Weekly Cotton Review: Prices stable amid low trading activity

Business Recorder

28-04-2025

KARACHI: Cotton prices have shown overall stability, while trading activity remained limited. New York cotton futures also recorded an improvement in prices. Indications suggest that the EFS (Export Finance Scheme) matter may be postponed until the budget. Frustrated with the government, the PCGA (Pakistan Cotton Ginners Association) has reportedly sent a letter to the Chief Justice of the Supreme Court after approaching the Army Chief, seeking judicial intervention in the matter.
Meanwhile, the import bill is rising due to rising imports of cotton, cotton yarn, and textiles, as highlighted by Shahid Rasheed Butt, former President of the Islamabad Chamber of Commerce and Industry.
Head Transfer of Technology Central Cotton Research Institute Multan Sajid Mahmood has said that the 18% sales tax on local cotton and the EFS facility on imported cotton are becoming an additional burden for cotton farmers and local industries.
During the past week, the local cotton market overall remained stable. Trading took place between 15,500 to 17,500 rupees per maund, depending on quality and payment conditions. Interested mills are showing some interest in purchasing cotton, but ginners' stock of cotton is gradually decreasing. However, imported cotton is also arriving rapidly, and mills are making payments for it, which is causing a financial strain in the local market. Additionally, cotton yarn and fabric are also being imported, causing distress among textile spinners as they are finding it difficult to sell their yarn. On the other hand, weaving sector is also being affected.
FPCCI, APTMA, PCGA, and other organisations have held several meetings with the relevant government departments regarding EFS. PCGA, disappointed with the situation, has even written a letter to the Army Chief, appealing for support in resolving EFS-related issues for cotton restoration and addressing ginning problems. It is being said that a decision on this matter will be made in the upcoming budget.
Various reports are circulating about the ongoing cotton cultivation. In some areas condition of cotton crop is good, while others are facing complaints of water shortage. On the other hand, the intensity of the heat is also raising concerns about its impact on newly sprouted plants. In several regions, delays in cotton sowing may occur due to water-related issues.
On the other hand, the import bill is increasing due to the import of cotton, yarn, and fabric. Shahid Rasheed Butt, former president of the Islamabad Chamber of Commerce, has stated that the rising competition in the global textile market is a cause for concern for Pakistan, which is also increasing global competition and the business costs of the textile sector. The decline in cotton production is further adding to the burden on the import bill.
Additionally, disappointed by the government's delayed response, Dr Jassu Mal Leemani, Chairman of PCGA, has written a letter to the Chief Justice of the Supreme Court of Pakistan after the Army Chief, requesting symbolic intervention regarding discriminatory treatment against local cotton farmers. The letter also highlights the difficulties faced by local textile spinners, manufacturers, and cotton farmers due to the restoration of cotton and issues related to GST and EFS, urging intervention to ensure a level playing field.
The rate of cotton in Punjab and Sindh as per quality and condition is in between Rs 15,500 to Rs 17,500 per maund. The Spot Rate Committee of the Karachi Cotton Association kept unchanged the rate at Rs 16,700 per maund.
Naseem Usman, Chairman of the Karachi Cotton Brokers Forum said that international cotton prices remained stable overall. The price of New York cotton futures is currently trading between 68 to 70 cents per pound. According to the USDA's weekly export and sales report, sales for the 2024-25 season reached 104,000 bales. Vietnam remained at the top by purchasing 34,400 bales. India secured the second position by buying 22,500 bales, while Pakistan ranked third with purchases of 16,500 bales. For the 2025-26 season, 38,000 bales were sold. Indonesia led the purchases with 13,200 bales, followed by Peru in second place with 9,700 bales, and Honduras in third place with 9,300 bales.
Chairman PCGA Dr Jassu Mal has written a letter highlighting a critical issue severely impacting Pakistan's agricultural sector— the unfair tax policies that disadvantage local cotton farmers and ginners while favouring imported cotton. The letter emphasizes the urgent need for policy reforms to address this imbalance, which is crippling the domestic cotton industry.
Local cotton farmers and ginners face an excessive tax burden, including an 18% General Sales Tax (GST) on ginning, along with multiple withholding and indirect taxes. In stark contrast, imported cotton enjoys a complete exemption from these taxes, entering the country with zero percent sales tax and no import duties. This discriminatory policy has led to a steady decline in cotton cultivation and production, as farmers struggle to compete with cheaper, tax-free imports.
The injustice has forced many farmers to abandon cotton in favour of other crops such as sugarcane, rice, and maize, which receive better government support and face fewer tax hurdles. This shift poses a serious threat to Pakistan's textile industry, a cornerstone of the national economy and a major source of employment and export revenue.
The letter said that major cotton-producing nations including India, China, the United States, and Brazil, actively protect their domestic cotton industries by imposing import duties and taxes on foreign cotton. These countries also provide subsidies and incentives to their farmers, ensuring the sustainability of their agricultural sectors. Pakistan; however, does the opposite— taxing local producers heavily while allowing imported cotton to enter tax-free, creating an uneven playing field that stifles domestic growth. This policy not only violates constitutional principles of equity and justice but also undermines economic fairness.
Dr Mal clarifies that this is not a plea for subsidies but a demand for equal treatment, urging the government to eliminate policies that penalize local producers in favour of foreign imports. He has appealed for immediate intervention, requesting a thorough review of current tax policies. The letter calls for urgent reforms to restore confidence in Pakistan's agricultural sector and ensure justice for cotton farmers and ginners, whose livelihoods are at stake. Without corrective measures, the continued decline of cotton farming could have far-reaching consequences for the country's economy and employment landscape.
However, Sajid Mahmood, Head of the Technology Transfer Department at the Central Cotton Research Institute (CCRI), Multan, while speaking to Naseem Usman, highlighted the mounting challenges facing Pakistan's cotton sector. He noted that the imposition of an 18% sales tax on locally produced cotton and its value-added products is placing an additional burden on both growers and the domestic textile industry. Simultaneously, the allowance of duty-free import of cotton under the Export Finance Scheme (EFS) is undermining the competitive position of local producers.
He further pointed out that policies encouraging large-scale imports of cotton and soybeans from the United States, coupled with the persistent under-funding of the Pakistan Central Cotton Committee (PCCC), the country's premier cotton research institution, have created uncertainty among farmers regarding the viability and future of cotton cultivation.
Copyright Business Recorder, 2025