THE textile industry is in a dilemma as cotton trade between Pakistan and India has been hit by a rise in border tension; and traders across the border, being uncertain of future developments, are not entering into new deals.

Pakistan’s Cotton Commissioner Khalid Abdullah says a low quantum of trade activity is still taking place. The government has not asked importers to stop buying cotton from India but many of them are not buying on their own as a gesture of national solidarity. However, Indian exporters are refusing to sell at their government’s behest although they would be the losers.

Pakistani spinners are the biggest buyers of Indian fibre. Fewer imports by Pakistan this year could hurt Indian exports, raise their prices and help rival cotton exporters like Brazil, the United States and some African countries. For Pakistan’s industry, buying the raw material from other sources may prove costly owing to long distance freight. In fact, the situation is in a wait-and see mode. Cotton trade between the two countries is worth $822m a year.

Pakistan’s Cotton Commissioner Khalid Abdullah says a low quantum of cotton trade activity is still taking place

Another victim of high political temperature is vegetables. According to Times of India, traders from the Indian state of Gujarat have decided to stop supplying vegetables to Pakistan.

Gujarat used to send 50 trucks having 10 tonnes of vegetables, mainly tomatoes and chilli, to Pakistan via the Wagah border. This is the first time in almost two decades that Gujarat’s exporters have halted the supply of essential vegetables to Pakistan. The commission agents say they will not resume exports till the normalisation of relations.

The suspension in cotton trade comes at a time when Pakistan’s cotton crop has recorded an overall decrease of 15pc over the last year, adding to the industry’s woes. Pakistan, the world’s third-largest cotton consumer, starts importing from September, but this time there has been little activity so far.

In the 2015-16 fiscal year ending on March 31 in India, official trade between the two was $2.6bn with cotton being a major component. However, in the crop year that ended on September 30, Pakistan was India’s biggest cotton buyer after its own crop was hit by drought and whitefly pest. According to an estimate, Pakistan will need to import at least three million bales in 2016-17.

The Cotton Crop Assessment Committee (CCAC), on Oct 7, estimated that the output for 2016-17 stood at 11.039m bales.Participants were informed that the lower output was mainly due to effects of climate change on the crop, besides pests like pink bollworm and whitefly. The crop output in Punjab is estimated at 7.3m bales, with each bale weighing 170 kilograms.The crop size of Sindh is estimated at 3.7m bales.

The representative of growers from Punjab agreed to the assessment whereas the Pakistan Cotton Ginners Association chairman was of the opinion that the crop size in Punjab was about 7.5-8m bales. Cotton sowing has registered a decrease of 21pc in Punjab while it has risen by 2pc in Sindh. The crop size is assessed on the basis of data provided by provincial governments.

Meanwhile, Afghan President’s special envoy and Ambassador to Pakistan, Dr Omar Zakhilwal, has refuted reports that Kabul has shut down the land route for Pakistani trucks going to Central Asian states through its territory. Ashraf Ghani had threatened, last month, to shut Pakistan’s transit route to Central Asian countries if it did not allow Afghan traders to use the Wagah border for trade with India. Pakistani trucks, the envoy says, can deliver transit goods directly to Uzbekistan, Tajikistan and Turkmenistan via Afghanistan.

It is interesting to note that in a highly charged political atmosphere, trade in other commodity goods has not been affected. The inward flow of Indian goods into Karachi’s major commodity and grocery markets, in old city areas which form the hub of the country’s wholesale trade, continues uninterrupted without any increase in prices or shortage of goods.

Shopkeepers selling Indian cosmetics and jewellery are doing business as usual because of their smooth flow and easy availability. The war-like situation has not affected their business. Not only is the arrival of goods from India normal, even exports are taking place at the usual pace. Pulses, spices and dried fruits continue to land in Pakistan, with these items not having faced any shortage in the wholesale market so far.

Trade balance between the two countries is in favour of India. In 2015-2016, exports from Pakistan to India dropped to $400m from $415m in 2014-2015. India’s exports to Pakistan surged 27pc to $1.8bn over the same period.

The All Pakistan Textile Mills Association (APTMA) Punjab Chairman Aamir Fayyaz says that since now the textile industry has become highly dependent on imported cotton, duties and taxes on import of cotton would make the entire value chain uncompetitive. The situation calls for the withdrawal of 4pc customs duty and 5pc sales tax on the import of cotton. He wants the government to resolve the textile industry’s issues and enable it to undertake investment worth $1bn per annum.

Published in Dawn, Business & Finance weekly, October 17th, 2016