960424

Cotton market languishes

in inactivity

DR. ZAFAR HASSAN

LAHORE: As the extended holidays are drawing near, there are intimations that the domestic lint market is languishing in inactivity. Both the bulls and the bears in the cotton market appear tired and fatigued, generally speaking, the spinning and certain other sectors of the textile industry are also reported to be none too well. At best, they are still in business. Thus on Wednesday, sale of less than 1,000 bales was reported till the afternoon.

It now appears that besides some of the cotton exporters, one or two well-heeled mills are also selling their extra lint in the domestic market. If everything is considered, now the spinners may be importing smaller quantities of cotton than earlier anticipated. On the one hand, one report in the press indicated that some growers were still withholding cotton and not bringing it into the market, and thus the total national lint output in Pakistan could even exceed 10 million bales (of 170 kgs. each) by another 200,000 bales while on the other hand, certain assessments indicate that the total cotton production this year (1995-96) in Pakistan could even be 10,000 or 20,000 bales short of the 10 million bales level. However, the considerable quantities of lint are still available in the country from both the ginners as well as the exporters at prices gradually ranging from Rs 2250 to Rs 2350 per maund do not denote any acute shortage of cotton in the country.

According to one report from Karachi, the cotton exporters are still holding physical stocks of 100,000 to 150,000 bales (of 170 kgs. each) of cotton, some of which they may not export and thus sell in the local market. Another report from Multan indicates that barely 5,000 to 7,000 bales of cotton are lying in lower Sindh, while another 10,000 to 12,000 unsold bales of cotton may be available in upper Sindh (K-68 variety). Rahimyar Khan region may only have 25,000 to 30,000 bales of cotton, while in the area starting from Bahawalpur to Multan. The central cotton growing area of Pakistan, there might be only 125,000 to 150,000 bales of unsold cotton left, besides the stocks held by the exporters now only an estimated total of 200,000 to 250,000 bales of unsold cotton may be left with the ginners.

Some ginners and commission agents in Multan and Rahimyar Khan are complaining that several textile mills have deducted the statutory income tax from them but have not yet deposited the same into the government treasury, which is creating lot of trouble for the cotton ginners.

In a recent communication to the federal government, Chairman of Karachi Cotton Association (KCA) Maqbul Sadiq has said that the imposition of the proposed 15 percent Sales Tax on ginned cotton, an addition to the one percent withholding tax already being charged from the ginners will not only place additional burden on the ginners but would also have serious repercussions on the production and exports of raw cotton and textiles.

Maqbul Sadiq has added that if the proposed 15 percent Sales Tax on ginned cotton is levied, it would result in depressing the local prices of ginned cotton by Rs 337 per maund (37.32 kgs.), and that of seedcotton (phutti) by Rs 112 per maund, which large amount would result in a direct disincentive for the grower to grow more cotton in the future.

It may be mentioned here that there is general apprehension against the proposed levy of Sales Tax on a number of items in the forthcoming federal budget expected to be announced in early June, 1996, the levy of federal Sales Tax is a major fiscal measure which the government wants to implement so as to widen the tax base, and in the process to possibly reduce the level of direct taxes on income. Moreover, the federal government also wants to draw more people into the tax net, and the levy of a general sales tax could partially help in this process.

In actual cotton sales in Sindh on Wednesday, 100 cotton bales each from Chundko sold at Rs 2200 per maund, while 100 bales each from Nayabad and Khipro sold at Rs 2250 per maund on ex-Karachi basis sold by an exporter. In the solo sale reported from the Punjab till Wednesday afternoon, 300 bales from Kahror Pucca sold at Rs 2350 per maund.