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Cotton ginners reneging on contracts with TCP
08 May '09
2 min read
The cotton ginners in the country have cancelled contracts signed with the state owned Trading Corporation of Pakistan (TCP), as cotton prices are rising in the domestic markets. Prices of cotton have zoomed past the minimum support price of Rs 3,202 per maund.
Since the beginning of the cotton season in November, cotton prices have been ruling at unusual lows, due to the impact of the recessionary trends which led to a slowdown in the economy. Add to that was the credit squeeze which kept away the mills from the markets.
The government had directed TCP to intervene in the market in a bid to stabilize prices and signed purchase contracts for 590,000 bales of which it took delivery of only 190,000 bales. The rest of the contracts stand cancelled due to the increase in prices.
In a order to get a clear understanding of the situation, Fibre2fashion spoke to Mr. Muhammad Akram Chaudhry, Chairman, Pakistan Cotton Ginners Association (PCGA) who said, “Prices of cotton started reached to the extent of 3,700 per maund in open market in Pakistan”.
“Hence in order to earn more profit, cotton ginners cancelled the contracts with TCP, since TCP is only offering 3,200 per maund to cotton ginners. The main reason for this price rise in the open market is due to cotton production dipping below government set targets”, he said.
He added by saying, “The target set for year 2008-2009 was around 12.1 million bales, whereas actual production, as per announcement on May 3 stands at 11.3 million bales, a shortfall of 800,000 bales, which has led to prices spurting in open markets”.
Since the beginning of the cotton season in November, cotton prices have been ruling at unusual lows, due to the impact of the recessionary trends which led to a slowdown in the economy. Add to that was the credit squeeze which kept away the mills from the markets.
The government had directed TCP to intervene in the market in a bid to stabilize prices and signed purchase contracts for 590,000 bales of which it took delivery of only 190,000 bales. The rest of the contracts stand cancelled due to the increase in prices.
In a order to get a clear understanding of the situation, Fibre2fashion spoke to Mr. Muhammad Akram Chaudhry, Chairman, Pakistan Cotton Ginners Association (PCGA) who said, “Prices of cotton started reached to the extent of 3,700 per maund in open market in Pakistan”.
“Hence in order to earn more profit, cotton ginners cancelled the contracts with TCP, since TCP is only offering 3,200 per maund to cotton ginners. The main reason for this price rise in the open market is due to cotton production dipping below government set targets”, he said.
He added by saying, “The target set for year 2008-2009 was around 12.1 million bales, whereas actual production, as per announcement on May 3 stands at 11.3 million bales, a shortfall of 800,000 bales, which has led to prices spurting in open markets”.
Fibre2fashion News Desk - India
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