HOPES FOR SPINNERS--FEARS FOR
By AMANULLAH BASHAR
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
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
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
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
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.