Responding to a report appearing in the Press recently that the government is considering to buy one million cotton bales at high prices from the market in order to support the growers, Amin Hashwani, Chairman, the Karachi Cotton Association (KCA) reiterated the Association's views that such an exercise would be counter productive.
Any intervention by the government-public sector organisation in the cotton market would create distortions with adverse repercussion for cotton exports, allied industries and the economy in general. It would also negate the declared free trade policy being followed successfully in the sector since over a decade. The Association strongly supports the growers and advocates a fair return to not only cover their cost but also a reasonable income for them.
However, by procuring large stocks of cotton at considerably high prices from the market will create unnatural shortage of quality cotton, incur billions of Rupees of losses to the exchequer, inflate prices unnecessarily, render the Textile Industry uncompetitive, accelerate the decline of exports, cause industry closures and unemployment. In addition, the desired benefit will not be passed on to the growers as most of it will be realized by the ginners and middlemen, as was the case last season. It may be recalled that last year the Government through TCP intervened in the cotton market to procure Cotton from the ginners at inflated prices but very little benefit passed on to the growers and those stocks are still lying with the Corporation which will cause heavy losses when disposed. An efficient and a more effective way to companionate the growers in adverse conditions would be to provide direct subsidy to them on the basis of the acreage sown as is practiced in other countries. The proposed mechanism would not only ensure direct benefit to the growers without any middlemen or malpractice but also help to lessen the losses to the government.-PR
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