960423

Cotton exporters

may default on

400,000 bales

contracts

SHAHID IQBAL

KARACHI: Cotton exporters are likely to default on commitments of four lakh bales as they have started selling their stocks on the domestic market because of significantly high profit margin, according to knowledgeable trade sources.

The profit margin in the local market ranges between Rs 300 and 400 per maund, which in irresistible for most of the exporters who had booked foreign sales at Rs 1700 to 1800 per maund.

The export contracts were made when the rate was about Rs 1600 per maund in the domestic market. The current price is around Rs 2100 per maund.

"Our commitment would be valid for the next year," said an exporter who disclosed that most of the exporters were trying to persuade their foreign buyers to wait for next season.

Some exporters are ready even to pay penalties in case of default, as the penalty is expected to be less than the profit being earned by selling cotton on the domestic market.

The exporters have booked 23,50,000 bales in all and so far 17,50,000 bales have been physically shipped.

However, the former president of Karachi Cotton Association and a ginner, Abdul Sattar Balagamwala, says that actually the exporters are going to default on contracts for two lakh bales, as looking of the remaining two lakh was bogus.

With 1,50,000 bales still to be shipped. Balagamwala said, "the actual figure of export will be around 1.9 million bales instead of 2.350 million bales."

The current price of cotton in the local market is so high that no fresh export commitment is possible.

Meanwhile, the Chairman All Pakistan Textile Mills Association, Anwar Ahmed Tata, has stressed the need for quick decision for import of cotton from India.

Talking to Business Recorder he said the market was running short of cotton he had written a letter on 14th April to the commerce minister to allow import of cotton from India, remove 10 percent regulatory duty and stop cotton export from Pakistan. "I did not receive any answer from the ministry," said Tata.

Import of cotton from India will not be only cheaper but would be timely as many spinning mills will close down because of unavailability of cotton, he added. He said that the consumption in Pakistan had increased to about nine million bales because the closed spinning mills had started production.

However, the ginners say that enough cotton is available in the domestic market and there is no need for import from India.

"At least 3,50,000 cotton bales are available in the domestic market. Out of it 75,000 bales are high quality cotton. India wants to sell its 3rd grade cotton as the high quality cotton has been purchased by its own spinners," claimed Balagamwala.

He also did not agree with the claim that local consumption was around 9 million bales. "The domestic consumption has never crossed the figure of 8.4 million bales and the average for five years is only 8.1 million bales," he added.