Weekly Cotton Review: Rates remain stable in markets

Updated 05 Jul, 2021

KARACHI: The rate of cotton remained stable in local markets during the last week. In the local cotton market, trading volume is increasing due to the increase in the supply of Phutti as well as due to the interest of textile and cotton sector in buying.

After the start of new cotton season from July 1, the Spot Rate Committee of Karachi Cotton Association has issued spot rate as well as started registering deals of new cotton crop. Although, the arrival of new season cotton has started from June and up till now it is for the first time that 100,000 bales of cotton were prepared in the month of June and PCGA will include this in their report as the new crop.

The representative of Naseem Usman and Sons visited many areas of Sindh and termed the sowing and ginning process satisfactory in their survey. In some areas, the height of cotton plants is relatively small, but the fruit is satisfactory. If there is adequate rainfall, these plants will be stronger and their height will be increased.

Water shortage is reported in Sindh province due to which cotton crop is being affected. At present, about 35 to 40 ginning factories are running partially in Sindh.

While in Punjab, cotton is being produced mostly from Phutti of Sindh and to some extent from Phutti of Punjab. Up till now the quality of cotton is satisfactory in Sindh and Punjab.

However, different views were coming regarding sowing area of cotton in Sindh and Punjab. Federal Agriculture Committee has allocated 17 lac acres for sowing of cotton in Sindh while it has allocated 40 lac acres of area in Punjab for cotton sowing. Over all sowing area was 2.32 million hectare.

According to the sources sowing was completed on 13 lac to 14 lac acres in Sindh while in Punjab sowing was completed on 32 lac to 34 lac hectare which is over all approximately 1.9 million hectare.

FCA has estimated that in 2021-22 one crore five lac bales will be produced in the country but according to the estimates of the people relating to cotton business, if the weather conditions remain favourable, eighty lac bales will be produced.

Moreover, instead of giving incentives for increasing the cotton crop in the budget of 2021-22, government has increased the rate of sales tax due to which all the stake holders were not happy with the government.

Ten percent sales tax was imposed on cotton. It was increased to 17 percent in the budget while there was no tax on cotton seed oil before.

Chairman Pakistan Cotton Ginners Association Dr Jassu Mal Limani strongly condemned the imposition of sales tax on cotton and cotton seed oil. He said if the government had not withdrawn the sales tax they will shut down their factories as a protest. He said earlier finance minister and ministers had assured that sales tax will be withdrawn but after that finance minister categorically said either sales tax will reduced or withdrawn.

Dr Jassu Mal said finance minister has stabbed in the back of whole cotton sector. One office bearer said government has put the last nail in the coffin of cotton sector.

The rate of cotton in Sindh is in between Rs 12800 to Rs 13000 per maund. The rate of Phutti is between Rs 5600 to Rs 6000 per 40 kg. The rate of Banola is in between Rs 1900 to Rs 2000 per maund.

The rate of cotton in Punjab is in between Rs 13500 to Rs 13600 per maund while the rate of Phutti is in Rs 5600 to Rs 6400 per 40 Kg. The rate of Banola is in between Rs 2000 to Rs 2100 per maund.

The Spot Rate Committee of the Karachi Cotton Association increased the spot rate by Rs 300 per maund and closed it at Rs 12900 per maund. Chairman Karachi Cotton Brokers Forum Naseem Usman told that mixed trend was seen in international cotton markets. The Rate of Promise (Waday Ka Bhao) of New York Cotton after fluctuation closed at 87 US cents. According to the weekly export report of USDA, exports decreased by 37 percent. Reports are circulating that cotton crop is affected in many areas of USA.

The cotton production area decreased a little bit however experts were of the view that rates of cotton remained stable. The effects of COVID 19 were decreasing in many areas of the world and business activities are increasing due to which it is expected that demand of cotton may increase.

The rate of cotton in Brazil and Central Asian states remained stable while in India the rate increased after fluctuation.

MNA Sheikh Fayyaz Uddin said while speaking on the floor of the House that agriculture is the backbone of Pakistan but the present government had done nothing for agriculture.

According to the target this year, we had to cultivate cotton on 2.2 million hectares, but unfortunately we have been able to cultivate on 1.9 million hectare.

The main reason for this decline is that government is ignoring the cotton crop and the other big reason is increasing influence of sugar mafia due to which the cotton cultivating area is decreasing.

Sixty percent of Pakistan's exports are textile based and the raw material of textile is cotton.

This year due to extreme decline in cotton production we have to import 50 lac bales of cotton of worth millions of dollars.

Government's lack of interest in the cotton crop can be evident from the fact that last year Rs 300 billion was earmarked for agricultural development and government had not allocated not a single penny for increasing the cotton production.

Moreover, that year when cotton crop was attacked by white flies, government had allocated Rs 5 billion to save crop from the attack of White Flies.

What could be more unfortunate for us that government to allocate five billion rupees and we could not spent a single penny.

The cotton crop lasts for 6 months after which wheat is cultivated. Last year the government had fixed the rate of wheat at Rs 1400 per maund but it is unfortunate that administration took wheat from the farmers' houses by force and later farmers bought the same wheat at Rs 2200 per maund.

In the year Pakistan Tehreek-e-Insaf (PTI) came into power, our agriculture growth rate was 3.8 percent which was negative 5 percent last year and this year according to the government claims it is 2 percent.

Moreover, federal government has released Rs 8 billion under the draw back of local taxes and levies (DLTL) claims of industries to help overcome cash constraints.

Unlike previous governments over the last thirteen years, the current PTI government has paid largest amount to exporters under DLTL. Sources said the present government has set a record by releasing a total of Rs. 46.7 billion under DLTL to exporters of textile in three years.

While, during PPP's five-year rule, a total of Rs 24.91 billion was released to exporters under DLTL. Similarly, during the five-year rule of PML-N a total of Rs 32.818 billion were released to exporters under DLTL.

Copyright Business Recorder, 2021

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