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Decline in world cotton prices

  1. Decline in world cotton prices
  2. WAPDA Bonds
  3. SECP launched to cleanse corporate sector
  4. Why tax on reserves of corporates?
  5. Ban on prize schemes
  6. Changes in SLR and CRR requirements


July 19 - 25, 1999

A bumper cotton crop in the United States and a massive off-load of cotton stocks by China have consequently brought down cotton prices to a record low in the world market. The current international price was quoted below 50 cents.

The local cotton market has feared a possible market crash due to falling cotton prices in the world market. Despite assurance given by the spinners to lift unsold stocks, they are still preferring import of cotton which is better in terms of quality. Half a million of cotton bales so far have been imported by the spinners. The import of cotton may bring a psychological pressure in the market to give a competitive advantage to the buyers, sources said.

Currently, the unsold cotton stocks with the ginners is estimated at 3.5 lakh bales while arrival of fresh crop has also begun.

The textile industry, however, seems to be unmoved on falling prices, rather they seem happy as the market forces have helped meeting their long-standing demand for restricting free export of raw cotton till the exact size of the crop is estimated. In a way, the textile sector is looking at the declining cotton prices at home and abroad with a sense of satisfaction. The low cotton prices in the international market ensures adequate supply of locally produced cotton comparatively at a cheaper rate.

The trade policy recently announced by the government was warmly welcomed by the textile sector as a number of their demands have been accepted.


Raw material constitutes 78 per cent of the direct cost in the textile industry. By announcing a free import and export policy for cotton, the Government has ensured that cotton would be made available to the local textile industry at internationally competitive prices and the growers would get a fair price for their produce.

After cotton, Polyester Stable Fibre (PSF) is the most important raw material for the textile industry. At present PSF is 20 per cent of the total raw material consumption of the local textile industry. By including PSF in No Duty No Drawback (NDND) Scheme, the textile industry has been assured internationally competitive prices of PSF.

Previously, the local textile industry was paying upto 35 per cent more than the international price of PSF due to restrictive duties on PSF imports and exorbitant prices charged by the local PSF producers.

Cotton yarn continues to be a very significant export item of the Country. By providing Export Refinancing on all counts of cotton yarn, the Government has brought the local textile industry at par with other competing countries which provide concessional export refinance on all items of textile exports.

Auto Coners are essential textile machinery for production of high quality yarn. By allowing duty-free import of Auto Coners, which are not produced locally, value addition in yarn production will be greatly promoted. Similarly, the Government has allowed duty-free import of Spare Parts for the textile industry, which will reduce the production cost.

Inspite of enormous funds being allocated to Pakistan Central Cotton Committee (PCCC) every year, very little improvement in quality and yield of cotton has taken place over the years. Without adequate improvement in quality and yield of cotton, quality yarn and textile products made there from cannot be produced. The textile industry has financing the entire annual operating budget of PCCC but 90 per cent of budget was being wasted on administrative expenses and there was no effective representation of the textile industry in the management and operations of PCCC. The government has now decided to transfer the management and operational control of PCCC to the private sector. Now PCCC can be expected to perform on scientific and commercial lines in the interest of the textile industry of Pakistan, cotton growers and the national economy in general.

The Central Excise Duty on yarn has been removed while Sales Tax Special Procedure for spinning industry rules 1999 is suspended for another 15 days. CBR and APTMA would finalize a revised procedure of sales tax on spinning industry to meet the objective of documentation in the industry.

Another major demand of the textile industry was reduction in power tariffs. WAPDA has already reduced power tariffs for industrial purposes while KESC has recently assured the textile industry to bring power tariffs at par with WAPDA.

Prior to announcement of the Trade Policy, APTMA had urged the government that the objective of the Trade Policy should be to facilitate local trade and industry so as to achieve the export target of $18 billion by July 2000.

The ball is now in the court of textile industry to come upto the expectations.

The Government, by removing all the bottlenecks, pointed out by the representatives of the industry, has however brought the textile sector under obligation to show the grit for promotion of stagnant exports of the country.