannot bring an amicable end to this brawl, then can one really expect the textile policy to bear its desired fruits?
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