KARACHI: Most of the members of All Pakistan Textile Manufacturers Association (APTMA) and hosiery manufacturers hailed government’s decision of removing five percent regulatory duty on cotton yarn import but its manufacturers are still demanding for enhancing duty on its import as after this decision their industry would shut down or collapsed.
“Because of the low cotton yarn prices in Pakistan, the products were being exported to China and several other countries,” the industry source claimed. “Luckily, Pakistan’s textile manufacturers and hosiery industries have received huge orders of fabrics and towel products from abroad because of rising COVID-19 in India and Bangladesh and the local manufacturers were unable to produce high-quality fabrics at competitive rates, he claimed.
The prices of cotton yarn were persistently moving up since March 2020 as the local producers were selling high-quality yarn to China and other countries and the textile manufacturers have no other option but to demand from the government to cut regulatory duty on cotton yarn and cotton import.
Economic Coordination Committee (ECC) in its last meeting headed by Adviser to the Prime Minister on Finance and Revenue Abdul Hafeez Shaikh announced to remove the regulatory duty on import of cotton yarn till June 30, 2021.
The decision has been taken to facilitate the exporters of apparel, hosiery and textile sectors, who were compelled to buy cotton yarn at higher rates in Pakistan.
Another factor of abolishing the regulatory duty is that the country will have at least 40-45 per low cotton production this year because of heavy rains in Punjab and Sindh. It is estimated that cotton production would be in the range of 6.5 to 8 million bales against the local textile sector’s requirement of 14 to 15 million bales.
“This is in line with our policy of getting more value-added exports,” Dawood said in a tweet. “The ECC decision will go the cabinet for ratification after which it will be notified,” local industrialists claimed.
APTMA’s Senior Vice President Zahid Mazhar, while opposing the government’s decision to allow yarn import, said that there was a demand-supply gap and therefore its prices have gone up in the market, but if the government did not reverse its decision, the cotton yarn manufacturers would be in trouble in next few days or months. “The government is supporting one sector of textile but creating a problem for the other,” he added.
Javed Bilwani, Ex-President of Pakistan Hosiery Manufacturers Association (PHMA), further urged the government to abolish remaining 5% import duty on cotton as the next year PHMA will face a shortage of cotton and cotton yarn owing to its low production.
He said that the spinning sector was allowed to import duty-free cotton, but the apparel and home textile sector were not allowed the same, which, according to him, was a discriminatory practice.
He further said, “why should we buy expensive cotton yarn from them when we can import it at cheaper rates?”
The former PHMA chairman alleged that spinning millers have formed a cartel and were blackmailing them by selling cotton yarn at higher rates.
According to the data available, the cotton yarn import has increased by almost 48% to 12654/ tons in November 2020 compared to 8504 per tons in October 2020.
Speaking to a national business magazine, Naveed Gulzar, a leading spinning miller from Faisalabad, corroborated APTMA’s statement, saying that cotton yarn is available in abundance and the allegation of cartelisation amongst spinning millers is baseless because cartels are only formed when there are 4 to 5 players in the market. “How one could have a cartel amongst 400 textile mills,” Gulzar asked.
The leading spinning miller said that the price of cotton yarn has increased due to an increase in the prices of raw materials needed for its production rather than a shortage.
He maintained that yarn and especially poly cotton yarn is available with everyone. “However, if there is such a thing going on then it could be because of hoarding by Sutar Mandi brokers,” Gulzar added.
Cotton yarn export to China
China has imported $41.836 million to $54.613 million worth of cotton yarn from Pakistan in August this year, which is 4.36 times up compared to the $9.592 million in the same period last year, with a year-on-year increase of 336 percent, as per data from China’s general administration of customs.
Huang Xifen, sales executive of import and export department at Litai Xingshi (Taicang) Holding Co. Ltd told China Economic Net (CEN) at the 2020 Autumn Joint Exhibition of China National Textile and Apparel Council in Shanghai said that Pakistan mainly produces low-count sirospun yarns, such as those of 8s or 10s, generally below 21s, which are mostly imported to south China’s Guangdong province to be made into denim.
Another importer, Yang Bin, director of Seazon Textile and Apparel Co., Ltd in Foshan, China said, he imported about 1,000 tons of cotton yarns from Pakistan every year. Our denim fabric is made of thick and low-count yarns, which are basically 10s or 8s, no more than 12s. The fabric woven with higher-count yarns is thinner and softer.
Yang said that he has cooperated with Pakistan’s cotton yarn manufacturers for 10 years. “As for Pakistan’s cotton yarn, we only imported it from Explorer, a Pakistani manufacturer, with which we have cooperated for more than ten years.
The main reason for the surge in import lies in the fact that Pakistan’s yarn export to China enjoys zero tariffs, thus having a greater competitive advantage internationally.
That’s why we prefer Pakistani cotton yarn even when offered the same price, said Ke Jiangwei, general manager of Xiamen Naseem Trade Co., Ltd, which has been importing Pakistani yarn for many years in China.
“It is not just tariffs, but the price that attracts us,” said Yang, adding that “as Pakistani yarn is much cheaper than the Chinese one, the largest gap reached RMB 2,000 to 3,000 per ton in the last two years, with a price gap of about 10%.