The International Cotton Association (ICA) has declared 84 major textile mills in Pakistan as defaulters, which means these mills can no longer enter into cotton purchase agreements with any country. This has added to the growing crisis in Pakistan’s cotton industry.
In Pakistan, the problem is worsened by the increasing imports of cotton and cotton yarn, thanks to a tax exemption on these imports. At the same time, the country’s cotton production has fallen far below its target. As a result, cotton prices and the prices of cotton bales have been continuously dropping. This situation is causing concern among cotton ginners (those who process cotton) and farmers, who fear that cotton cultivation may decrease even more in the coming year.
Ihsan-ul-Haq, the Chairman of the Cotton Ginners Forum, explained that over the past few years, several textile mills failed to fulfill their cotton purchase agreements. As a result, the ICA has declared these mills as defaulters. Now, these mills are unable to buy cotton from any country, making it harder for them to stay in business.
Pakistan’s Cotton Production Falls 33%
According to the Pakistan Cotton Ginners Association, cotton production in Pakistan has taken a major hit. As of November 30, 2024, the country has produced only about 5.2 million bales of cotton. This is a 33% drop compared to the same time last year, a worrying sign for the local cotton industry.
Impact of Imports on Local Cotton Prices
With the rise in imports of cotton and cotton yarn from abroad, local textile mills have shown less interest in buying cotton grown in Pakistan. One reason for this is the 18% sales tax on domestic cotton, which makes it more expensive compared to imported cotton. As a result, local cotton prices have continued to fall, despite expectations of price increases due to lower production.
Concerns About Future Cotton Farming
The ongoing decline in cotton prices is making cotton ginners and farmers nervous. Many are afraid that if this trend continues, there may be even less cotton grown in Pakistan next year, worsening the country’s cotton shortage.
The cotton industry is in a tough spot, and it remains to be seen how the government and industry leaders will respond to prevent further damage to this important sector.
