Islamabad has committed to make significant changes to the cotton sector in an attempt to revive it.
As per the details, the Pakistan Cotton Ginners Association (PCGA) revealed that production levels fell short of the targets set for 2024-25 by a staggering 34 percent.
National Food Security Minister Rana Tanveer Monday announced that Islamabad will review the extortionate 18 percent General Sales Tax (GST) on local lint. According to the minister, this move would introduce fairness in the current market environment.
Currently, GST is levied on domestic cotton while imported cotton and yarn arrive duty free into the country. Textile millers have thus preferred to purchase imported cotton as it is more economical for production. This has served to the detriment of local cotton farmers who are struggling to compete with cheap cotton imports.
Tanveer said that agents with vested interests in the production of cotton will go over strategies to attempt to revive cotton production levels. These discussions will take place as part of the National Cotton Revival Conference on Tuesday. He pledged that the ministry will support farmers in order to boost cotton production levels.
According to reports, Islamabad aims to collaborate with international agencies such as the International Cotton Advisory Committee (ICAC). Officials are interested in such collaboration opportunities as it may enable growth for the cotton sector, effectively propelling Pakistan up the ranks in the international cotton market.
Tanveer met with ICAC Executive Director Eric Trachtenberg who was leading a delegation to Pakistan. Reports revealed that the meeting covered cotton trade, production and even the development of the textile sector.
As per data from the PCGA, Pakistan was only able to produce half of the targeted level of lint for crop year 2024-25. This reveals the extent to which duty-free cotton imports have hampered domestic cotton yields.
The Federal Committee on agriculture had set the targeted level of cotton bale production at 11.2 million bales. However, the agricultural sector only produced a measly 5.5 million.
While reduced input supply usually results in manufactures clambering for said inputs, the reverse is being witnessed in Pakistan. Despite a significant fall in domestic cotton supply, ginning factories and spinning mills possess large stocks of the commodity.
Ginning factories have an additional 114,000 bales in their inventories, bringing their total cotton stock up to 486,000 bales. This represents a sharp 31 percent rise in stock held by industrialists.
The reason behind this seemingly contradictory fact is that millers and ginners are procuring a vast majority of their cotton inputs from imports. As per reports, a staggering 1.5 million cotton bales have been imported with import agreements totaling the purchase of an additional 3.5 million cotton bales in the pipeline.