Pakistan local spinning industry concern over the rising import of finer counts yarn (above 30 counts) at cheaper rates from India at the time when they are already facing energy and gas outages leading to high cost of doing business.
According to Cotton analyst Naseem Usman, TCPâ€™s intervention help cotton growers get better price but it is encouraging spinning industry to go for imported cheap cotton from across the border.
More alarming for the textile industry is governmentâ€™s recent decision to allow state-owned Trading Corporation of Pakistan (TCP) to procure one million cotton bales to help growers get better price for their produce.
Many stakeholders including Karachi Cotton Association (KCA) and All Pakistan Textile Mills Association (Aptma) have already registered their objections on allowing TCP to intervene in free-market mechanism being followed in cotton economy for the last 18 years.
According to Aptma Chairman S.M. Tanveer, whatever is the outcome of the TCPâ€™s intervention in cotton trade , it is going to incur huge losses to national exchequer for sure because cotton prices world over are depressed this season.
India is harvesting a bumper cotton crop this season which could touch 40 million bales, the highest in the world production followed by China at 39.5 million bales.
There was a time when China was a major buyer of Indian cotton and imported around 6 to 7 million bales each year. However, for the last couple of years China is buying only quality lint. The country is presently supplying cotton to its industry from domestic stocks accumulated since 2009.
Similarly, imports of cotton yarn by China has been reduced which is not only hurting Pakistani spinning industry but also Indian industry.
India is desperately looking for markets to dispose of its huge exportable surplus of cotton and cotton yarn, The Indian government is giving rebate to cotton and cotton yarn exporters so that huge exportable stocks of both the commodities could be disposed of easily, said Yasin Siddik, a former chairman of Aptma.
Though there is 5 percent import duty on cotton yarn, Indian exporters enjoying a couple of advantages including low cost of electricity and rebates get price edge of Rs10 to Rs20 a pound or Rs200 to Rs100 per bundle of cotton yarn.
The landed cost of imported cotton from India comes to around Rs5,400 which is cheaper for being contamination free and will also have no storage
cost which is normally done for three months for domestic cotton.
Presently, at Pakistan cotton market, Sindh quality cotton is being quoted between Rs5,175 and Rs5,200 per maund, whereas Punjab variety in the range of Rs5,275 to Rs5,300 per maund.
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