- Massive cotton imports to hurt textile sector
The estimated 20% shortfall in the country’s overall cotton production during 2010-11 crop seasons will stand at around 2.3 million bales, which will financially burden country’s textile value chain from fiber to fabric. A number of factors have already put the domestic as well as international textile industry in a fix, as lower-than-expected cotton crop and stronger-than-expected demand in many countries have already driven the prices of cotton in recent months, fiber, said analyst Shakeel Ahmad. During the last crop season 2009-10, the lint production in the country stood at 12.8 million bales, while the domestic demand was 14.9 million bales. The shortfall by 2 million bales would be met by imports for which textile sector has to suffer a financial burden (cost) of more than $5 billion. The imposition of RGST will increase Rs 365,000 on 100 cotton bales which will further burden the textile and spinning sector of the country. The Federal Cabinet in Islamabad increased excise duty from 1% to 2% on several items. The financial burden is inevitable as the reports to further taxing the cotton sector was on the cards besides refusal of Indian exporters to honor the commitment made by Pakistani importers. The restrictions, which have been placed by the government of India, in the form of delays or bans of cotton exports for already concluded contracts, have also contributed to financial burden on Pakistan’s textile sector. The global textile industry is not in a position to absorb any longer cotton price increases of unprecedented dimensions recorded during the past months without risking its own existence. Lower production forecast in China and USA due to bad weather is forcing mills to import more from major producing countries, which is also contributing increase in the world lint prices. The US, the largest producer of cotton in the world, has sold 97% of its crop and has nothing significant to offer to Pakistan as it would cost Rs9, 800 per maund to Pakistani importers.
- GST impasse – Domestic textile trade falters
Producers-cum-exporters from the five sectors which previously were under the zero-tax regime have halted their domestic as well as international trade as they are looking forward to the government to clear the uncertainties in the ordinance issued on March 15. Through the ordinance, the government ended the 17 percent general sales tax (GST) exemption, that these sectors enjoyed on their domestic sales and also obliges traders to trade with only registered taxpayers, failing which, they would be subjected to the levy of 17 percent GST. The collective exports of the five zero-rated sectors, namely leather, textiles, carpets, sports goods and surgical goods, for financial year 2009-10 remained above $13 billion. None of the ginners, cotton cultivators or weavers are registered taxpayers or exporters, and hence if an exporter purchases products from them with an intention to export the same after value addition, he would be subjected to 17 percent GST. Also it is apprehended that, such halting of trade would result in delay in exports, and would cause irreversible damage to the country’s economy and may even lead these industries to lose their hard-earned markets to other competing countries in the region. Meanwhile, as the cotton yarn producers are not being able to gain clarity regarding the law, they have blocked supplies to the fabric producers.
- Pakistan would be for first time importing cotton from Uzbekistan
With serious effort of Prime Minister Yusuf Raza Gilani, the Uzbekistan government has agreed to provide one million cotton bales to Pakistan up to 30th June 2011. Chairman All Pakistan Textile Mills Association (APTMA) Gohar Ejaz said that the Uzbekistan government has agreed Pakistan government to provide up to one million cotton bales to Pakistan on purely business terms. According to him, no such import of cotton has ever taken place from Uzbekistan to Pakistan over the last 10 years. China was major importer besides the international traders of Uzbek cotton with 80 percent advance payment as cash. However, the Uzbek government has amended this law for Pakistan and the condition of 80 percent advance Cash withdrawn. Further, he said, the Uzbek index was higher than A index and the Uzbek government agreed to provided cotton on A index. Gohar, besides Minister for Privatization Syed Naveed Qamar, Minister for Food and Agriculture Israrullah Zehri and State Minister for Foreign Affairs Hina Rabbani Khar, was part of a PM-led delegation to Uzbekistan. Gohar said the Prime Minister Gilani has become hero of textile industry by resolving the cotton shortage issue through holding successful negotiations with his Uzbek counterpart Shavket Mirziyayev and Uzbek President of Uzbekistan Islam Karimov. According to him, Pakistan was short of one million cotton bales due to non-availability of cotton from traditional suppliers like Indian and US. He said Pakistan would be for the first time importing cotton from Uzbekistan and all credit goes to President Asif Ali Zardari and Prime Minister Yusuf Raza Gilani. He said he had pointed out to the PM Gilani that it was not possible for Pakistani importers to pay 80 percent cash as advance payment as per the Uzbek law. The PM Gilani, he said, took it to his Uzbek counterpart and got through a waiver to this condition and the Uzbek government agreed to waive it of for Pakistan. Gohar also said that a total of four meetings held with Uzbek government where the issue relating to pricing formula on the basis of A index was also resolved. Chairman APTMA said the prime minister extended his full support to ensure availability of one million cotton bales from Uzbekistan. Earlier, he said, China and Bangladesh were importing Uzbek cotton altogether. Gohar said this agreement has brought a deep sigh of relief to the textile industry, as it has met shortage of remaining one million cotton bales up to June 30, 2011.
- PCGA Chairman disputes recovery in cotton output
“There is no recovery in cotton output” said the Chairman of Pakistan Cotton Ginners Association (PCGA) – Mr Masood Majeed. Mr Majeed was reacting to reports that the 2010-11 cotton crop has witnessed recovery, after it was reported that, an additional 88,000 cottonseed bales arrived in the market between March 1 and 15, 2011. Speaking exclusively with fibre2fashion, Mr Majeed informed, “Arrivals have almost stopped and total output is around 11.6 million bales. Actually two million bales have been destroyed by the flood”. “However, because of the very good prices to the farmers there would be more sowing and now that the water in the flood affected areas has receded, the land is now cultivable so the farmer will cultivate cotton there also”, he informed. “I cannot correctly estimate the acreage under cotton, but the area which was destroyed by the floods is under consideration as well as new areas, where till date, no cotton was cultivated, farmers are shifting towards cotton” he added by saying. “Exact cotton acreage figures can be had in the month of April. We are expecting around 15 million bales in the next cotton season”, he wrapped up by saying
- Pakistani cotton production better than India
Punjab Minister for Agriculture, Livestock, Forests and Co-operatives, Ahmed Ali has said that despite unfavorable conditions, average cotton production in Punjab has remained much better than the neighboring country India. He said that Rawalpindi, Jhelum and Gujranwala districts had been ranked the best for achieving 122 percent, 118 percent and 106 percent target of wheat cultivation, respectively. He said that preparations are being made on emergency basis for provision of quality seed for the next cotton crop. He expressed these views while addressing officers of Agriculture Department at Central Cotton Research Institute, Multan. He said the Punjab Agriculture Department has so far successfully achieved 95 percent wheat sowing against the target of 16.89 million acres of land in the province. He said he hoped that overall target would be achieved soon. He said it was for the first time in the history that all desirous farmers were being granted loans, on the spot, on easy terms under one-window operation. The minister said that subsidy of billions of rupees was given to the growers for purchasing agriculture implements, including tractors. Ahmad Ali said that fertilizers had been made available to all farmers at their doorsteps. He hoped that production target would be met through proper crop management and plant protection. He said that a policy is being evolved for purchase of wheat while the storage capacity of wheat will be increased to 100,000 tons in southern Punjab. He added that the government has provided seed to the farmers free of cost for cultivation of wheat at 1 million acres of land. The Minister said that Punjab government is facing some difficulties due to increasing prices of agriculture inputs and owing to which desired results are not being yielded. He said that recent increase in fertilizer prices was unjustified, on which the Punjab government has recorded its protest with federal government and also demanded to reduce the price immediately. He said that import of 225,000 tons fertilizer from Saudi Arabia next month would help stabilize the prices of fertilizer. He said that an international cotton conference is being arranged for evolving a comprehensive strategy for the next cotton crop. He said besides provision of quality seeds, an effective campaign would be launched to create awareness among farmers about latest agri recommendations. He said that plant protection measures were being taken according to the pest and disease situation by adopting integrated pest management approach. He said that Jhelum, Khushab, Bhakkar, Jhang, TT Singh, Narowal, Sheikhupura, Okara, Sahiwal, Pakpattan, Multan, Khanewal, Layyah, DG Khan and Bahawalpur districts would definitely surpass the 100 percent target while other districts except Chakwal and Attock had achieved of 86 percent target. Ahmad Ali said that weeds cause damage to wheat crops considerably and a campaign would be launched to control it by motivating the farmers to adopt both culturable and chemical methods. He said efforts were also being made to bring as much as possible cultivable wasteland lying in different parts of the province, especially the riverine areas, for increasing wheat production through horizontal expansion of acreage. He said that availability of canal water for irrigation was another important factor for timely sowing of wheat, proper tillage and application of fertilizers.
- Pakistan – Textile exports grow by 28 percent in seven months
Textiles exports saw a growth of 28 percent during the first seven months of this fiscal year to reach $7.585 billion, contributing over 56 percent to the overall exports of the country, sources said on Tuesday. Pakistan exported a record $1.3 billion worth of textile products during January, an increase of 40 percent over the corresponding month last year, the sources in the Ministry of Textiles said. The textile exports also registered a healthy increase of 43 percent in December, 2010 as entrepreneurs started passing on the high price of cotton to their buyers. “We are well on our target to export $14 billion textile products this year,” said Gohar Ejaz, Chairman of the All Pakistan Textile Mills Association (APTMA). The textile exports are expected to rise further in the remaining five months of this fiscal year, he said. However, even if they remain at January’s level, Pakistan would fetch a minimum of $6.5 billion exports to reach $14 billion exports target that was fixed by the APTMA five months back. He said the government’s target for textile exports stood at around $11 billion. After the government made it clear that it would not interfere in the free market mechanism, the value-added sector started passing on the high cost of raw material to foreign buyers. “Pakistan is still the cheapest source of yarn, fabric and garments in the world,” he said, adding that textile exports could further enhance if the government succeeded in addressing the energy crisis. Gohar said that the increase in textile exports this year is mainly due to increase in value. Further increase of $2 billion in textile exports is possible next year provided the government facilitates new investment in the sector through interest rates and tax concessions. He expressed hope that after declaring 2011 as the year of textiles, the president would take personal interest in addressing the raw material and energy issues of the industry. A leading knitwear exporter M I Khurram said that the knitwear exports have increased by 25 percent in value terms and the readymade garment exports by over 35 percent during the first seven months of 2010/11. Regular rise in cotton rates would result in further increase in per unit value of the apparel sector. A leading spinner S M Tanveer said that in July-January the textile exports significantly increased from $5.925 billion during the corresponding period last year to $7.585 billion, showing an increase of $1.6 billion. This, he said, couple with increased remittances have enabled the country to post a current account surplus. “The rupee has appreciated for the first time in three years on the back of higher exports,” he added. The textile entrepreneurs now have sufficient reserves that they want to invest in balancing and modernization. “High interest rates, power and energy shortages, he said, are the main hindrances that discourage investment,” he added.