Pakistan - Govt must regulate cotton trade

The government must regulate sale of domestic cotton to a certain extent as speculators in recent months pushed its price high, which hurt textile makers, industry officials said on Tuesday.

“Traders, builders, brokersóeveryone seems to have jumped in the trade,” Jawaid Bilwani, Coordinator of Council of All Pakistan Textile Association told The News. “It has provided some people a way to make quick money by hoarding cotton, creating an artificial shortage and making the price rise.”

The price of cotton has come down by 35 percent in the last three months in tandem with fall in the international market. But the textile makers remain concerned that if price starts moving up again, manipulation will come into play. There is no control over the quantities spinning companies, which use cotton to make yarn, can buy, he said. “This means spinners can literally lift all the cotton, notwithstanding their needs.”

Pakistan produces around 12 million bales of cotton annually whereas its demand stands at 15 million bales. The difference is imported.

Textile makers complain that yarn manufacturers have a monopoly over supplies of their key raw material.

Spinners and the makers of garments, hosiery, bed sheets and linen have been at loggerheads over the export of yarn, the thread used to make cloth. The fight always leads to the question of free-market economy under which export of raw material cannot be hindered.

Bilwani said that spinners should be allowed to buy enough cotton for a maximum of three months. “Excess sales must be registered so that the government knows the situation of market exactly.”

Textile makers complain that their contracts with global buyers are fixed and price fluctuation in yarn midway through manufacturing often forces them to suffer losses.

Naqi Bari, former chairman Pakistan Hosiery Manufacturers Association, said that large spinning companies could comfortably raise funds from banks to buy excess cotton. “For us, it’s a matter of contract. We normally make deals for one year at a predetermined price.”

India has regulated its textile industry firmly, making sure that cotton and yarn meet domestic needs first, he said. “They use a mix of non-tax barriers to check exports of yarn.”

Cotton traders brush aside concerns about hoarding. “No one would risk billions of rupees of loan just to bet that prices will go up,” said a cotton trader. “There is no evidence of borrowing from banks for hoarding cotton.”