August 19, 2002	Monday	Jamadi-us-Saani 9, 1423

Cotton is admittedly the most important cash crop of Pakistan which claims 5th position among the cotton-growing countries of the world. Its export in the raw form (as lint) as well as its finished products, are a source of sizable foreign exchange to the national exchequer.

Still cotton industry had never had a smooth sailing due to various reasons — ill-conceived policies, unfavourable whether, virus attacks, etc. A review of the annual cotton production for the last five years (96-97 to 2000-01) shows that it has never been stable at all. It was the lowest at 8,790 bales in 98-99 and highest at 11,240 bales in 99-2000 .

A 10-year review shows that the yield of cotton has decreased considerably and it is strange that even the last year’s decline failed to move the government for improving the situation.

Until 1973, a free trade policy was pursued by the government with certain adjustments of export duty for stabilization of domestic prices vis-a-vis export prices. Towards the end of 1973, the cotton export was restricted to public sector only and the Cotton Export Corporation (CEC) was established which used to purchase raw cotton for local textile industry. Now the CEC stands dissolved and it has been replaced by the Trading Corporation of Pakistan (TCP). The TCP’s modus oprendi in this regard is not clear. Sometimes it makes export direct to foreign buyers and at other times through issue of tenders to private exporters to purchase specified volumes of cotton from TCP for export. The TCP’s purchases of raw cotton from ginners is also not sound enough with the result that huge stocks are still lying unsold with the ginners which in turn hesitate to make payments to growers forthwith.

The TCP also enters the domestic cotton market when private traders including spinners do not show any interest to make purchases at the government fixed prices.

Thus the entire system of business transactions of cotton can in no way be considered as scientific.

In these circumstances, there is a dire need to privatize the entire trading system with the least possible intervention by the government. Induction of hedge trading in the system as is prevalent in most of the other leading cotton growing countries of the world may be pretty useful.

On the persistent demand of traders to introduce hedge trading, the government some time past had constituted a committee for making recommendations and formulation of rules on hedge trading. It is now learnt that this committee has since finalised and submitted its report to the ministry of commerce. Another committee, headed by the chairman, Karachi Cotton Association, and including representatives of growers, ginners, the State Bank, the SECP and the ADBP,was also formed.

It is understood that the KCA, in anticipation of the introduction of hedge trading, has already amended its by-laws and other relevant articles so as to bring them in conformity with the requirements of the prevailing situation in the market.