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100 spinning mills likely to shut down
07
Jul '10
Owing to increasing prices of cotton, Rs 7,000 per maund, close to 100 spinning mills will face closure, informs industry sources. As of now, about 50 spinning mills have already shut down, due to increasing cotton prices and more 50 are soon to join them.

On the other hand, spinning industry too, is facing adverse situations, owing to sudden situations, which have restricted marketing of yarn at 15 percent below the market price.

Dearth in cotton and funds and buying cotton at an exorbitantly high price of Rs 7,000 per maund, which has never been recorded in the history of cotton purchase, are the main reasons behind the shutting down of spinning industry operations. It is now time for the authorities to come up with all their short-term measures in the Free Market Mechanism.

Since, last year, owing to global dearth of cotton, especially in China, cotton prices have been sky-rocketing. In addition, the Ministry of Textile industry has been cutting down exports of yarn, by levying a ban on these exports, with the help of one or the other anti-free market mechanism, on the impulse of value-added segment of the textile industry.

Sudden and rapid rise in prices of cotton has pushed the spinning industry owners towards the edge of the cliff, thereby, also making value-added sector's operations more adverse. Owing to this, global buyers are losing faith and confidence in Pakistan's value-added sector, as a supplier.

Off late, Dr Abdul Hafeez Sheikh, Federal Finance Minister, made a promise to the sugar industry, about absence of government intervention in their sector, and therefore, permits market forces to act accordingly. Textile industry too, demands such assurances from the government, as due to government's intervention, they have already incurred huge losses, owing to uncalled for cuts on exports.

In the meantime, the extension of 15 percent Regulatory Duty on yarn exports till September, will most probably not take place. This is because, the ministry is apparently seriously pondering over removing the ban of 15 percent Regulatory Duty on yarn exports by July 27, in order to help the cotton farmers, as more delay in the same will result in to further shutting down of spinning mills, which would lead to a chaotic situation for cotton farmers.

Hence, to avoid hurting the cotton farmers more, government will reconsider the policy decisions taken so far.

Fibre2Fashion News Desk - India

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