TCP’s sixth cotton tender scraped on nil participation

Trading Corporation of Pakistan (TCP) once again at its sixth cotton tender announced to offload cotton stock procured from the domestic market to facilitate the farmers did not fetch a single bid. It failed to attract textile mills and trader for cotton procurement, textile mills were reluctant to procure cotton from the state-run grain trader. Previously , TCP not received a single bid in the fifth cotton tender too, which was opened on September 14, 2015.

According to market sources, the Federal Board of Revenue (FBR) has imposed 10 percent advance tax on cotton procurement from TCP, due to which the textile millers and traders are reluctant to procure cotton from TCP. As per tender condition, successful bidders are required to pay advance tax at the rate of 10 percent, which will be later adjusted in their annual tax returns.

TCP issued sixth cotton tender on September 18, 2015 for sale of 84,600 cotton bales and accordingly the tender was opened on September 30, 2015 at Corporation’s head office. In response to TCP’s sixth cotton tender not a single buyer/textile miller/trader participated in the tender. As the participation was nil TCP has announced to scrape the tender.

In order to stabilise cotton prices in the domestic market, the federal government, in November last year, asked TCP to procure cotton from ginning factories to facilitate the farmers. Accordingly, TCP spent some Rs 3 billion and procured 96,000 cotton bales from the ginners. Now, the state-run grain trader is facing difficulties in offloading the procured cotton stocks as prices, in the domestic market, are much lower than procurement rates and secondly the federal government has imposed advance tax on procurement from TCP. Overall, the state-run grain trader procured some 95,400 cotton bales from ginners at a support price of Rs 6,864 per maund in November 2015.

So far TCP has managed of offload some 10,800 cotton bales through two tenders and some 6,800 cotton bales were sold through first cotton tender and 4,000 cotton bales in the fourth cotton tender as offers were equal to the reserve price.

In total, TCP has conducted six tenders for sale of cotton , out of which some four tenders have been scrapped. Two tenders were scrapped due to nil participation and two other were scrapped due to less than reserve price bids.