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KARACHI: With the arrival of new year, a bullish trend is prevailing in the rate of cotton in local cotton market. Textile and spinning mills have increased their cotton purchases due to which the price of cotton has increased by Rs 1000 to Rs1500 per maund.

According to the cotton production report of Pakistan Cotton Ginners Association up to January 1, the total production of cotton is estimated to be between 50 Lakh and 55 Lakh bales because currently 471 ginning factories are running. It is assumed that the inflow of Phutti will continue. On the other hand, the stock of cotton is also decreasing.

However, the overall trend of increasing cotton prices is expected to continue.

The reason is that imported cotton containers are stuck at the port due to the scarcity of dollars, while the stock of cotton in the local market is decreasing day by day, while the rate of dollar is also increasing. Covid restrictions in China are now relaxing.

According to the Russian President it is expected that energy crisis in European countries will be lessened. It is hoped that Russia will start giving supply of energy to the European countries. On the other hand there are chances that after two years it is expected that the US will start purchasing from Europe. Due to these reasons, the demand for textile products may increase to some extent.

The situation is starting to improve in the market with the start of new year. The political and economic situation in the country is not good. However, if it improves then there are chances that business will also improve in the country. In this situation politicians should sit together and evolve a strategy for economic revival.

The rate of cotton in Sindh and Punjab is in between Rs 16,500 to Rs 19,500 per maund. The rate of Balochistan cotton is Rs 20,000 per maund.

The rate of Phutti in Sindh is in between Rs 6,500 to Rs 8,500 per 40 kg. The rate of Phutti in Punjab is in between Rs 7,000 to Rs 10,200 per 40 kg.

The Spot Rate Committee of the Karachi Cotton Association increased the spot rate by Rs 500 per maund and closed it at Rs 17,500 per maund.

Due to the low production there is an increasing trend in the rate of Banola and Khal. Due to the fog trading volume is low in Punjab.

Chairman Karachi Cotton Brokers Forum Naseem Usman has said that there was an upward trend after the overall volatility in the international cotton market. There is a tendency of increase in the price of cotton due to the limited supply of Phutti in India.

Meanwhile, Chairman Cotton Ginners Forum Ehsanul Haque has said that according to the estimates production of cotton in Pakistan this year will be limited to 55 Lakh bales, the lowest level in the country’s history. Head Transfer of Technology Central Cotton Research Institute Multan Sajid Mahmood in a statement said that only by increasing the production of cotton, we can get out of the current economic crisis resolved and be free from the clutches of the IMF. Cotton, cotton farmers and the textile industry are the main pillars of our economy.

He also said that cotton arrival in Pakistan has eased 37 percent year-on-year, as per the latest data released by the Pakistan Cotton Ginner’s Association (PCGA).

As per the report, total cotton arrival in Pakistan declined to 4.61 million bales as of January 1, 2023, compared to 7.347 million bales in the same period last year, a fall of 2.737 million bales or 37.2 percent.

The decline in cotton arrival is attributed to the flash floods in Pakistan, which devastated large swathes of agricultural land in the country, especially in Sindh and Balochistan.

“For FY2023, economic growth is likely to remain below the budgeted target due to devastation created by floods. This combination of low growth, high inflation and low levels of official reserves is particularly challenging for policymakers,” the Ministry of Finance said in its latest “Monthly Economic Update & Outlook for December”.

Meanwhile, as per the PCGA data, cotton arrival reported a substantial decrease from Sindh.

As of January 1, cotton arrival in Sindh was 1.85 million bales compared to 3.509 million bales in the same period in 2021, a decrease of 1.659 million bales or 47%. On a monthly basis, cotton arrival recorded an improvement of 5% as compared to 1.765 million bales arrived on December 1.

Similarly, cotton arrival in Punjab clocked in at 2.760 million bales as compared to 3.839 million bales reported in the same period last year, a decline of 28 percent. However, on a monthly basis, cotton arrival recorded an increase of 10% as compared to 2.515 million bales arrived on December 1.

The Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) has warned that in the face of continued delay in sales tax refunds and unofficial restrictions on import of raw material the garment industry would stop running gradually, leading to inordinate delay in export orders and damaging the reputation of Pakistan, as several units have already slashed their productions because they are in a difficult situation in the face of growing currency crisis.

Moreover, PRGMEA Central Chairman Mubashar Naseer Butt and Vice Chairman Wasim Akhtar Khan, in a joint statement, said though the central bank has officially removed restrictions on import of raw material under Customs tariff chapter 84, 85, but practically the constraints still continued to haunt the garment industry, leading to severe shortage of industry raw material in the country, as the authorities have not been fulfilling their commitments in spite of several reminders and meetings.

We are facing severe liquidity crunch due to undue delays in release of our own money in the form of stuck up refunds, besides the barriers created by the SBP in connivance with the commercial banks to open LCs to proceed export shipment, said PRGMEA Chairman.

Mubashar Naseer Butt observed that the value-added textile industry is facing hurdle to get the meagre amount of just $10,000 against the export of $100,000, which is unfortunate for the country, as commercial banks are refusing to provide dollars to the exporters on the plea of shortage of greenback and SBP is totally unable to take any action against them.

Moreover, consignments of industry raw material remained stuck at the port despite the government had lifted the ban on the import. The PRGMEA Chairman observed that the business community was expecting that the imports restrictions will be relaxed as soon as the country receives instalment of the IMF loan but it is unfortunate that the situation has not changed so for mainly due to mismanagement of the authorities.

The PRGMEA Chairman also expressed his distress over the performance of the FBR’s refunds system, as sales tax refund claims are mounting due to irresponsible approach of the authorities concerned, who are unable to explain the reason of this delay.

Mubashar Naseer Butt urged the government to immediately release refunds claims of the textile industry, as the government had committed that the exporters’ refunds payment orders would be issued in 24 hours while refunds would be cleared within 72 hours of the issuance of the RPOs, but practically this commitment is not being fulfilled, as the 72 hours are being extended to several months.

He said the government needs to take immediate measures to arrest the slowdown in textile exports, as these policies would bring Pakistan’s most valuable sector on the verge of collapse.

PRGMEA Vice Chairman Wasim Akhtar demanded the continuation of the previous transparent, speedy and trust worthy culture of sales tax refunds of the exporters. He said that exporters are unable to procure and purchase raw materials and other accessories to fulfil their future export orders and this will ultimately collapse the entire export trade.

He pointed out that the government had created a culture of trust among the business community by paying refunds timely and regularly, which was appreciable but the situation has now changed. The industry is presently facing gaps and the authorities are not ready to give us reason of delay, creating a trust deficit and sending a wrong message to the exporters of the value-added textile industry, which is the backbone of the economy.

Copyright Business Recorder, 2023


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