TEXTILE BIG PLAYERS CREATE PANIC TO LOWER COTTON RATES

PROCESSING SECTOR NEEDS 7-DAY GAS, AS THEY HAVE NO OPTION; OTHER SECTORS CAN RUN ON OIL

KANWAL SALEEM
(feedback@pgeconomist.com)

Nov 12 - 18, 2012

One of the segments of textile sector is trying to create panic in local market in an effort to bring down cotton prices with a view to stock cheaper raw material through cartelization and giving wrong reports of importing cotton from China and India.

Only 10 to 12 big textile groups hoard raw cotton at lower rate, later creating monopoly on yarn and blackmailing the whole local market in the country, observed Garments Manufacturers and Exporters Association (PRGMEA) chief coordinator Ijaz Khokhar, urging the textile ministry to regulate entire market, starting from phutti to cotton yarn.

He accused textile mafia, of making huge profits at the cost of growers by hoarding the produce and later selling it high prices, asking the government to stop unchecked export of cotton yarn in the nation's best interest.

The former central chairman of PRGMEA pointed out that big players are projecting wrong production figures, cotton rates and world cotton scenario as per their interest just to create panic in local market, which is happening under the government's nose, who remains a silent spectator.

He called for fact-based analytical approach of government in the larger interest of all stakeholders, including growers, ginners and millers, value-added sector with a view to maximise resource transfer towards the farming sector.

He said that seed cotton is purchased by the ginners at the cheapest price while cotton is sold at the highest price, resulting in fleecing growers from their hard-earned money.

Briefing about energy crisis, he said that textile industry is likely to face a worsening situation in the coming days, as the Sui Northern Gas Pipelines Limited has reduced gas supply to the industry to four days a week, urging the authorities to provide non-stop gas to dying and processing mills for seven days a week.

Government has set textile exports' target at $ 16 billion for the current year 2012-13, however due to the ongoing energy crisis it is difficult to realize the target and the exports would be no more than $ 12.5 billion, he warned.

Large spinning units have also several other options to run the industry but the processing and dying sectors have no choice to operate due to unavailability of gas, value added sector leader disclosed.

He added that large-scale closures as well as bankruptcies and massive lays off in the textile industry are feared due to energy crisis.

Gas is not available and the industrialists are in a fix to meet their energy requirements, pleading with the authorities to supply gas so that cotton could be converted into value-addition.

Ijaz Khokhar further said that growing energy shortage especially in the textile value-added sector is impeding industrial growth and could lead to substantial reduction in production, jobs and exports.

Market sources claimed that Pakistani spinners will hardly be able to import any cotton from India this year because Indian traders are backing out of their sales contracts due to the commodity's rapidly rising global prices.

The Indian traders have cited new cotton export regulations and licensing requirements for exporters as an excuse for canceling their sales contracts with Pakistani importers.

But we know that they are terminating contracts because of a sharp jump in global prices during the last several weeks, a leading textile exporter said.

The new Indian cotton export regulations are meant to keep the cotton exports from exceeding the permissible quantity of 5.5 million bales and to ensure its availability to domestic textile industry at reasonable prices.

The Pakistani spinners had made contracts for the import of more than one million bales from India in September for Nov-Dec delivery at $0.80-0.90 per pound. With the current global prices increasing to 15-year high of above $1.10 cents a pound on supply concerns, the Indian traders stand to lose a great deal of money if they keep their contracts with Pakistani industry, spinners say.

Pakistan faces a shortage of around four million bales due to destruction of more than two million bales in recent floods. Aptma, however, believes that the shortages could not be more than two million bales at the spinning industry's current consumption requirements of 15 million bales.

Exporter said Pakistan's textiles could earn additional export revenue to the tune of $4 billion this year by transferring the increase in cotton prices to foreign buyers. Another $1 billion would be added due to the trade concessions given by the EU, thus taking the country's total textile exports to $15 billion from $10 billion.

The growers had sold their last year crop of 12.7 million bales for Rs260 billion. This year they will earn Rs400 billion from the same crop size because of the rapid hike in global prices.