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KARACHI: The local cotton market remained sluggish on Tuesday. Market sources told that trading volume remained thin.

Cotton analyst Naseem Usman told that ICE cotton futures rebounded on Monday, following a dive of more than 3% in the preceding session, with the natural fibre drawing support from a tepid dollar and upbeat risk sentiment as US equities scaled record peaks.

Cotton contracts for May rose 1.03 cents or 1.3% to 78.98 cents per lb by 12:59 p.m. EDT. It traded within a range of 78.7 to 79.6 cents a lb. Prices tumbled 3.9% on Thursday.

“It (cotton) is recovering from Thursday’s level, (but) overall it still seems to be in a holding pattern - trying to choose a direction for the near-term,” said Bailey Thomen, cotton risk management associate with StoneX Group.

Cotton’s near-term price action will likely be influenced by speculators largely focused on its weak technical outlook, but longer-term, prices could rise as focus returns to the fundamental outlook which points to a tighter market, Thomen added.

The dollar dropped to its lowest level since March 25, lowering the cost of cotton for buyers holding other currencies.

Vice Chairman of Pakistan Yarn Merchants Association (PYMA) & convener FPCCI’s Central Standing Committee on Yarn Trading Farhan Ashrafi, and former SVP Khurram Bharaa have demanded from Chairman Federal Board of Revenue (FBR) Muhammad Javed Ghani to withdraw 1.5 percent turnover tax imposed on yarn traders and restore the previous rate of 0.1 percent.

Otherwise, the majority of yarn traders will be forced to close their businesses that have already been badly affected by the Corona epidemic and facing severe financial crunch.

In a letter to FBR chairman, Farhan Ashrafi informed that PYMA members have brought attention towards this important issue, as they were doing business in large volume but unfortunately at nominal rate of profit margin which is 1pc even less. By virtue of SRO.333 (I) 2001 dated 02.05.2011, the traders of yarn had been subject to turnover tax at concessional rate 0.1pc, which constitutes about 10pc of their margin.

Provision of rate of minimum tax 0.1pc was made under clause 45 (A) second schedule to the income tax ordinance 2001.

“Because of some oversight traders of yarn were not included in the purview of minimum tax under the first schedule Part-1 (Division IX) of the Income tax ordinance 2001, which would be the correct approach to treat the levy of concessional rate on yarn traders, as is the case with various other sectors and persons,” they added. Due to this lacuna a state of confusion remains about the levy of tax and frequent changes are made in the rate of turnover tax without consultation with stakeholders.

Naseem Usman told that cotton arrivals in ginning factories hit the three-decade lowest level of 5.6 million bales as the industry is concerned about prospects of textile production without sufficient raw material and no alternative arrangement by the government, traders said on Saturday.

Till April 1, a total of 70,200 bales were exported, while 5.49 million bales were sold to textile mills. Ginners have 85,070 bales in stocks, according to Pakistan Cotton Ginners Association.

Since no data was released by the Pakistan Cotton Ginners Association during this time last year due to the pandemic lockdown, there is no comparison. However, last fortnightly data showed a decline of 34 percent in the arrivals compared to last year.

Naseem Usman also told that production of 8.7 million bales was recorded last year. Current production was down by 3 million bales, which is the lowest production in last 30 years.

Industry is concerned about the consistent decline in cotton production in the country and indecisiveness of the government about the steps to meet the demand of local textile businesses as it first allowed cotton imports from India and later disapproved the decision on political issues.

Arrivals from Punjab have been recorded at 3.5 million bales, while Sindh contributed 2.1 million bales. Currently, only five mills are in partially operation in Punjab. No mill is operating in Sindh.

Usman said partial cotton sowing for the new season has started in Sindh while it is likely to begin in Punjab from April 15.

Mills remained cautious of buying during the last week, which affected the trade volume and rates decreased Rs500 to Rs600 per maund in the local market. In the international market, prices also were down 3 to 4 cents per pound.

Cotton spot rate in the local market decreased Rs1,100 per maund in two weeks, which was the highest decline in the history of the Karachi Cotton Association, a trader said.

Besides, depreciation in the dollar value could also affect prices in the local market.

There were further speculations related to dollar prices and mills did not want to take risk of huge buying. A decline in yarn prices was also a reason behind decline of cotton rates in the local market.

PCGA Chairman Dr Jesu Mal said that if Indian cotton imports are allowed, growers will not go for sowing of cotton for this season. Cotton sowing has already begun in Sindh and will start soon in Punjab.

“Due to no research on cotton seeds, poor pesticides and high cost of fertilisers, cotton yield fell to nine maund per acre during the season ended with just 5.5 million bales — almost one third of the production we achieved with 14.8m bales a few years ago,” he said.

The recent yields are around 16 maund per acre which has been sharply declining as the government has largely neglected the most important cash crop which helped earn over 60 per cent export proceeds, Mal said.

Commenting on the cost of cotton production, he said in India it was Rs20,000 (equal to Pak rupee) per acre compared to Rs50,000 in Pakistan. Furthermore, the Indian government buys cotton if the price falls below minimum rate, he said.

“The Indian government is offering cotton from its stocks. It is not in the hands of farmers or ginners,” Mal said while demanding minimum support price on the lines of wheat and sugarcane for cotton.

“We are not supported by the government because 85pc farmers have just 12 acres of land. Small farmers have no lobby in Islamabad to get protection,” he said.

Naseem told that 700 bales of Sadiqabad were sold at Rs 11000 per maund.

Naseem also told that rate of cotton in Sindh was in between Rs 10,200 to Rs 10400 per maund. The rate of Phutti in Sindh is in between Rs 4500 to Rs 5100 per 40 kg.

The rate of cotton in Punjab is Rs 10500 per maund. The rate of Phutti in Punjab is in between RS 4800 to Rs 6300 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 12000 per maund. The rate of Phutti of Dalbadin Balochistan is available at Rs 6300 to Rs 6400 per 40 Kg. The Spot Rate remained unchanged at Rs 11000 per maund. The Polyester Fiber was available at RS 215 per Kg.

Copyright Business Recorder, 2021