Source: Business Recorder

RECORDER REPORT | Apr 16, 2021

LAHORE: The sluggish trend remained continued in the local market on Thursday. Market sources told that due to the Ramazan the market volume remained very thin. The Economic Coordination Committee (ECC) of the Cabinet on Wednesday withdrew customs duty on import of cotton yarns till June 30, 2021 in order to ensure smooth supply of cotton and cotton yarns to the value-added industry.

The ECC meeting presided over by Minister for Finance and Revenue Hammad Azhar was presented a summary by the Ministry of Commerce for withdrawal of customs duty on import of cotton yarns under PCT 5205, 5206 and 5207 till 30th June, 2021. The Committee approved the withdrawal of customs duty to ensure smooth supply of cotton and cotton yarns to the value-added industry, while bridging the gap between domestic production and overall demand for the inputs.

Cotton Analyst Naseem Usman told that according to media reports the government has refused to bail out the value-added sector (VAS) seeking monetary compensation for the export orders it booked on the presumption that Pak Rupee would further depreciate against the US dollar. The government maintains that commercial decisions always have consequences that are to be borne by commercial entities and it’s not possible for the government to bail them out.

To seek compensation, some VAS representatives recently met Prime Minister’s Adviser on Commerce Textile and Investment Abdul Razak Dawood and top ministry officials. The VAS representatives sought the compensation, contending they did not book the rupees in advance as they usually do, presuming the rupee depreciation would continue. However, the unprecedented depreciation of the US dollar and appreciation of Pak Rupee from 165 to 152 has inflicted loss to the VAS exporters.

The officials also said that last year, the “big brothers” of the textile sector wrote a letter to the government to cover their losses as a consequence which the government very rightly refused to even consider. “And this year, because they did not book the currency, they have lost out because they will once again receive less rupees against the dollars,” the officials added.

Meanwhile, All Pakistan Textile Mills Association rebuts arguments regarding cotton yarn availability. APTMA is the premier trade organization of Textile Sector with members responsible for 60% by value of all direct exports. APTMA membership includes representation from all segments of textile value chain: spinning, weaving, knitwear, garments, home textile etc., as well as vertically integrated concerns.

It is highly regrettable that a purely economic issue has been politicized by some of the smaller trade associations. The real economic issue which has caused such an uncalled outburst is the revaluation of rupee from 165 to 152 to a dollar which has squeezed the profitability of the entire value chain, including the yarn manufacturers, as explained below.

Monthly yarn production is 200,000 tons with consumption of 1.3 million bales per month approximately 15.5 million bales per year of cotton paying international prices to 10 million cotton farmers and buying 100 percent of Pak cotton produce competing with international merchants at international prices with free export policy of cotton by the government at 0 percent duty to ensure international prices to cotton farmers.

Out of which only 6 million bales were produced domestically, and balance had to be imported at international prices from USA Brazil and west Africa this year and 200,000 tons of Yarn production has been kept constant. The spinning industry consumes 100 percent of 30,000 tons of Synthetic fibers produced in the country, 200,000 yarn is produced from cotton and synthetic fibers monthly out of which only 100,000 tons of yarn is consumed by value added per month balance is surplus exported in form of 60,000 tons of Fabric and 40,000 tons of yarn every month.

There is no question of shortage of yarn or fabric as is surplus. As per free market mechanism the buyers only need to pay international prices of the products to the value chain, but the so-called value-added sector of knitwear and woven garments are unwilling to pay international prices of yarn and fabric. Government has set cotton sowing target at four million acres in Punjab and agriculture department was making strenuous efforts to achieve target and advocating sowing of registered varieties to improve cotton production.

Agriculture spokesman said in a statement that Rs 1000 subsidy was being extended to farmers on purchase of cotton seed bags for their encouragement adding that registered varieties including IUB-2013, FH-142, BS-15, MNH-886, Nayab-878, and Nayab Kiran were included in the subsidy scheme. He said that Rs 1000 per seed bag subsidy was being extended on 10kg bag of seed with fur and 6 kilogram fur-free seed bag. Farmers from Bahawalpur, Dera Ghazi Khan, Multan, and Faisalabad divisions besides those from Mianwali and Bakhar can avail the subsidy.

Subsidy can only be availed through vouchers in seed bags. Farmers should seek seed bags with vouchers from the merchant and get themselves registered with the local office of agriculture extension to claim subsidy. Farmers can avail subsidy on maximum two seed bags. Moreover, Indian cotton prices slip on the back of slowing demand from textile industry due to COVID. According to Atul Ganatra, President Cotton Association of India they have seen cotton and yarn prices correct form high due to COVID related restrictions. (Source: Business Recorder)