RECORDER REPORT

KARACHI: The local market remained stable on Wednesday. Market sources told that trading volume remained thin.

Market sources told that rate of Phutti reached at the highest level in the history of Pakistan. Sources also said that it is in the first time of history that new cotton season starts in the month of May. The rate of Phutti reached at Rs 6200 per 40 kg which is at highest level in the history.

Chairman Karachi Cotton Brokers Forum Naseem Usman told Business Recorder that new season of cotton 2021-22 has started on Monday; Up till now 800 bales were prepared.

He also told that new season of cotton has started in the country from June 1. 400 bales of cotton has been delivered from the ginning factory of Tandoo Adam and 100 bales of cotton were prepared in the ginning factory of Sanghar. A ginning factory of Burewala has delivered 200 bales of cotton from the Phutti of Sindh. Up till now 800 bales of cotton were prepared from the Phutti of new season of 2021-22.

Naseem told that Federal Agriculture Committee has set the target of production of one core five lac bales will be produced in the country. An office bearer of Ministry of National Food Security and vice chairman Pakistan Central Cotton Committee Dr Muhammad Ali Talpur told Chairman Karachi Cotton Brokers Forum Naseem Usman told that cotton will be cultivated on fourty lac acres in Punjab while in Sindh it will be cultivated on seventeen lac acers. Cotton will be cultivated in Balochistan and Khyber Pakhtoon Kha on three lacs. Up till now sowing will be completed on 65 % to 70 % area.

The rate of Phutti in Sindh is in between Rs 6000 to Rs 6200 per 40 kg. The rate of Banola is in between Rs 2400 to Rs 2500 per maund.

Pakistan Yarn Merchants Association (PYMA) has urged the Federal Minister for Finance and Revenue Shaukat Tarin to eliminate the discrimination between industrial and commercial importers and provide equal opportunities for businesses. It also requested him to impose same taxes on both so that business activities could be restored.

Hanif Lakhany, senior vice chairman of the Pakistan Yarn Merchants Association (PYMA), and Farhan Ashrafi, vice chairman, in an appeal to the minister said that commercial importers of synthetic yarns essentially cater to the needs of the SME sector.

The knitters and weavers in the SME sector don’t have access to bank credits and exclusively rely on commercial importers to meet their needs of raw materials.

The PYMA said, “Commercial importers also facilitate the SME sector by providing credit. Unfortunately, our current taxation policy penalizes the commercial importers of raw materials, which results in higher costs and subsequently the SME sector has to bear the additional cost on account of a discriminatory tax regime.”

The PYMA pointed out that the industrial importers of synthetic yarn are subjected to withholding tax at import stage at 1 percent versus 2 percent for commercial importers.

Furthermore, Industrial importers pay no value addition sales tax at import stage whereas commercial importers are subjected to a 3 percent value addition sales tax.

The extra cost incurred by the commercial importers is passed on to the SMEs rendering them uncompetitive.

They further said that the SME sector due to its very nature suffers from many disadvantages because of their small size and lack of access to formal credit. The government must ensure that they get their raw materials at competitive prices.

“Another contentious issue is the further tax in case of sales to unregistered buyer. The conventional wisdom would have us believe that more unregistered buyers will register to avoid paying further tax at 3 percent, and that the tax base will be expanded. The ground realities are very different, and this policy is incentivizing fake invoices causing revenue leakages,” it said.

Moreover, Pakistan Yarn Merchants Association (PYMA) has urged Prime Minister Imran Khan to remove additional customs duty (ACD) and regulatory duty (RD) on basic raw material synthetic yarns for making the textile industry competitive in international markets, and also requested to reduce turnover tax on yarn traders so that trade and industry can be restored to normal and exports can boost, which is already affected by Covid-19 pandemic.

Cotton Cooperation of India has increased prices today by 200-500 Rs./Candy across all growths of all Zones for 2020-21 season and for 2019-20 season.

ICE cotton futures gained on Tuesday, as some concerns emerged that adverse weather in Texas could hamper planting, while the natural fibre also benefited from a dip in the dollar.

Cotton contracts for December rose 2.01 cent, or 2.4%, to 85.33 cents per lb by 12:37 p.m. EDT. It traded within a range of 83.32 and 85.44 cents a lb.

“We saw quite a bit of rain over the weekend but almost to the point that it was too much. There was quite a bit of flooding and hale damage to some of the new crop in Texas,” said Bailey Thomen, cotton risk management associate at StoneX Group.

“Any damage or delays to the planting now could give the market some additional support,” Thomen said. Increased rainfall in the top cotton producing West Texas region that helped farmers plant the crop, have weighed on cotton prices in recent weeks.

While the heavy downpour and hail likely damaged some of the crop, it also likely ended the drought in a lot of other areas, meaning that cotton acreage remains uncertain and a “moving target” in the longer-term, Peter Egli, director of risk management at British merchant Plexus Cotton, said.

“The speculators that remain are probably not going to sell their positions and if demand is decent, we could move higher,” Egli added.

Also, aiding cotton’s rise, the dollar weakened against rival currencies, making greenback denominated cotton cheaper for other currency holders. Market participants now await a weekly crop progress by the US Department of Agriculture due later in the day.

Total futures market volume rose by 6,766 to 28,544 lots. Data showed total open interest fell 21 to 226,493 contracts in the previous session.

The Spot Rate remained unchanged at Rs 12300 per maund. The Polyester Fiber was available at Rs 200 per kg.