Cotton stocks

While stocks running short at the start of the year is a reality, the trade deficit has brought attention to the issue

The textile industry could be in for some tough times as domestic cotton stocks are expected to run out in a matter of weeks. While several larger textile companies have existing contracts or are negotiating new ones to import cotton, smaller mills will struggle to continue operations, according to industry experts and lobbyists. This is because several smaller operations will not be able to make import deals economically feasible. Lobbyists have been critical of the government’s failure to even try to bridge the gap through some deal-making to ensure cotton supply from abroad to supplement local stocks. Although stocks running short at the start of the calendar year and the new crop not becoming available till June is a historical reality, the widening trade deficit has brought new attention to the problem, as the government ostensibly would have an easy fix if it had acted faster.

Textile exports are rapidly growing — up 26% in the first half of the current fiscal year — and account for 62% of total exports. A government scheme to import cotton for domestic distribution — even without any subsidies — to meet the industry’s needs would still lead to gains for the national economy and exports because of value addition, and it would probably lead to better import prices due to the larger orders. This gains increased importance because it would also help offset the higher prices of imported cotton, which would normally eat into the profit margins of textile producers. It would help ensure that the export growth can continue with little impact on profitability for textile producers.

Unfortunately, even textile units that have access to cotton still have to deal with the fallout of the power crisis. Like other industries and the economy in general, output and growth are expected to slow as uninterrupted gas and power supply remain a problem, especially in Balochistan and Sindh. Some factories have been without fuel supplies for the past three months, going against the government’s previous assurance of ensuring gas supply for export-oriented industries. The government has spent months harping on about record exports while ignoring these underlying problems. Without a swift response, gains will quickly and embarrassingly begin drying up.

Published in The Express Tribune, February 1^st, 2022.

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