Bullish trend witnessed on cotton market

The local cotton market remained bullish on Tuesday. Market sources told that trading volume was good.

Cotton Analyst Naseem Usman told that the fertilizer companies have increased prices of DAP by Rs 300 per bag. Earlier, Fauji Fertilizer Bin Qasim Limited (FFBL) had increased its DAP prices by Rs 550 per bag. The company has increased its prices due to increased demand globally and the reduction in supply from China. Now, DAP prices are again up due to increased demand globally. After the increase, FFBL primary DAP margins had increased to a record high of USD230/ton, which was last seen in 2015 as phosphoric acid remained stable at USD689/ton.

Naseem Usman also told that large-scale manufacturing (LSM) in the country grew by 11.4 per cent in December 2020 as compared to December 2019, data released by Pakistan Bureau of Statistics (PBS) showed.

LSM recorded an overall growth of 8.16 per cent in the first half (July-December) of the current fiscal year as compared to last year’s corresponding period.

Ten industrial sectors, including textile, food, beverages and tobacco, coke and petroleum products, pharmaceuticals, chemicals, non metallic mineral products, automobiles, fertilizers and paper and paperboard, showed a growth while five others showed a decline.

Textile showed 3.54pc growth, food, beverages and tobacco 17.72pc, coke and petroleum products 23.91pc, pharmaceuticals 13.82pc, chemicals 16.95pc, automobiles 43.91pc, non-metallic mineral products 17.52pc, fertilizers 11.98pc, paper & board 8.93pc and rubber products 8.24pc.

On the other hand, industries that witnessed a negative growth in December 202 included electronics (35.59pc), leather products (40.55pc), engineering products (23.93pc) and wooden products (30.20pc).

Naseem Usman also told that Pakistan has said that it has no plans to allow duty-free import of cotton from India to bridge the shortfall.

The country is currently facing a shortfall of one million bales due to low production this year.

Talking to journalists, adviser to Prime Minister on Commerce Abdul Razak Dawood said that people from the industry had been demanding revision in duties and taxes on the textile sector.

However, he ruled out any change in duties on import of cotton from India to bridge the shortfall. He hoped that the country would produce a better cotton crop next year.

Responding to a question, the adviser said that the government would restore the zero-rated regime for the five leading export-focused sectors in the upcoming budget.

Talking about trade with Afghanistan and Central Asian states, he said that Afghanistan had offered a preferential trade agreement (PTA), which was not a problem.

Forum Naseem Usman while addressing a protest outside the building of the Karachi Cotton Association on called for adopting new technologies for increasing the production of cotton. He demanded that government should abolish all kind of taxes including sales tax for the revival of cotton. There should be complete ban on growing any crop in the cotton belt. He further said that government should constitute Cotton Control Board having representation of all the stake holders.

The Lahore Chamber of Commerce and Industry (LCCI) has urged the government to declare a cotton emergency in the agriculture sector as a fall in cotton production has started affecting the economic chain.

LCCI President Mian Tariq Misbah, along with Senior Vice President Nasir Hameed Khan and Vice President Tahir Manzoor Chaudhry, told the media, after a meeting on Thursday, that the lower cotton production had impacted the textile sector, other industries directly or indirectly associated with it, ginners and growers.

The LCCI office-bearers said that textile was the largest export-oriented sector, contributing around 60% to total exports of the country.

Cotton production has declined persistently since 2017-18 when the harvest was 11.9 million bales. Production declined 17.5% to 9.8 million bales in 2018-19 and further dropped by 6.9% to 9.18 million bales in 2019-20.

The Federal Board of Revenue (FBR) has taken a major policy decision of not reverting back to sales tax zero-rating regime for five export-oriented sectors including textile, leather, surgical, carpets, and sports goods, in the upcoming 2021-22.

Naseem Usman further told that according to sources the zero-rating regime would not be restored due to speedy payment of refund mechanism under the “FASTER” system of the Federal Board of Revenue (FBR).

There is a significant progress on account of payment of sales tax refunds under the “FASTER” system, and there is no justification of the restoration of the sales tax zero-rating regime.

“We cannot say that all refunds are paid without delay under the FASTER system, but most of the refunds are now being cleared. A presentation of the FBR to the Finance Ministry, Ministry of Commerce and other departments at the FBR here on Thursday shows satisfactory performance of the FBR regarding payment of sales tax refunds. The FBR has informed the meeting that the system is improving day by day and there is no reason for reverting back to the old system,” top officials added.

Naseem Usman told that 600 bales of Rohri were sold at Rs 10,600 per maund, 200 bales of Fort Abbas were sold at Rs 11,300 per maund, 200 bales of Haroonabad were sold at Rs 11,000 per maund, 600 bales of Rajan Pur were sold at Rs 10,950 per maund and 700 bales of Rahim Yar Khan were sold at Rs 10,250 per maund.

Naseem also told that rate of cotton in Sindh was in between Rs 10,000 to Rs 10,700 per maund. The rate of cotton in Punjab is in between Rs 10,200 to Rs 11,000 per maund. He also told that Phutti of Sindh was sold in between Rs 3800 to Rs 5000 per 40 kg. The rate of Phutti in Punjab is in between Rs 3500 to Rs 5400 per 40 Kg.

The rate of Banola in Sindh was in between Rs 1600 to Rs 2000 while the price of Banola in Punjab was in between Rs 1800 to Rs 2250. The rate of cotton in Balochistan is Rs 11,000 per maund. The Spot Rate remained unchanged at Rs 11,000 per maund. The Polyester Fiber was available at Rs 197 per Kg.


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