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Business Recorder
19-05-2025
- Business
- Business Recorder
Weekly Cotton Review: Trading activity remains subdued
KARACHI: The cotton market witnessed overall stability, though trading activity remained subdued. In the international market, New York cotton maintained a downward trend. On the domestic front, a significant development emerged as the government, after a 50-year gap, finally allowed the import of cotton seed in an interview, Muhammad Adil Naseem Oswala stated that one of the major reasons for the decline in the cotton crop in the country is the government's flawed policies, particularly due to energy and the EFS, which have caused problems for spinners. He mentioned that while the EFS policy is good, it is being misused. He pointed out that because of the EFS, cotton and fabric are being imported in large quantities, especially Chinese cotton yarn, which is being imported in excessive amounts, creating difficulties for spinners. Additionally, fabric is also being imported, and the government needs to reconsider its EFS policy. Due to the EFS and expensive energy, many mills are shutting down, while others are operating partially. The government must adopt a positive policy for the cotton and textile industry; otherwise, in the current situation, the textile sector—especially spinning mills and the denim industry—will continue to close down In this regard, Nadeem Shah, President of the Sindh Seed Association, issued a clarifying statement detailing the import-related provisions. Meanwhile, the Pakistan Business Forum has demanded the removal of the General Sales Tax (GST) on cotton in the upcoming federal budget. Industry circles emphasize the need for immediate and practical measures to ensure the sustainable growth of the textile sector. According to Patron- in -Chief Pakistan Textile Exporters Association Khurram Mukhtar, progress in this sector is unlikely without resolving its persistent challenges. Additionally, experts from the ginning and spinning industries have criticized government policies, stating that flawed decisions have severely impacted these sectors. Adil Nasim Osawala stressed that the government must take serious steps to address the industry's pressing issues without delay. Last week, the local cotton market overall remained stable, with limited trading activity. Cotton deals were finalized at prices ranging from 16,700 to 17,500 rupees per maund, depending on quality and condition. The stock of cotton with ginners is gradually decreasing. Advance deals for the new crop (2025-26) of Phutti and cotton are taking place. In Sindh, Phutti traded at 8,300 to 8,500 rupees per 40 kg, while cotton was sold at 17,300 to 17,500 rupees per maund. It is being said that by the third week of May, two or three ginning factories in Punjab are expected to partially start operating using cottonseed from Sindh. In several cotton-growing areas of Sindh and Punjab, Phutti production is underway, and partial picking has also begun. The Federal Committee on Agriculture has set a production target of 10.18 million bales of cotton for the upcoming 2025-26 season. All Pakistan Textile Mills Association (APTMA), Pakistan Cotton Ginners Association (PCGA), and Federation of Pakistan Chambers of Commerce and Industry (FPCCI) have repeatedly appealed to the government regarding the continuation of the Export Facilitation Scheme (EFS) and are persistently urging action, but so far, no decision has been made. Hopes are raised at times, only to be dashed later. Currently, there are reassurances regarding EFS for the textile sector, but during a recent Senate session, hints were given that it may be difficult to reach a decision on EFS in the upcoming budget. Nevertheless, textile industrialists and PCGA cotton ginners continue to submit requests for EFS, holding meetings and press conferences through FPCCI and other organizations, emphasizing the need for a level playing field for EFS facilitation. However, no positive steps have been taken so far. A delegation including PCGA Chairman Dr. Jesu Mal Leemani, former Chairman Sohail Mahmood Haral, and APTMA Chairman Kamran Arshad met with Prime Minister Shehbaz Sharif, where assurances were given that sales tax on local cotton and other by-products would be abolished in the budget. Meanwhile, the Pakistan Business Forum has demanded the elimination of GST in the budget. In the provinces of Sindh and Punjab, the price of cotton per maund ranges from 16,700 to 17,500 rupees based on quality and condition. Advance deals for the new crop have been settled at a price of 17,300 to 17,500 rupees per maund. The Spot Rate Committee of the Karachi Cotton Association has maintained the spot rate stable at 16,700 rupees per maund. Naseem Usman, Chairman of the Karachi Cotton Brokers Forum, said that international cotton prices are fluctuating. The futures price of New York cotton is trading between 64.50 to 69.50 American cents. According to the USDA's weekly export and sales report, 122,200 bales were sold for the year 2024-25. Vietnam remained at the top by purchasing 95,600 bales. Bangladesh secured the second position by buying 26,200 bales. Indonesia ranked third with the purchase of 6,300 bales. For the year 2025-26, 34,200 bales were sold. Honduras led by purchasing 25,400 bales. Indonesia came in second place by buying 8,800 bales. In an interview, Muhammad Adil Naseem Oswala said that one of the major reasons for the decline in the cotton crop in the country is the government's flawed policies, particularly due to energy and the EFS, which have caused problems for spinners. He mentioned that while the EFS policy is good, it is being misused. He pointed out that because of the EFS, cotton and fabric are being imported in large quantities, especially Chinese cotton yarn, which is being imported in excessive amounts, creating difficulties for spinners. Additionally, fabric is also being imported, and the government needs to reconsider its EFS policy. Due to the EFS and expensive energy, many mills are shutting down, while others are operating partially. The government must adopt a positive policy for the cotton and textile industry; otherwise, in the current situation, the textile sector—especially spinning mills and the denim industry will continue to close down. Meanwhile, Pakistan has recently lifted a 50-year ban on the import of cotton seeds, and some are hailing it as a major achievement. However, in reality, this decision is a sign that our own agricultural system is not functioning properly. It means our government has not taken adequate measures for cotton research, seed production, and quality control. Zain Iftikhar Chaudhry, Regional Chairman of the Lahore Federation of Pakistan Chambers of Commerce and Industry, and Shahzad Ali Malik, former Chairman of the Pakistan IT Hybrid Seed Association, addressed a press conference at the FPCCI Regional Office in Lahore. They stated that cotton is not just our crop but the backbone of our economy. For several years, the cotton sector has been facing immense challenges. The industry repeatedly warned that if cotton was not saved, the textile industry would collapse. Allowing the import of cotton seeds is the first step toward improving the textile industry. The lifting of the import ban is a welcome move. Shahzad Ali Malik expressed gratitude to Prime Minister Shehbaz Sharif for ending the ban on cotton seed imports. In 2014, cotton production was 14 million bales, which has now dropped to 5.5 million bales. Around 800 ginning factories and 120 textile mills have shut down. Pakistan has previously allowed hybrid seeds for corn and rice, leading to rice yields reaching up to 120 maunds per acre. Now, with the approval of hybrid cotton seeds, a revolution in the cotton sector is expected soon. The Pakistan Business Forum has demanded that the federal government eliminate the GST (General Sales Tax) on local cotton in the upcoming budget to promote the domestic cotton industry. A spokesperson for the forum stated that if the government continues its policy of allowing duty-free imports of American cotton, it would amount to 'step-motherly treatment' toward Pakistani cotton, which could harm local farmers and the textile industry. In this regard, Chief Organizer Ahmed Jawad has called for an annual allocation of one billion rupees in the budget for the Central Cotton Committee to facilitate advanced research, quality control, and the provision of modern technology for cotton farmers. He emphasized that strong central measures are needed to improve the yield and quality of Pakistani cotton; otherwise, the country's reliance on cotton imports may increase. Let us define the proposed intervention of the guard system as it could become a ray of hope for the paralyzed cotton crop. To break free from this stagnant situation, which is gradually worsening, all available opportunities must be utilized. Along with strengthening the internal system of cotton seeds, our farmers need to be granted access to elite germplasms available in the international market (farmers' right). There are also prospects for the development of the indigenous cotton seed industry. However, to avoid surprises, we strongly recommend adopting cotton plant protection and quarantine measures. Great appreciation for Dr. Ghazanfar Ali Khan, who knows cotton very well and is a distinguished former cotton researcher. In my opinion, it is not correct to say that all public and private sectors have stopped working on germplasm. Central Cotton Research Institute (CCRI) Multan has established a gene bank. It is extremely concerning that the only organization Pakistan Central Cotton Committee (PCCC) in the country has been destroyed due to the unavailability of funds for further advanced R&D. Similarly, other institutions also have their breeding stock. This must be maintained. There is a strong emphasis on the need to further enhance the role of the Sindh Seed Corporation, while strengthening the regulatory role of federal seed certification could yield better results. Experts suggest that prioritizing locally produced seeds over reliance on foreign varieties can help achieve desired outcomes. Recently, the Sindh Seed Council approved new varieties of CCRI Sakrand, while the Punjab Seed Council has also approved CCRI Multan varieties. In Sindh's cultivated areas, varieties such as Sindh-1, Konj, Mehran, and Shahzadi have demonstrated excellent performance during early sowing. All these varieties have been developed and introduced for farmers by the Sindh Agriculture Department. Copyright Business Recorder, 2025
Business Recorder
12-05-2025
- Business
- Business Recorder
Tariff anomalies: PTEA seeks rectification among industrial consumer categories
ISLAMABAD: Pakistan Textile Exporters Association (PTEA) has sought rectification of tariff design anomaly between B-2, B -3 and B-4 industrial consumer categories based on voltage level, system losses and metering configuration. In a letter to different ministers including Commerce Minister, Jam Kamal and Power Minister, Sardar Awais Leghari PETA has shared critical structural anomaly in the industrial electricity tariff design recently notified by NEPRA. According to the Association, the current tariff structure contradicts standard grid cost principles and unintentionally dis-incentivizes industrial consumers from investing in high-voltage grid connections, which are otherwise more efficient and economical for the system. Pakistan Electricity Review 2025 launched As per the current NEPRA tariff applicable from July 1, 2024, the off-peak variable energy charges are as follows: (i) B2 (400V): Rs. 28.56/kWh ;(ii) B3 (11 kV): Rs 29.39/kWh; and (iii) B4 (132 kV): Rs. 29.11/kWh. According to technical analysis, industry feedback and research, this tariff design is counterintuitive and regressive as standard cost-of-service methodology prescribes lower tariffs for higher-voltage connections due to reduced distribution and transformation losses, avoidance of LT infrastructure and utility O&M and improved grid load profile and reactive power management. PETA maintains that despite these benefits, B3 and B4 consumers are being charged higher rates than B2, even though they bear full capital and O&M costs of their own internal power systems while providing low-loss load to the grid. There is also metering disparity and system responsibility as B2 and B1 consumers are metered after the transformer, meaning utility bears transformer losses and LT O&M whereas B3 and B4 consumers are metered at the HT terminals, and maintain their entire downstream infrastructure independently. This fundamental difference means B3/B4 consumers relieve the utility of significant cost burden-yet are penalized with higher rates. Another factor is distorted industrial behaviour and technical losses. This anomaly has triggered non-technical bifurcation of industrial load. Large industries are splitting sanctioned loads across multiple B2 (LT) connections to avoid the B3/B4 tariff. This leads to inefficient grid expansion, higher technical losses due to LT delivery, reduced network visibility for DISCOs, revenue losses and fragmented billing. In advanced energy systems, HT consumers are incentivized through lower tariffs. Examples from India, Bangladesh, and past WAPDA practices show HT industrial users are charged 10-15% less per kWh than LT consumers, ensuring system efficiency and stability. PETA has submitted the following recommendations ;(i) tariff rationalization so that B3 and B4 industrial consumers are provided a minimum Rs. 2/kWh discount compared to B2 ;(ii) incorporate voltage level, metering point, and network ownership into industrial tariff design, consistent with engineering and cost-of-service principles; and (iii) introduce regulatory disincentives for industrial consumers operating multiple B2 connections when a B3/B4 interconnection is technically feasible. 'This realignment will reduce system losses, improve grid utilization, promote technically sound industrial expansion, and enhance DISCO financial performance without requiring additional subsidies,' said Khurram Mukhtar, Pattern In-Chief PETA. Copyright Business Recorder, 2025
