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Cotton shortage adds to woes of textile sector

09
Mar '10
Against a requirement of 16 million bales of cotton, cotton production in the current season has touched 12.63 million bales, out of which exports accounted for 975,000 bales, which means a huge gap between demand and supply, which is adding fuel to cotton prices in the domestic markets.

Despite revising the cap on yarn exports in end-February, availability of yarn at remunerative prices is still a big challenge facing the textile value chain in Pakistan. To make matters worse, raw cotton prices have risen sharply, making the task more difficult.

Experts are of the opinion that importing cotton at current global prices is not feasible as it would not be possible to meet the price expectations of the domestic value added sector, however it would be remunerative to export, as export prices are higher than local prices of cotton yarn.

They also add by saying that, by capping yarn exports at 35,000 tons the government has interfered with the free-market mechanism and that the yarn sector cannot be expected to subsidize the value-added industry. The government on its part can provide subsidies to the value-added sector if it wants to support them.

They opine that, yarn prices were bound to go up, as cotton have prices have risen tremendously in the last few months and instead of negotiating higher selling prices with their overseas buyers, they chose to put pressure on the government to ban or cap yarn exports from the country.

The experts warn by saying that, if proper supply of cotton is not made available, textile spinning mills will have to cut production, since the new cotton will be available only in August and with the low inventory levels of ginners and the mills, the day is not too far off.

Fibre2fashion News Desk - India


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