KARACHI: The local cotton market remained stable on Friday. Market sources told that trading volume was low.
Cotton futures fell on Thursday to a more than two-week low on speculator selling toward the end of the month and a mixed export sales report by the US Department of Agriculture (USDA).
The cotton contract for March fell 0.49 cent, or 0.6%, to 80.35 cents per lb by 1:01 p.m. EST (1801 GMT), having earlier touched its lowest level since Jan. 11.
“We are approaching the end of the month and are seeing some profit taking from the speculators. Export numbers were good but not great. Shipments are more important than sales as once cotton is shipped it never comes back,” said Keith Brown, principal at cotton brokers Keith Brown and Co in Georgia.
In its weekly export sales report, the USDA showed that net sales of 322,700 running bales (RB) for 2020/2021 were up 10% from the previous week, while exports of 275,300 RB were down 15%.
Limiting some downside in the cotton prices, the dollar was down 0.2% against key rivals.
Investors were also paying close attention to the Biden administration’s $1.9 trillion stimulus bill, which was facing opposition from Republicans and some Democrats over the size of the package.
Cotton Analyst Naseem Usman told that the tussle is going on between the industry (mainly textile) and the federal government on the provisioning of gas to the captive power plants for the industry’s own generation. The industry moved to the captive last decade due to acute power shortage back then. Now the grid capacity is higher than the consumption, the government rightly wants the industry to return to the grid. But the industry is resisting. A better move could be to give right price signal for industry to gradually shift; but the transition must take place for larger interest of the country.
Base load increase cannot be consumed without having industry on board. Without consuming newer capacity, circular debt cannot be controlled. Without resolving circular debt, the fiscal house is not sustainable. Without a stable fiscal state, the industrial competitiveness cannot be achieved.
Industry knows that; but they want to enjoy higher profits. That would be at the cost of rest of the country. That cannot continue for long. Industry must come on the same page. The government and industry both want industrialization. They both know the ground realities. It is best to sit on table and get this resolved for the betterment of the country.
The argument that export-oriented industry is using for the availability of energy at regional competitive rates is correct. But 30-40 percent of textile produced is consumed within Pakistan. Why get subsidized energy for that. If textile is getting cheaper energy inputs for domestic consumption, same should happen for the rest of the industries.
The policy should be to give energy subsidy to those who are bringing exports. Link it to the export proceeds. The punch line should be “show the dollars and take the rebate”. Industry claims that not all units are vertically integrated. If incentive is given to exports, yarn (or other input) producers will be wiped out as exporter would import yarn. That can be resolved by passing on the incentive in value chain – just like VAT, this can be sorted.
The government on Wednesday discussed the revival of the Pakistan Central Cotton Committee (PCCC).
This was done during the meeting to discuss ways and means to enhance cotton production in the country. The meeting was chaired by Federal Minister for National Food Security and Research, Syed Fakhar Imam.
The meeting was informed that the use of biotechnology and genetic engineering is necessary using international support, whereas the importance of research was also emphasised for the revival of cotton. It was highlighted that cotton is an important crop whereas seven per cent of edible oil in Pakistan is produced by cotton.
Further, problems such as competency of staff, funds, and yields, as well as issues of pests and pesticides were discussed while keeping the farmers’ cost of production and sale in consideration.
The Pakistan Kissan Ittehad (PKI) has reminded the government that the cost of production is to be reduced and a minimum support price has to be set up.
PKI President Khalid Khokhar suggested that taxes and duty need to be levied on imported cotton to promote local farmers. “The marketing mechanism needs to be revamped as well,” he added.
Moreover, Federal Board of Revenue (FBR) has strongly opposed a proposal of the textile sector for the restoration of zero-rating regime or applicability of lower rate of sales tax on five export-oriented sectors.
Sources told Business Recorder here on Wednesday that exporters have approached the prime minister and different parliamentary committees with the proposal to restore the sales tax zero-rating regime in the budget (2020-21).
The alternate proposal of the industry is to reduce the sales tax rate from 17 percent to a lower percentage like five percent on the five export-oriented sectors.
However, the FBR has taken the principal stance for not withdrawing the sales tax regime from the export-oriented sectors.
According to the sources, the FBR can only propose to the policy makers and the final decision would be taken by the government.
The issue of zero-rating regime was discussed during the last meeting of businessmen and exporters from Sialkot with Hammad Azhar, Minister for Industries and Production, and the FBR officials at the Ministry of Industries and Production few weeks ago.
During this meeting, the senior officials of the Ministry of Industries and Production had informed the exporters that the government would consider possible restoration of the zero-rating regime during the budget preparation exercise for the next fiscal year.
The ministry has conveyed the concerns of the exporters to the Ministry of Finance as well as the FBR.
Meanwhile Towel Manufacturers Association of Pakistan has urged the Prime Minister Of Pakistan to take the notice of the suspension of the gas supply to the export oriented industry from March 2021 and suspension of gas supply to general industry from February 21.
Towel Manufactures Association has appealed to immediately ban yarn export as reduction in cotton production and export of cotton yarn has already put the export oriented in difficulty.
Commercial Attache of Turkey, Eyup Yildirim, has said that Turkey will provide full support to businesspeople from Pakistan for opening business offices in Turkey and this will be a move under the Strategic Economic Front (SEF) between the two countries.
Replying to different questions from members of executive committee of Pakistan Yarn Merchants Association (PYMA) during a meeting, he said that the proposed Free Trade Agreement (FTA) between Turkey and Pakistan and MoU are major developments in the bilateral trade and demands raised by PYMA will be met.
Turkish Consulate in Karachi and PYMA have also agreed on joint efforts to boost bilateral trade and investment ties.
In this regard, new avenues for investment in various sectors of the economy will be explored and attention will also be paid to the exchange of trade delegations.
He further said that Turkey and Pakistan will work together for the promotion of yarn, fabric and textile industry whereas initiatives will be taken for meetings between businessmen of both the countries on quarterly basis.
Naseem Usman told that 100 bales of Kotri were sold at Rs 10,800 per maund, 400 bales of Dharki were sold at Rs 10,500 per maund, 800 bales of Ghotki were sold at Rs 10450 per maund, 2000 bales of Rhim Yar Khan were sold at Rs 11000 per maund, 1000 bales of Fort Abbas were sold at Rs 10825 per maund and 400 bales of Yazman Mandi were sold at Rs 10450 per maund.
Naseem also told that rate of cotton in Sindh was in between Rs 10,000 to Rs 10,700 per maund. The rate of cotton in Punjab is in between Rs 10,200 to Rs 11000 per maund. He also told that Phutti of Sindh was sold in between Rs 3800 to Rs 5000 per 40 kg. The rate of Phutti in Punjab is in between Rs 3500 to Rs 5400 per 40 Kg.
The rate of Banola in Sindh was in between Rs 1600 to Rs 2000 while the price of Banola in Punjab was in between Rs 1800 to Rs 2250. The rate of cotton in Balochistan is Rs 10,000 per maund. The Spot Rate remained unchanged at Rs 10,800 per maund. The Polyester Fiber was available at Rs 193 per Kg.
Copyright Business Recorder, 2021