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Prospects for cotton exports

Complexities kill the spirit of trade

Sep 11 - 17, 2000

Despite the policy of free cotton export laid down by the government, the cotton exports are not likely to contribute noticeably in view of the crop size, which seems to be enough for domestic consumption.

So far the assessment of the cotton crop is around 9.7 million bales this year while a final word has yet to come about the exact size of the crop.

Sadiq Maqbool, Chairman, Karachi Cotton Association while talking PAGE said that it would be too early to talk about cotton export as the crop has not been assessed yet. As far as the figures of 9.7 million bales were concerned if they are taken as correct it would be required by the local textile industry.

Contradictions in the system are another impeding factor. On one hand it is said that we should increase our exports while complexities in the procedures designed to keep the trade under thumb are killing the spirit on the other hand, Maqbool said.

Meanwhile, the government has arranged a credit line worth Rs10 billion for the Trading Corporation of Pakistan (TCP) to launch cotton buying in Sindh and Punjab. The allocation of Rs10 billion could be expanded further if it was needed.

Intervention by TCP in cotton lifting has been allowed with a view to help stabilizing the market prices. The idea is to encourage the growers. In this connection all government sections have been geared up to prevent cotton price crisis which had occurred last year.

Under this policy, it has also been decided that phutti price of Rs725 will not be increased or revised. This time, the TCP has been provided complete infrastructure for cotton procurement to avoid any complaints from the growers. In order to protect the interest of the growers that is a priority of the present government the gainers will have to accommodate them by paying them premium according to material. The public sector intervention in cotton sector is to extend all possible benefits to the growers to improve their lots. Under this programme, the production target has been fixed at 16 million bales by the year 2005.

It may be recalled that farmers had to go through serious crisis last year due to shortage of storage facility with TCP. This time adequate storage arrangements have been made to avoid recurrence. Another factor for cotton crisis was the import of cotton by the previous government. The imported cotton was instrumental in declining the prices sharply in the local market.

The Export Promotion Bureau (EPB) has issued procedure for registration of export contract for raw cotton by private sector. The exporters, under the scheme, shall be entitled to register the export contracts of cotton on the basis of type of grade. However, in case where the export sale is type-based, the exporter would mention the equivalent Grades on the registration certificate, issued by EPB and other export documents at the stage of shipment so that the foreign buyers become familiar with cotton grades.

This registration procedure shall apply to registration of export contracts of raw cotton of private sector with EPB for both new crop and the fresh contracts of old cotton.

The export contracts of raw cotton would be registered in five copies with EPB on the enclosed format with submission of copy of Contact/fax/telex confirmation. Copy of export registration of the firm and Production of certificate from State Bank of Pakistan to the effect that the shipper has deposited with the State Bank, Bank guarantees equal to 2 per cent of the value of the contract.

EPB would retain one copy and return four copies to the shipper after receipt of irrevocable LC within 35 days of registration of contract with EPB as mentioned earlier. The shipper would approach EPB with duly filled four copies of registration certificates containing information about L/C. After necessary verification; EPB would issue registration in quadruplicate on the next day of submission along with return of original L/C.

The State Bank would maintain bank guarantees, invoke the forfeiture mechanism in case of non-establishment of irrevocable L/C within 35 days of registration and non-shipment within 180 days of registration of contract with EPB.

At the time of shipment, the shipper will submit to customs authorities the above mentioned registration certificate issued by EPB along with necessary shipping documents and grading and classification certificate issued by Pakistan Cotton Standards Institute (PCSI).

The requirement of grading and classification certificate issued by PCSI is mandatory. The only relaxation will be in case of consignments where the cotton has been packed in export packing at the ginning stage and the Customs Authorities are satisfied with the proof/evidence submitted to them by the export to that effect.

The customs authorities will also ensure that the shipments of cotton take place within 18-days of the date of registration of contract with EPB as stipulated in the registration certificate of EPB.