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The common refrain of domestic textile industry is that falling cotton output is responsible for decline of Pakistan’s spinning segment, as raw material supply is hard to come by. Pre-pandemic, annual production by spinning industry had averaged at 3.4 million tons per annum – levels it has plateaued at for past seven years. That explanation appears to be misleading at best.

The most significant indicator of the perceived slowdown is claimed to be volume of cotton yarn exports, which by FY19 (pre-pandemic) had declined by over 40 percent to just 0.43 million tons, from peak levels of 0.74 million tons achieved back in FY13.

However, during much of the last decade when national cotton yarn output remained largely static, not only has the domestic textile retail consumption mushroomed exponentially, so have the exports of mainly cotton-based textile value-add products (in volume terms). Prior to the pandemic year, quantity exported of all cotton-yarn based product categories such as cloth, bedwear, towels, and readymade garments had grown by double digits between FY11 and FY19.

Recall that until now national tariff policy has also not been welcoming towards imported cotton yarn. Domestic spinning industry was protected through prohibitive regulatory and custom duties, even as the industry association claimed stagnating output due to availability of poor-quality domestic cotton. Thus, increasing production of textile value add products – both for domestic clientele and by value-adding exporters – could not be explained away by improving availability of imported cotton yarn.

Which begs the question as to how the industry has managed to keep its reported output static even as output (volume) of value-adding segments have maintained a largely steady growth momentum. The answer? Domestic cotton cloth industry.

Pakistan’s cotton yarn spinning industry largely operates within the formal sector. Consider that 408 cotton mills are listed with Textile Commissioner’s Organization, of which over 90 percent output is produced by exchanged-listed units. In sharp contrast, yarn is consumed by the weaving industry, where the situation is completely opposite.

Based on BR Research estimates’ using data from Ministry of Industries & Production, as much as 91 percent of cotton cloth produced locally comes from non-milling mid-sized weaving units. Although few can vouch for data coming from a largely non-documented segment, increasing cotton cloth production by non-milling segment along with improved quantity exported of value-added textile product indicates that the cotton yarn is coming from somewhere after all. Until last year, majority of that yarn consumed by weaving segment could only come from domestic industry.

Is spinning output really stagnating then?