Cotton output shortage to affect textile exports of Pakistan

Pakistan cotton crop for the year 2015/16 due to its sharp reduction in output, textile manufacturers are anticipate serious affects on export activities for which they demand for an immediate tax holiday on import of cotton, that might off-set decline in the textile exports.

All Pakistan Textile Manufacturers Association (Aptma) has sent a letter to the finance minister, informing that the cotton crop for the year 2015/16 had miserably failed to meet the industry requirement. There is a shortage of approximately, four million cotton bales compared to the last year and the industry will have no option but to import cotton, it added.

The finance minister has been informed that five percent sales tax and three percent customs duty was levied on the import of cotton. In order to make the basic textile industry competitive for the entire textile value chain, the levy on import of cotton should be withdrawn, Aptma said in its letter.

The communication also said the sales tax up to six percent had also been imposed on import of polyester staple fibre (PSF) and Viscose Staple Fibre (VSF).

A textile manufacturer said that the local industry consumed about 15.5 – 16 million bales annually. Previously, the imports stood around 2.5-3 million bales annually. However, the shortage this year has been projected at 10.8 million bales, which means the industry will need around 5-6 million bales to meet the manufacturing demand.

The manufacturer said that fall in production and high rates of duty and taxes had already started affecting textile exports.

Textile exports have already posted 9 percent decline to $6.27 billion during the first half of the current fiscal year as compared with $6.88 billion in the corresponding half of the last fiscal.

On the other hand, cotton import grew sharply due to output shortage. The import of raw cotton posted 175 percent growth to $311 million in July-December 2015 as compared with $113 million in the same months of last year.

The Pakistan Cotton Ginners Association (PCGA) estimates the current year’s output at a 12-year low, as production was recorded at 10.05 million bales back in 2003-2004.

The United State Department of Agriculture (USDA) has projected 10.24 million bales this year output in Pakistan even lower than local estimates.
The USDA projected world-wide decline in cotton production for this year. According to the USDA global data, cotton production may face 13 percent decline this year.

Pakistan’s major trading partners in cotton import include India, Central Asia, USA, and Brazil.