TCP to buy 1m bales of cotton as prices fall

ISLAMABAD:

The Trading Corporation of Pakistan (TCP) has decided to purchase one million bales of cotton following the fall in its prices in open market below the intervention threshold.

It has invited bids from cotton procurement agents, cotton procurement firms and labour contractors. Any surge in cotton prices in the wake of procurement by the TCP will spark optimism among crop growers.

Cotton Ginners Forum Chairman Ihsanul Haq said that during the current year, the federal government, in response to Prime Minister Shehbaz Sharif’s directives, initially set the intervention price of cotton at Rs8,500 per 40 kg.

The government stipulated that if cotton prices dipped below the intervention level in the open market, the TCP, on behalf of the government, would commence the purchase of one million bales from ginners to stabilise prices.

He pointed out that the subsidised rates for electricity and gas supply to textile mills had been withdrawn owing to the pressure from the International Monetary Fund (IMF). Coupled with a record hike in production costs, an unusual decline was observed in cotton purchases by the textile mills.

Consequently, cotton prices slid from Rs9,500 to the range of Rs7,500 to Rs8,000 per 40 kg.

In response to those developments, the growers staged protests and appealed to the TCP to intervene in the market. Responding to the appeal, the TCP invited bids three days ago for the hiring of cotton procurement agents, a cotton procurement firm and labour contractors.

Procurement agents will be appointed for Rahim Yar Khan, Multan, Bahawalpur, Dera Ghazi Khan, Vehari, Sahiwal, Sanghar, Sukkur, Nawabshah and Mirpurpur Khas districts.

Additionally, a procurement firm will be hired, which will facilitate the buying of cotton along with its transportation from ginning factories to warehouses.

It is anticipated that with the commencement of procurement by the TCP, a notable upward trend will be observed in cotton prices.

By the end of July this year, 1.429 million bales of cotton had arrived in ginning factories from farms across the country.

For the first time in the past 12 years, the total domestic production of cotton will exceed 10 million bales owing to record arrivals from farms till July 31.

According to data released by the Cotton Ginners Association, a total of 389,000 bales had reached ginning factories in Punjab by the end of July, 41,000 bales arrived in ginning factories of Balochistan while Sindh’s ginning factories received 999,000 bales. Most of the cotton reached the ginning factories in Sanghar district, Sindh, which totaled 671,000 bales.

Giving the reason, industry players mention the lack of factories in the coastal districts of Sindh, which is why the cotton produced in these areas is also being supplied to the factories in Sanghar.

So far, textile mills have bought 1.28 million bales of cotton from the ginning factories while 7,500 bales have been exported. Around 0.136 million bales are still available for sale in the factories.

At present, 182 ginning factories are running in Punjab and 186 in Sindh, primarily due to the increase in cotton cultivation this year and improved weather conditions.

It is expected that the total harvest will cross 10 million bales, saving billions of dollars on the import of cotton and edible oil.

 

Published in The Express Tribune, August 9^th, 2023.

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