KARACHI: Stability in cotton prices remains elusive as business volume sees a significant downturn. Ginners are now left with only a small stock of cotton.
The All Pakistan Textile Mills Association (APTMA) complains of increased production costs due to an unbearable rise in energy and basic interest rates compared to their regional competitors, yet the government consistently ignores their pleas.
The industry has been warned about the looming threat of a complete shutdown.
Commerce Minister Jam Kamal Khan is actively collaborating with APTMA to devise a policy roadmap aimed at boosting textile exports.
The Pakistan Hosiery Manufacturers Association has committed to enhance exports through collaboration with the government.
Dr Syed Waseem ul Hassan, Food Security Commissioner at the Ministry of National Food Security and Research has stated that the ministry is undertaking new initiatives to revive and promote cotton production.
During the past week, the trading volume remained low due to a lack of interest in purchasing by textile spinners. The price of cotton remains generally stable. However, ginners are witnessing a decrease in stock. The ginners have a limited stock of two hundred thousand bales. It is understood that the cotton season has come to an end.
In any case, the government has made a deal with the IMF, but in return, Pakistan has to fulfil IMF’s strict conditions. The IMF is continuously demanding the government to ‘do more’. Especially, there is a proposal to increase the price of electricity by 5 rupees per unit and by 147 percent in the case of gas.
Already, a 260 percent increase in gas prices has been implemented. Industries, including the textile sector, are facing difficulties due to a significant rise in energy costs. Industrialists argue that the unbearable increase in production costs, fuelled by rises in energy prices and high interest rates, is making it not only difficult but almost impossible for them to run their industries.
Due to the increasing problems of the textile industry, the business of cotton has also become extremely slow. Although discussions are under way by the government to increase cotton production in the upcoming season, there is a continuous delay from the Federal Committee on Agriculture in setting the target for cotton production in the country.
The interventionist prices of cotton are also experiencing delay. According to reports, the government should announce it as soon as possible. The government is obtaining proposals from cotton stockholders to determine the intervention price of cotton.
The rate of cotton in Punjab and Sindh is in between Rs 20, 000 to Rs 22,000 per maund. The rate of Phutti per 40 kg is in between Rs 9,500 to Rs 10500 per maund. The rate of Khal, Banola and oil is stable.
The Spot Rate Committee of the Karachi Cotton Association stabled the rate at Rs 21,500 per maund.
Chairman Nasim Usman of the Karachi Cotton Brokers Forum stated that after fluctuations in the international cotton market, the price of cotton closed below 91.53 cents.
According to the USDA’s weekly income and sales report, sales of 92,600 bales were made for the year 2023-24. Turkey remained at the top by purchasing 23,800 bales, followed by Peru with 13,700 bales. Vietnam secured the third position with the purchase of 11,700 bales, while Bangladesh bought 11,400 bales, securing the fourth position. Pakistan purchased 10,200 bales, securing the fifth position.
For the year 2024-25, sales of 40,500 bales were made. Bangladesh remained at the top by purchasing 26,400 bales, followed by Turkey with 8,800 bales. Pakistan purchased 4,400 bales, securing the fourth position.
Apart from this, All Pakistan Textile Mills Association (APTMA) has shared a policy road-map with newly-appointed Commerce Minister Jam Kamal. It envisages taking textile sector exports to $50 billion by 2029 subject to energy tariffs at par with regional competitors.
In a letter to Jam Kamal, APTMA stated that given that the economy and external sector are highly vulnerable with Pakistan’s gross external financing requirements projected at over $25 billion annually for the next 5 years, export-led growth represents the only sustainable path forward.
In line with this, APTMA shared its Policy Roadmap for the new elected government for achieving $50 billion in textile and apparel exports by 2029.
This blueprint lays down a strategic foundation to harness the full potential of Pakistan’s textile sector, contributing substantially to economic revitalization and job creation.
Given that the sector’s exports are currently stagnant around $1.4 billion a month - around $600 million below the installed capacity of approx. $2 billion/ month- implementation of this roadmap with key policy corrections can bring in an additional $8-9 billion in annual export earnings over the short-term, while also building capacity for an additional $25 billion per annum over the next 5 years.
The policy roadmap is cantered around three key pillars, i.e., diversification, expansion, and competition. First, the government must incentivise product diversification to increase the range and variety of exportable products. Crucially, this requires rationalising import and other duties on MMF inputs like purified terephthalic acid and polyester staple fibre that have created opportunities for rent-seeking in the domestic market and resulted in a strong anti-export bias. It must also create structures to incentivise investment in MMF manufacturing capacity as well as a shift towards higher value- added original brand and design manufacturing.
Second, investment needs to be made in upgradation and expansion of manufacturing capacity. APTMA’s ambitious initiative to establish 1000 new garment plants is a bold step in this direction. This project is not merely about scaling up production it represents a strategic reorientation of our industry towards higher value-added manufacturing.
The sector currently has an annual export capacity of around $25 billion but by boosting it to over $50 billion per year, APTMA aims to diversify export portfolio and enhance competitiveness on the global stage. This expansion is a testament to textile sector’s commitment to growth, innovation, and resilience in the face of global economic shifts, and an investment in the very fabric of our nation-our workforce, our economic stability, and our future.
APTMA argued that establishment of specialized industrial and export processing zones with developed factory sites and plug and play facilities is of utmost importance to facilitate this investment and create an ecosystem conducive to growth and innovation. These zones will significantly lower entry barriers for new ventures and catalyze the expansion of exports by attracting domestic and foreign investment in export-oriented activities. Finally, the government must foster a business environment that is conducive to competition, growth and ease of doing business. This encompasses policy interventions related to energy, taxation, and investment and financing, export marketing, supply chain traceability, environmental and social sustainability and compliance and reviving domestic cotton production.
APTMA has maintained that the issue of energy is critical for the sector’s competiveness, adding that power tariffs for industrial consumers in Pakistan currently stand at around 17.6 cents/ kWh, while the most recent hike in gas prices and abolition of the preferential gas tariff category for export-oriented industries has increased gas prices by 223 per cent since January 2023. This is over twice the power tariff faced by competing firms in regional economies like Bangladesh, India and Vietnam and such a high input differential results in Pakistan’s exports getting priced out of the international market.
APTMA advocated the following solutions to the confronting issues: (i) reduce power tariff for industrial consumers to a regionally competitive level of cents 9/kWh by removing the cross subsidy to non-productive sectors of the economy that is an inefficient form of taxation and cannot be exported; (ii) operationalise the CTBCM to allow B2B power contracts with a use of system/wheeling charge of 1-1.5 cents/kWh, excluding cross subsidies and stranded costs. This will allow industry to procure green energy at competitive end-used price through captive generation from geothermal plants in depleted oil fields and hybrid solar/wind plants or from other green power producers; (iii) increase the cap on solar net-metering for industrial consumers from 1 MW up 5 MW. This will further facilitate the transition towards net zero by adding over 3,000 MW of clean energy at the point of usage with no investment or guarantee from the government; (iv) ensure adequate gas supply to cogeneration units and treat them as industrial consumer given that their efficiency is over 60 per cent and gas supply is used for steam and hot water related processes in addition to power generation; and (v) re-establish the separate gas tariff category for export-oriented consumers and supply them with a gas/RLNG blend with a higher proportion of indigenous gas that is currently 25:75 but has traditionally been 50:50 for March through October.
Pakistan Hosiery Manufacturers Association (PHMA) leadership has vowed that the value-added textile industry will work closely with the new government in a bid to enhance exports and rejuvenate the growth momentum.
In a statement, PHMA Zonal Chairman Farrukh Iqbal asked the government to provide its backing for the value-added apparel sector, so that it could utilise its potential to reap benefits of the GSP Plus preferential trade facility and provide mass employment to the jobless population.
“Exports to EU countries have started dropping, which is a matter of grave concern,” he said.
Iqbal hailed the recent government move to release Rs65 billion worth of verified pending tax refunds of exporters until February 2024. “This is a welcome move from Prime Minister Shehbaz Sharif and we appreciate him along with his team, as this will definitely boost the confidence of exporters and encourage the export sector.”
He expressed hope that the same spirit would be followed for the release of the remaining refunds of deferred sales tax and under schemes like Duty Drawback of Taxes and Drawback of Local Taxes and Levies, the Technology Up-gradation Fund and mark-up subsidy in order to raise exports.
As energy prices had escalated to record highs, the PHMA leader pointed out that frequent hikes in gas and power tariffs would further stoke inflation, amidst high mark-up, making Pakistani value-added textile products uncompetitive in the international market.
He termed the increase in energy tariffs an unwise move that would sabotage the efforts of exporters.
He asked the new government to ensure a level-playing field by offering regionally competitive energy tariffs and continuing the DLTL scheme, as committed in the new five-year textile and apparel policy.
Iqbal was of the view that energy rates for industries should be brought at par or below tariffs prevailing in the competing regional countries.
Pakistan needs an even playing field with regional competitors through the continuation of previous concessionary energy tariffs for the export industry.
Pointing to the fall in exports to the EU, the PHMA zonal chairman said that Pakistan’s exports to European nations dipped 7.54% year-on-year in the first seven months of the current fiscal year, primarily due to reduced demand for Pakistani goods in western, southern and northern Europe.
Export proceeds from those countries dropped to $4.866 billion in July-January FY24, against shipments of $5.263 billion recorded in the corresponding period of the previous year, according to figures compiled by the State Bank of Pakistan.
This decline in export earnings indicates the challenges faced by Pakistani exporters in these uncertain economic times despite having preferential trade access to the 27-member EU bloc.
Dr Waseem-ul Hassan, the Cotton Commissioner of the Ministry of National Food Security and Research, acknowledged the challenges faced by cotton farmers during the Annual Meeting of the Agricultural Research Sub- Committee of the Pakistan Central Cotton Committee (PCCC) held at CCRI Multan.
He highlighted the ministry’s efforts to devise a new plan aimed at the rehabilitation, development, and promotion of cotton. The cotton commissioner emphasised the importance of assessing progress and benchmarking against advancements in other countries. He assured that the federal government would extend full support to research institutions, including enhancing scientists’ capabilities through advanced international training programs.
Copyright Business Recorder, 2024
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