Yarn spinners in Punjab region are headed for another crisis which can force them to stop production or to close down factories to avoid losses. A mix of domestic and regional factors has been forcing many spinners to stop buying cotton and production until the market stabilises. This has led to unsold stock to pile up at ginners.
Regional issues that have made domestic yarn spinning unviable include slowing demand from Chinese demand for Pakistani yarn and a five per cent rebate allowed by India on its yarn exports since January.
Along with these, domestic issues like rising electricity prices (currently at US$0.18 per unit), unavailability of cheaper gas for captive power generation and strong revaluation of the PakRe have been affecting yarn production in Punjab.
Reportedly, tapering demand from China and surplus Indian cotton entering the market, the situation has turned to worse for spinners. Indian yarn is not only replacing Pakistan in China but also flooding local market taking advantage of the 10-20 per cent price differential in various categories.
A Lahore-based spinner opined that yarn imports from India could rise to 1.5-2m bales this year. Indiaâ€™s rebate has damage the textile industry, which was buoyed after getting GSP+ status from the EU. "We could have somehow survived competition from India but the recent rupee appreciation against the dollar and increasing electricity prices have broken our back," the spinner told a national daily, he also added that at least 100 spinning factories in Punjab faced closure once their current cotton stocks are exhausted over the next few days.
Spinners want government to intervene to survive the industry. They have demanded the government to allow them rebate to offset the effect of the currency appreciation, imposed 5 per cent duty on yarn imports, bring down electricity rates and provided gas for captive power five days a week.
Nevertheless, value-added textile exporters are opposing restrictions on Indian yarn.
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