Pakistan may need to import up to 5 million cotton bales if export rally continues

If Pakistan's textile exports continue to go up at the same pace as they are currently, the country may need to import up to five million cotton bales to meet a shortfall of around 40% in production output compared to last year.

Textile exports during the first four months of fiscal year 2024-25 (FY25) surged by 10.5% to $6.15 billion compared to $5.56 billion during the same period last year, according to data from the Pakistan Bureau of Statistics.

Of these, the highest share was of readymade garments, which recorded a growth of 25.4% to $1.35 billion, followed by knitwear which was up 18.5% to $1.75 billion, bedwear by 13.6% to $1.06 billion and cotton cloth up by 5% to $679 million.

If this export trend continues, imports are likely to go haywire, settling around five to six million bales, Ahsanul Haq, chairman of the Cotton Ginners Forum told Nuktafrom Rahim Yar Khan.

He said so far, around 600,000 to 800,000 cotton bales have arrived while deals for up to three million bales have been finalized.

Tax distortion leading to higher imports

Textile millers are buying more cotton through import contracts compared to buying from the domestic suppliers due to a distortion in tax levy. Textile millers are exempted from paying sales tax of 18% on importing cotton and yarn while, on the other hand, if they buy locally, they have to pay a levy of 18%, Haq said.

The price of cotton in the domestic market recently declined by PKR 300 to PKR 17,700 per maund.

The fall in the domestic market was mostly because of a lack of buying from millers, owing to 18% sales tax and textile sector preferring to import, Haq said.

According to the data released by Pakistan Cotton Ginners Association, by November 15, cotton arrivals amounted to 4.893 million bales while textile millers bought 4.139 million bales. Cotton production is currently short by 33.60% or 2.476 million from last year’s output of 7.370 million bales.

Sindh's cotton output stood around 2.649 million bales as of Nov 15, down from 3.941 million bales during the same period last year. Meanwhile, Punjab's output was around 2.244 million, falling short by 34.53%, according to the data.