Volume of business improves on cotton market

KARACHI: The local cotton market on Monday remained bullish and volume remained satisfactory.

Cotton Analyst Naseem Usman told that the rate of cotton in Sindh is in between Rs 13000 to Rs 13100 per maund. The rate of cotton in Punjab is in between Rs 13500 to Rs 13600 per maund.

The rate of new crop of Phutti in Sindh was in between Rs 5800 to Rs 6200 per 40 kg. The rate of Phutti in Punjab is in between Rs 6000 to Rs 6600 per 40 kg. The rate of Banola in Sindh is in between Rs 2000 to Rs 2100 per maund. The rate of Banola in Punjab is in between Rs 2100 to Rs 2200 per maund.

400 bales of Shahdad Pur were sold in between Rs 13000 to Rs 13100 per maund, 1400 bales of Sanghar, 1600 bales of Tando Adam were sold in between Rs 13000 to Rs 13100 per maund, 200 bales of Shah Pur Chakar were sold at Rs 13000 per maund, 200 bales of Kotri were sold at Rs 13100 per maund, 400 bales of Hyderabad and 400 bales of Khadro were sold at Rs 13000 per maund.

The country’s cotton imports hit $2.3 billion — an increase of 44 per cent — during July 2020-May 2021 (11MFY21) compared to the same period in the previous fiscal year.

The country produced barely 5.6 million bales in FY21. Despite higher orders and a number of incentives provided by the government to boost exports, poor cotton production and imported lint nullified the efforts of the textile sector.

However, instead of providing additional help to the cotton producing sector, Finance Minister Shaukat Tarin has increased sales tax on cotton to 17pc from the earlier 10pc. Cotton seed oil or banola, which earlier had zero tax, has been slapped with 17pc tax.

Farmers, ginners mull strike against new taxes. The increase in taxes and low cotton production has created serious situation for farmers and ginners who are planning to go on a strike if the government does not accept their demand for abolishing taxes.

“We are going to decide about the actions against the new taxes on Sunday in Bahawalpur,” Chairman Pakistan Cotton Ginners Association Dr Jasomal told media.

The cotton sector has a great impact on the economy as it produces lint for textiles as well as byproducts including cotton seed oil and cotton cakes. The sector helps create jobs for millions of workers across the country.

“We have not decided to call a strike but the Sunday meeting we might decide as the government has shown no sympathy towards farmers and ginners,” he said.

“It is strange that while the government is trying to boost textile exports, it has left the cotton crop in crisis and imposed more taxes,” said Dr Jasomal.

He also disclosed that instead of increase, the area of cultivation has declined by 20pc compared to previous year, which reflects a serious threat to cotton as a cash crop. Cultivation areas in Punjab fell to 3.1 million acres from the target of 4m acres. Cultivation area in Sindh also fell to 1.3m acres.

Meanwhile, Chairman Cotton Brokers Forum Nasim Usman said the cotton import bill will further increase when June figures are added. Total figures would easily cross $2.273bn during July-May to $3bn as large textile millers keep stocks for three months, he said. Cotton price in the domestic market is currently higher than in the US, showing higher demand and lesser supply. The cotton season has just begun in Sindh from July1. The season will peak in September for Punjab.

“Low cotton production led to the shutdown of 850 ginning factories during the previous season. Out of 1,300, only 450 ginning factories were working during the previous season which means thousands of people lost their jobs,” said Dr Jasomal.

Despite low cotton production, exports witnessed a growth of 18.2pc to $25.294bn in FY21 compared to $21.394bn in FY20. This increase of 3.9bn export proceeds could reduce the trade deficit if cotton was not imported.

Only a few years ago, Pakistan—which is the fourth largest cotton producer—was a cotton exporting country. The government has set 10.5m bales target for the current season but the reports reaching to the cotton brokers suggest that the production could be maximum around 8m bales.

Recently, the Federation of Chambers of Commerce and Industry Pakistan (FPCCI) met with the Monsanto and Bayer Crop Science Regulatory Team to get technology which boosted Indian cotton production from 10m bales to 40m bales. Despite the Covid-19 pandemic, cotton production in India this year is about 36m bales.

Hanif Lakhany, Vice President FPCCI, Senior Vice Chairman PYMA and Farhan Ashrafi, Convener FPCCI Yarn Standing Committee, Vice Chairman PYMA have demanded that the duty structure be changed as announced in the budget document so that industries could create vast employment opportunities.

They demanded this while addressing the 1st meeting of the FPCCI Standing Committee on yarns. They said that in the budget speech 2 percent (pc) customs duty on filament yarn, 2pc additional customs duty reduction and abolition of 2.5 pc regulatory duty were announced, but unfortunately, all the recommendations of the Commerce Division were ignored, and without Stakeholder consultation, anomalies committee’s recommendations were made part of the budget, which is unacceptable.

“In case of non-reduction of duties and non-abolition of duty, the rate of duty on cloth & yarn will be the same. As a result, the textile industry is feared to be shutdown, while the 7pc gap was not maintained under cascading,” they expressed concern.

Khurshid A Shaikh, member committee & former central chairman PYMA, said that user industry of yarn sector is facing big loss as the cotton production is very low. Fiber & Yarn are two major sectors who can boost the Textile Sector of the country.

President, Federation of Pakistan Chambers of Commerce & Industry (FPCCI), Nasir Hayat Magoon questioned the appointment of Sultan Ali Allana as chairman of the Senate Standing Committee on Budget Anomalies, while expressing deep concern over decisions by committee before conducting meeting, which is beyond comprehension.

Nasir Hayat Magoon pointed out in a meeting of budget anomalies committee headed by Sultan Ali Allana (HBL), why a meeting is convened when decisions have to be made in advance.

He said that decisions are being imposed without consultation, which is a total injustice. However, decisions should be taken in consultation with FPCCI and other stake holders.

M Usman said that Nylon Yarn & Viscose Yarn are major issues. We request Nasir Hayat Magoon, President FPCCI & the government to resolve the issue of tariff over yarn & fiber.

Hafeez Aziz, Chief PCLC, said yarn traders are facing a lot of problems at different stages and they don’t get refund for many years. In exports, yarn traders play a major role but they suffer much. He observed that turnover tax is a big fraud imposed by FBR. They always keep yarn traders in darkness and always demand tax more than income from traders.

Junaid-ur-Rehman, member managing committee of KCCI & chairman standing committee on Law & Order, said that we should also discuss issues of cotton yarn and government policy for raw material of cotton must be Pro-Business & Industry.

Muhammad Hussain Moosani, observed that government and FBR always talk about subsidies and not issues. He further said that quantity of seed is a major issue and we should improve the quality of Cotton Seed another issue is non–availability of quality fertilisers and pesticides. The Spot Rate remained unchanged at Rs 12900 per maund. The Polyester Fibre was available at Rs 210 per kg.

Copyright Business Recorder, 2021