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More areas to produce contamination-free cotton

By AMANULLAH BASHAR
 May 06 -12, 2002

Abdul Razak Dawood, Federal Minister for Commerce has expressed his satisfaction regarding movement of the cotton-textile sector in accordance to the guidelines provided by the Textile Vision 2005.

He was addressing a large gathering of the people who matter in the cotton textile sector at seminar jointly organized by APTMA and KCA on "Cotton Production, Quality Improvement and Hedge Trading".

Razak Dawood, however said that this important segment of the economy has to go a long way to achieve the desired results. Out of the entire cotton-textile network, the minister pointed out the ginning sector as the weakest link in the chain and has to improve to come up to the mark, he asserted.

The minister said that the efforts to produce contamination-free cotton have started producing results and the farmers from Punjab have shown encouraging results by leading the sector in contamination-free cotton. He said that in order to broaden the base for producing contamination-free quality cotton more areas would be included in the scheme.

Khair Baksh Jonejo, Federal Minister for Agriculture, while addressing the gathering, said that the next cotton season is just before us. This is the time when all the stakeholders need to formulate their strategies for producing and handling the next crop to the best interest of their own as well as the national economy.

However, we should keep a close watch on the possible world cotton scenario and its impact on the domestic market in Pakistan.

According to available information, the depressed world market prices in 2001-2002 season had discouraged the farmers the world over. Consequently, the world cotton area is expected to decline by 40 per cent in 2002-03 resulting in over 8 per cent decline in the production. But the consumption at the same time is anticipated to improve by 2 per cent. As such the cotton prices in the world market are expected to improve. The domestic market would also improve to benefit all the stakeholders. The reported economic recovery now underway in major economies also indicates that the textile industry will be positively impacted by the higher economic growth.

The domestic cotton production during 2001-2002 is estimated to be 10.9 million bales, which speaks of the untiring efforts made by the growing community for producing such a sizable crop despite irrigation water scarcity for which they need to be acknowledged. The Minister urged the entire cotton textile industry that the growers should be properly rewarded for their hard labour.

Quality now plays a much important role in determining the market value of cotton. With the fast approaching 2005, when the quotas will vanish, every nation will have to compete and create its credibility in the free international market, the minister said. Necessary measures are thus urgently needed to upgrade the status of Pakistan cottons in the world market. This also calls for rapid improvement in the cotton production and ginning process through proper handling procedures and ginning practices. The government is well prepared to provide all the possible support to the private sector for producing high quality and contamination-free cotton, the minister assured.

The private sector stakeholders are also required to play a more important role in implementing such a programme to the benefit of all the segments of the cotton economy. The endeavours made to produce better grade and low contamination cotton in Rahim Yar Khan area this season has reiterated the efficacy of the cotton standardization and grading system. Hence, the government intends to soon promulgate the cotton Standardization Ordinance in Pakistan, the minister disclosed.

HEDGING

Speaking on Hedging issue, Zahid Bashir, Chairman KCA, said that hedging has been defined as "the method employed by many dealers in cash commodities to protect themselves against losses, which might result from price fluctuations". The most important economic function performed by futures trading is the price insurance offered through hedging. Hedging provides a cover against the risk of fluctuations in prices, thereby facilitating smooth conduct of national and international trade in cotton for all sectors of the cotton trade in a more equitable manner.

Cotton marketing involves a tremendous business risk of fluctuations in prices; it is therefore, necessary that there should be some form of price insurance to reduce the risk of volatile price fluctuations, Zahid recommended. Futures trading services the interests of the producer, the middleman and the manufacturer alike by stabilizing prices, guaranteeing deliveries and payments against contracts, minimizing risks involved in price fluctuations and stimulating improvement in the quality of the cotton.

It may be noted that there are divergent views regarding re-opening of the hedge trading, however, a committee in the ministry of commerce is working on the hedging issue and is likely to take decision in this regard. It is however yet to be seen how the committee to accommodate different views on the re-opening of the hedge trading in Pakistan.