* Production shortfall, Indian export refusal to hit textile sector cost of production
By Razi Syed
KARACHI: The estimated 20 percent shortfall in the country’s overall cotton production during 2010-11 crop season 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, fibre analyst Shakeel Ahmad said.
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, Ahmad maintained.
He said 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,” he added.
The federal cabinet in Islamabad increased excise duty from 1 percent to 2 percent 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,” Ahmad said.
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, he added.
The India’s decision to ban the export of cotton is adversely affecting the global textile industry.
The increase in the prices of cotton is not unusual if they are market driven and within the international laws and regulations.
The trade sanctity of the contracts is fundamental rule and therefore should be preserved at all times. The intervention by the government of India is undermining the sanctity of the contract and distorting the international cotton and textile markets, which in turn is negatively affecting large parts of the global textile and cotton sector.
For the past 20 years, the global textile industry has been exposed to a deflationary environment with nominal prices for apparel and home textiles having fallen during this period on average by approximate 50 percent.
He said 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, he added.
The US, the largest producer of cotton in the world, has sold 97 percent of its crop and has nothing significant to offer to Pakistan as it would cost 9,800 per maund to Pakistani importers, he said.
Chairman Pakistan Cotton Ginners association, Chaudhry Masood Majeed said during July-October 2010, country exported 350,000 cotton bales while in the same period last year the export stood at 450,000 cotton bales.
He said cotton price also crossed a record level of Rs 11,000 per maund in October 2010 in the country while international price also hit record high $1.52 per pound.
Around 2 million bales were destroyed in the recent floods in Punjab and Sindh while tonnes of seed were also washed away, he said.
The ICAC monthly update on the world S/D estimates that world production in 2010-11 was projected at 115 million bales. World consumption was pegged at 116 million bales up a 1 million bales from a month earlier.
