LAHORE, Oct 30: The government's decision to export lint cotton to be procured by the Trading Corporation of Pakistan this season has sent a wave of shock among spinners, who say the "move would tantamount to giving subsidy to their (foreign) competitors and hurt their interest".

"Do they (the government) want to subsidize the Indian textile industry?" asked a senior Aptma official on Saturday. "This move is going to benefit only the foreign spinners and local middleman and not (cotton) growers for whom the TCP is claimed to have been inducted in the procurement of cotton."

The government claims that it has inducted the TCP in order to stabilize the market with a view to ensuring the minimum indicative cotton price of Rs925 per maund for the growers. Food and Agriculture Minister Sikandar Khan Bosan is reported to have said earlier this week that the TCP would remain in the market as long as it was needed and would export all cotton to be procured by it in the process.

"It is outrageous. Nobody came to our rescue last year when we were forced to purchase cotton at an as high a price as Rs3,600 a maund," Aptma chairman Arif Saeed told Dawn.

"We didn't ask the government to intervene in the market as we believe in a free import-export market mechanism. It was in spite of the fact that we sold yarn at the rate of phutti (seed cotton) and suffered losses," Mr Saeed said.

He insisted that the cotton price in the local market could not fall below the international prices because "such a situation always offered a margin for exporters" who would immediately jump into the market to take the advantage.

"Even if the local price drops below the world rates, it could not last for more than a couple of days due to the procurement by the exporters. This is the right way of stabilizing the prices in a free market," Mr Saeed insisted.

Total exports registered with the KCA as of Oct 23, 2004 stood at 109,943 bales, including 64,154 bales from the 2004-05 crop and another 23,100 bales are shipped out of the country during August and September.

Total cotton arrivals, according to the PCGA, as of Oct 15 are 3.613 million bales. Out of them, 18,300 bales have been procured by the TCP, 61,499 by the exporters and 2.712m by mills. About 821,181 bales formed the unsold stock of the ginners.

The KCA spot rates (excluding sales tax) closed at Rs2,090 per 37.32 kg and Rs2,186 per 40 kg on Friday, as New York Cotton Market Closing Delivery Contract 2 for December stood 46.40 US cents.

"Pakistan's cotton is priced at 42-44 US cents (FoB Karachi), while the TCP is procuring it for Rs2,195 per 37.324 kg. Thus, the TCP will buy cotton at a higher price to sell it at a lower rate. What would you call it? If the government wishes to subsidize the growers, it must offer them direct subsidy. The present mechanism is benefiting only the middleman and foreign spinners at the cost of our local industry. Is it a wise thing to do?" asked the Aptma chairman.