Cotton crisis deepens amid record imports

The cotton industry stands on the brink of a full-blown crisis as ineffective policies and neglect by policymakers have put the agricultural backbone and textile sector in dire straits.

The unchecked wave of duty-free imports of cotton and yarn has set the stage for a perfect storm, endangering farmers, ginners and the entire textile value chain.

Experts fear that the looming threat of a cotton crisis similar to the ongoing wheat debacle is due to ineffective policies and neglect from policymakers.

Ihsanul Haq, chairman of the Cotton Ginners Forum, explained that the unprecedented wheat imports earlier this year, combined with the government's failure to purchase wheat from farmers at the official rate of Rs3,900 per 40 kg, plunged the agricultural and milling sectors into severe financial turmoil.

Currently, wheat is being sold at an average price of Rs2,800 per 40 kg, causing flour millers and seed companies to incur heavy losses due to higher input costs and exorbitant interest rates.

Haq added that reports suggest farmers have cultivated wheat on significantly less acreage this season, raising fears of another wheat crisis next year.

Similarly, the cotton sector is under immense pressure. A staggering 18% sales tax on domestic cotton and yarn purchases, coupled with duty-free imports, has resulted in record-breaking cotton imports.

According to the Federal Bureau of Statistics (FBS), as of October 31, Pakistan had imported 800,000 bales of cotton and 450,000 bales of yarn. By November 30, the figures are estimated to have risen to 1.1 million and 600,000 bales, respectively.

It is further reported that textile mill owners have already signed agreements to import 3.5 million bales of cotton, with additional agreements being negotiated at a rapid pace.

Projections for the 2024-25 cotton year indicate imports could reach at least 5 million bales of cotton and 1 million bales of yarn, setting a historic high for cotton imports in a single year.

The surge in imports has led to a complete halt in domestic cotton and lint sales. Haq revealed that vast stocks of unsold cotton remain in warehouses and ginning factories, leading to a sharp decline in prices.

Cotton, which was recently sold at Rs18,500 per maund, has dropped by over Rs1,000 per maund. The decline has left farmers and the entire cotton industry deeply concerned, with fears of further price reductions akin to the wheat market collapse.

Haq warned that diminishing demand for cotton could spell disaster for Pakistan's agricultural and industrial economy.

He urged Prime Minister Shehbaz Sharif to impose a sales tax on imported cotton and yarn while removing duties on domestic production. The measures, he said, could revive the struggling cotton industry, support agriculture, and save billions in foreign exchange.