KARACHI: Dullness prevails in the local cotton market. In international cotton markets there is a mixed trend. There is an increase in the supply of water in the cotton production areas of lower Sindh; however, water crisis continues in Punjab.
Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has termed the ever-decreasing cotton production as a direct threat to the economic security of the country. Federation has requested the government to take steps for increasing the production of cotton in the country. However, All Pakistan Textile Mills Association (APTMA) has appealed to the government to fix the price of Phutti at Rs 8000 per 40 kg for the upcoming season. APTMA also submitted its suggestions to Prime Minister regarding solutions of the problems faced by the industry.
In the local cotton market during the last week trading volume remained very low. If there was any trading activity it was not recorded. We can say that dullness prevails in the cotton market. Ginners had limited stock while an international organisation had stock of twenty five thousand bales. All eyes are on the next season. Although, there is a severe shortage of water in the country but now the supply of water in the cotton production areas of lower Sindh has increased and the sowing of cotton is picking a pace.
It is expected that sowing of cotton will increase in the upcoming season. Although, Federal Agriculture Committee has fixed the price of Phutti at Rs 5700 per 40 Kg, but according to the farmers and the people related to the cotton business the support price is less keeping in view the increase in the price of inputs and also as compared to increase in the rates of international market the local support price is low.
Keeping in view all these factors APTMA has urged the government to immediately announce a cotton support price of Rs 8,000 per 40 kg for the upcoming season. After fluctuation in the prices of crude oil in the international cotton market the prices of crude oil overall have increased and as a result of which the rate of Polyester Fibre also witnessed an increasing trend. Some mills have increased the use of polyester fibre after increase in the prices of cotton.
On the other hand, once again the rate of US dollar has started increasing. Many textile mills are worried that due to increase in the rate of cotton it is difficult to make parity between cotton and cotton yarn. On the other hand there is a decrease in the demand and rate of cotton yarn in the market due to which the financial crunch is increasing.
Fluctuation was seen in the rate of cotton in international cotton markets. Overall decrease was witnessed in the rate of Future Trading of New York Cotton because reports are coming that spell of rain is going to be started in cotton producing areas especially, Texas.
The rate of cotton in Punjab and Sindh is in between Rs 18000 to Rs 21,000 per maund while the rate of Banola, Banola oil and Khal is stable. The Spot Rate Committee of the Karachi Cotton Association kept stable the rate at Rs 20,500 per maund.
Chairman Karachi Cotton Brokers Forum Naseem Usman said that rate of cotton decreased in the cotton market as compared to previous rates, especially the rate of Future Trading of New York Cotton witnessed a decrease. The reason behind decrease is the start of a spell of rains in cotton producing areas, especially Texas.
As per USDA export report more than fifty thousand bales of the year 2021-22 were sold which are 15 per cent less as compared to last week. India was on number one with more than nineteen thousand bales; Peru was on number two with more than ten thousand bales while Guatemala was on number third with more than six thousand bales. For the year 2022-23 more than one lac thirty six thousand bales were sold. The rate of cotton in Brazil, Central Asia and Africa remained stable. The rate of cotton in India remained stable after some fluctuation.
The textile industry has filed a package of submissions with Prime Minister Mian Mohammad Shehbaz Sharif for his nod, which will help pave the way for increasing textile exports to $26 billion in the next fiscal year and to $50 billion in next 5 years.
In a letter written on April 20, 2022 to the new chief executive of the country, APTMA urged him to ensure the continuation of Regionally Competitive Energy Tariff (RCET) to the textile industry with RLNG price at $6.5/MMBTU and electricity at 7.5 cents/ unit, immediate provision of gas connections to the new units coupled with extension of load for enhanced capacity and revival of sick units, and reaffirmation for export sector priority in gas allocation.
APTMA also called on the Prime Minister to ensure the cotton support price for this season was fixed at Rs8,000/ maund to encourage farmers to grow more cotton, making a point that the country every year loses at least $ 3 billion/ annum on account of low production of cotton.
The textile sector demanded a review of duty on Polyester Staple Fibre and removal of anti-dumping duties to enable Pakistani export products to compete internationally. It also asked the government to implement a weighted average cost of gas in letter & spirit, enabling uniform and rational gas or RLNG prices across the country.
In the letter, APTMA drew the PM’s attention towards the success story of exports showing the increase by 26 percent over the previous year to a record of $ 23.3 billion, the majority of which were textiles (61 percent).
It pleaded that the growth was enabled by implementation of Regionally Competitive Energy Tariff (RCET), investment of over $5 billion in expansion and establishment of 100 new textile units, resulting in enhanced export capacity of $ 500 million per month.
“The reduction in area and lower productivity has reduced the cotton production from a high of 14.81 million bales to 7.44 million bales last year. Cotton has lost 1 million hectares during the last decade and if this area reverted to cotton than the country will produce an extra 5 million bales of cotton which will add 1.523 percent to GDP and will save the country’s $ 5 billion directly while generating incomes in the rural economy of Pakistan and playing a vital role in poverty alleviation,” the APTMA said.
Coming to the energy issues, APTMA said that the cost to the exchequer of Regionally Competitive Energy Tariffs has been 2.44 percent of textile exports which was a tiny fraction of the cost of potential foreign currency borrowing that the forex earnings were replacing.
Meanwhile, President of the Federation of FPCCI Irfan Iqbal Sheikh has termed the ever-decreasing cotton production as a direct threat to the economic security of the country, as cotton is one of the most significant cash crops and above all it provides indigenous raw material for the country’s largest exportable product category, textiles.
Additionally, textiles exports are all set to cross the $20 billion mark in the outgoing fiscal year. However, cotton production has been reduced to 6-7 million bales per year, he added.
Sheikh said that Pakistan’s textiles products could become much more competitive, provided the entire amount of the raw material required is produced domestically or at least resumption of production of the previous levels of 10-12 million bales per year is ensured.
He added that importing 1 million bales results in the outflow of $1 billion of precious foreign exchange.
The FPCCI chief explained that 60% cost of producing the textile products lay with the raw material of cotton. “Therefore, cotton is our lifeline as far as the lion’s share of our exports is concerned.
“Producing more cotton will also strengthen our foreign exchange reserves, improve abysmal trade balance, and put a stop to the incessant rupee depreciation,” he said.
Sheikh noted with deep concern that the total area under cotton cultivation has declined by 1 million hectares and, if the government and agriculturalists can collectively reclaim that area from other crops like sugarcane, Pakistan could produce an additional 5 million bales per year and save $5 billion.
Khawaja Muhammad Zubair, chairman of the Karachi Cotton Association, maintained that lack of governmental support and non-availability of certified and high-quality cotton seeds were also hampering cotton production in the country.
He added that, given the upward trend in export orders and domestic consumption, the total cotton requirement of the country might climb to 17 million bales, and Pakistan simply cannot afford to import 10 million bales of cotton.
Copyright Business Recorder, 2022