KARACHI: Decline in cotton prices particularly in international cotton market resulted in a significant decline in cotton prices locally. Zoning of cotton areas is essential to increase cotton production, as well as, fixing intervention immediately.
However, recession in textile sector is increasing day by day coupled with a continued declining trend in exports of textile products. Industrial and trade organizations have rejected the policy of withdrawal of electricity and gas concessions given to industries and textile sector, increase in sales tax and hike in interest rate by 20 percent.
In the domestic cotton market, cotton prices were overall bearish during the last week. Spinners are buying cotton very cautiously due to the upheaval in the textile sector while ginners are interested in selling. Business volume was very limited. State Bank of Pakistan has raised the interest rate to the highest level of 20% due to strict International Monetary Fund (IMF) conditions.
The textile sector is in dire straits due to the removal of energy subsidies and low supply of gas and increase in sales tax. The ginners have stock of about four lac bales of cotton but they are worried due to less buying.
The cost of stock is increasing and if the heat intensity increases, the weight will also start coming down whereas business activity would further slow down in the month of Ramadan.
Experts are of the opinion that the government should immediately announce the intervention price of Phutti as if it is announced before the crop is sown it makes it easier for the cotton farmers to think about sowing cotton. If the intervention price is good then it is expected that cotton production will increase.
Apart from this, zoning of cotton production areas should be done and a ban should be imposed on sowing of rice and sugarcane in cotton zones.
The price of cotton in Sindh province is in between Rs 17,500 to Rs 21,000 per maund. The rate of Phutti is in between Rs 6,000 to Rs 8,300 per 40 kg. The rate of cotton in Punjab is in between Rs 18,000 to Rs 20,000 per maund and the rate of Phutti is in between Rs 6,500 to Rs 9,300 per 40 kg. The rate of Khal, Banola and oil remained stable.
The Spot Rate Committee of the Karachi Cotton Association decreased the spot rate by Rs 200 per maund and closed it at Rs 19,800 per maund.
Chairman Karachi Cotton Brokers Forum Naseem Usman told that over all bearish trend remained prevalent in international cotton markets. The rate of Future Trading of New York Cotton reached at seventy eight American cents after decreasing by six cent per pound.
According to the weekly export and sales report of 2022-23, 1 lac fourteen thousand and five hundred bales were sold.
Vietnam stood first by buying 44,700 bales. Turkey bought 17,400 bales and came second. China was third with 15,300 bales. Pakistan bought 11 thousand 900 bales and stood at the fourth position. Sixty eight thousand and three hundred bales were sold for the year 2023-24.
Apart from this, the heads and representatives of industrial and commercial organizations have rejected government’s decision of withdrawing subsidy given on electricity and gas for the textile sector, increase in the sales tax by one percent and increased the interest rate by 20 percent by the State Bank under the pressure of the IMF.
They took out a rally against the government’s anti-industry decision especially against the textile sector and raised slogans in favour of their demands and demanded the immediate resignation of the incompetent Federal Minister of Commerce.
More than 20 industrial heads and trade organizations including Faisalabad Chamber of Commerce and Industry, All Pakistan Mills Association, Pakistan Hosiery Manufacturers Association, All Pakistan Sizing Industry Association, Power Looms Industry Association and Pakistan Textile Exporters Association were present in the protest camp. The representatives of the industry addressed a joint press conference outside the All Pakistan Bed Sheets and Upholstery Manufacturers Association.
Moreover, the textile industry of Pakistan is facing decrease in exports for the fifth consecutive month because of the effects of the domestic economic crisis, as well as, the global economic slowdown.
According to latest data, textile exports fell more than expected by 28.1% year-on-year (YoY) and 9.1% month-on-month, reaching $1.20 billion in February 2023.
Exports had been the lowest since May 2021, when overseas shipments came in at $1.05 billion, said Arif Habib Limited Head of Research Tahir Abbas.
Explaining the reasons, Abbas cited the restrictions on imports, high interest rates and an overall slowdown in the global economy.
“This is not just happening in Pakistan, many other countries such as Bangladesh and Vietnam are also facing a similar situation,” he said. Topline Securities textile sector analyst Nasheed Malik stated that the decline in textile exports was expected due to a sharp drop in orders from the European and US buyers.
“The Covid-19 pandemic has had a significant impact on global economies, and the textile industry is no exception,” he pointed out, adding that restrictions on imports also caused shortage of raw material, which affected production activities at the textile industry.
Textile industry in a major contributor to Pakistan’s economy and this decline will have a significant impact on the overall exports. This is the reason why businessmen are demanding that the government take steps to address the challenges facing the industry and offer incentives to exporters by reducing interest rates,” added Malik.
Exporters have often complained about stiff competition from other countries, particularly Bangladesh and Vietnam, which have been able to win more orders owing to a relatively low cost of production and better infrastructure. Keeping that in view, he emphasised that Pakistan should focus on improving its competitiveness by investing in infrastructure, reducing production cost and providing better incentives to the exporters.
“The fall in textile exports is worrisome for Pakistan’s economy and also for the worker employed at the industry, many of whom have already lost their jobs,” remarked the Topline analyst.
Meanwhile, Pakistan’s cotton production dropped by 34.5% in February, which reflected the impact of last year’s floods. In this scenario, a threat is looming over the textile industry, which requires around 14 million cotton bales annually.
Large-scale spinners had booked big orders when cotton prices were at peak, but prices dropped 20-25% by the time shipments arrived, coinciding with a deep recession in the global market.
Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Irfan Iqbal Sheikh recently warned that sudden withdrawal of power-sector subsidies to appease the IMF was likely to further hurt Pakistan’s already declining exports. “Power subsidy was due to end by June 2023 but the government withdrew it hastily before the cut-off date,” he said.
According to the Pakistan Bureau of Statistics, exports have continued to fall for seven consecutive months from August 2022 to February 2023. Latest statistics showed that Pakistan’s exports fell by 18.67% YoY to $2.31 billion in February 2023.
Union of Small and Medium Enterprises (UNISAME) President Zulfikar Thaver; however, was of the view that the discontinuation of zero-rated industrial package was justified as exporters were now benefiting from a favourable rupee-dollar exchange rate.
Any additional relief for the exporters would be unfair on the importers of other sectors who were paying high prices, he said.
Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Irfan Iqbal Sheikh recently warned that a sudden withdrawal of power sector subsidies to appease the IMF would affect Pakistan’s already declining economy. Exports are likely to suffer further. “The power subsidy was supposed to end by June 2023 but the government hastily withdrew it before the cut-off date,” he said.
According to the Pakistan Bureau of Statistics, exports have continued to decline for seven consecutive months from August 2022 to February 2023. The latest data shows that Pakistan’s exports fell by 18.67 percent year-on-year to $2.31 billion in February 2023.
Copyright Business Recorder, 2023
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