Prices of textile products likely to rise 7 per cent

Prices expected to increase on the back of a surge of 15 per cent in rates of cotton during the last month.

KARACHI: Prices of textile products are expected to increase by 7.5 per cent on the back of a surge of 15 per cent in rates of cotton during the last one month, a top garment manufacturer said.

Cotton prices have increased to Rs7,400 from Rs6,400 per maund (37.324 kg) in a month, sparking concern among finished goods exporters who say that their profits shrink even if they pass on the increase to end-users.

Although exports of finished products increased in August in the face of high world demand, the present rise in cotton prices may hit the positive momentum, Mohsin Ayub, chairman Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA), said. “A lot of buyers are turning towards Pakistan from the gas and electricity-starved Bangladesh,” he added.

He said the increase in cotton prices is affecting all small and big exporters of finished products, but expected the good cotton crops in India, the US and Australia will reduce the shortage this year.

Ayub saw textile exports cross $11.5 billion this year, but said this increase of one and a half billion dollars will be more in figures and less in quantity.

CEO Multinational Export M Babar Khan said: “It is easy to understand because when raw material prices increase, the cost of production rises, leading to an increase in prices of end products.”

The problem is severe as hoarding during ups and downs in cotton prices compounds the woes of industries, he said, adding such things also slow the pace of textile business.

Present increase in cotton prices may push up the cost of production from 15 to 20 per cent, Khan said.

Former chairman Federal B Area Association of Trade and Industry, Idrees Gigi, said cotton prices have soared all over the world but their impact in Pakistan is widespread because the government has not a specific policy to deal with the issue. Lashing out at the government’s policy for textile industry, he said the leadership is busy in non-issues and does not pay heed to real problems of the industry.

He emphasised the importance of value addition in raw cotton, saying the process supports six to eight other industries, provides employment and earns foreign exchange.

This year, India has a bumper crop of cotton but its government is trying to export value added products instead of raw cotton. “They are doing this because they can sell a $1 product in $8 after value addition,” he explained.

Gigi said exporters also face problems when foreign buyers do not come to Pakistan owing to security issues and hence they do not know about the infrastructure put in place.

On the contrary, “our regional competitors have an edge as their buyers can come to inspect industries and place orders.”

Published in The Express Tribune, September 26^th, 2010.