KARACHI: The country’s cotton imports hit $2.3 billion — an increase of 44 per cent — during July 2020-May 2021 (11MFY21) compared to the same period in the previous fiscal year.

The country produced barely 5.6 million bales in FY21. Despite higher orders and a number of incentives provided by the government to boost exports, poor cotton production and imported lint nullified the efforts of the textile sector.

However, instead of providing additional help to the cotton producing sector, Finance Minister Shaukat Tarin has increased sales tax on cotton to 17pc from the earlier 10pc. Cotton seed oil or banola, which earlier had zero tax, has been slapped with 17pc tax.

Farmers, ginners mull strike against new taxes

The increase in taxes and low cotton production has created serious situation for farmers and ginners who are planning to go on a strike if the government does not accept their demand for abolishing taxes.

“We are going to decide about the actions against the new taxes on Sunday in Bahawalpur,” Chairman Pakistan Cotton Ginners Association Dr Jasomal told Dawn.

The cotton sector has a great impact on the economy as it produces lint for textiles as well as byproducts including cotton seed oil and cotton cakes. The sector helps create jobs for millions of workers across the country.

“We have not decided to call a strike but the Sunday meeting we might decide as the government has shown no sympathy towards farmers and ginners,” he said.

“It is strange that while the government is trying to boost textile exports, it has left the cotton crop in crisis and imposed more taxes,” said Dr Jasomal.

He also disclosed that instead of increase, the area of cultivation has declined by 20pc compared to previous year, which reflects a serious threat to cotton as a cash crop. Cultivation areas in Punjab fell to 3.1 million acres from the target of 4m acres. Cultivation area in Sindh also fell to 1.3m acres.

Meanwhile, Chairman Cotton Brokers Forum Nasim Usman said the cotton import bill will further increase when June figures are added. Total figures would easily cross $2.273bn during July-May to $3bn as large textile millers keep stocks for three months, he said. Cotton price in the domestic market is currently higher than in the US, showing higher demand and lesser supply. The cotton season has just begun in Sindh from July1. The season will peak in September for Punjab.

“Low cotton production led to the shutdown of 850 ginning factories during the previous season. Out of 1,300, only 450 ginning factories were working during the previous season which means thousands of people lost their jobs,” said Dr Jasomal.

Despite low cotton production, exports witnessed a growth of 18.2pc to $25.294bn in FY21 compared to $21.394bn in FY20. This increase of 3.9bn export proceeds could reduce the trade deficit if cotton was not imported.

Only a few years ago, Pakistan — which is the fourth largest cotton producer — was a cotton exporting country.

The government has set 10.5m bales target for the current season but the reports reaching to the cotton brokers suggest that the production could be maximum around 8m bales.

Recently, the Federation of Chambers of Commerce and Industry Pakistan (FPCCI) met with the Monsanto and Bayer Crop Science Regulatory Team to get technology which boosted Indian cotton production from 10m bales to 40m bales. Despite the Covid-19 pandemic, cotton production in India this year is about 36m bales.

Published in Dawn, July 4th, 2021