LAHORE – All stakeholders of the textile sector have unanimously decided to oppose intervention of government in free market mechanism through Trading Corporation of Pakistan (TCP).

In this regard, the Ministry of Textile Industry held a meeting on Dec 28 with all stakeholders of cotton trade, including industry, Karachi Cotton Association (KCA) and cotton exporters. The meeting agreed on one-point agenda that no intervention of TCP will be tolerated in the free market mechanism.

At the end of the meeting, the Ministry of Textile Industry assured stakeholders that TCP would not intervene in the market affairs of textile products, as the ministry was fully convinced by the participants.

It may be noted that the proposal of PCGA for lifting of their remaining cotton stocks through TCP amidst falling prices was pending with the textile ministry.

The participants of the meeting argued that till 15th December 2011, as many as 11 million bales of cotton had arrived, which would further increase by 31st December 2011 to around 12.2 million bales. They pointed out that crop lifting data suggests that 95pc of the cotton crop, estimated to be 12.58 million bales, would be out of the hands of the cotton farmers. Therefore, the intervention would not yield any benefit and if so, it would benefit only cotton hoarders.

Chairman Aptma Mohsin Aziz said that cotton prices surged abnormally to $2.2 per kg last year but Aptma did not ask for government intervention for a single day and instead fought for continuity of free market mechanism. Right now, he added, fall in cotton prices is global phenomenon and Aptma has nothing to do with tumbling cotton prices therefore PCGA’s propaganda of manipulation the market by Aptma was baseless. It is not the manipulation but speculation of a few ginners who have created fuss in market, he said.

He said the TCP’s intervention, if inevitable in any case, should be broad-based and Aptma should also be allowed to bid for TCP’s tender against 4.5 million stocks with industry at present. There should be an equal opportunity for every stakeholder to avail the opportunity at the cost of exchequer and no discrimination should be made by the government, he added.  He said the textile industry was passing through severe energy crisis and it would prefer to sell its stocks to the TCP rather converting it into yarn on heavy losses.

It is to be noted that Pakistan’s textile industry has endured a very mixed year, ranging from a sharp fall in cotton prices from its all time peak levels to energy crisis. Cotton prices peaked in March 2011 resulting in windfall gains for the textile chain during 1H2011. However, since then prices have tumbled to Rs5,400 per maund (down 58pc from its peak) due to growth in cotton output. In addition, gas shortage in the country especially during the ongoing winter season has put more burden on the sector. Hence, the textile sector has so far underperformed the local bourse by a massive 19pc.

Low cotton prices putting pressure on margins, as 1H2011 witnessed cotton prices rallying to all time peaks internationally and domestically on the back of limited supply and escalating demand. As a result, the textile chain made windfall gains during that period with exorbitant margins. However, prices have since then taken a breather and come down significantly to $0.93 per lbs. Domestically as well, the prices have contracted by 58pc to Rs5,400 per maund from its peak level of Rs13,000 per maund in March 2011.

Since the start of the year, the country has faced acute gas shortages resulting in massive production losses or reliance on expensive alternate fuel such as diesel.