April 06, 2008	Sunday	Rabi-ul-Awwal 28, 1429

LAHORE, April 5: All Pakistan Textile Mills Association, Punjab chapter, has expressed concern over the move by some vested interests to resume futures trading in cotton.

Aptma zonal chairman Akbar Sheikh said in a statement on Saturday that the hedge trading in cotton was stopped in Pakistan in 1978 after unhappy experiences. Not only the textile mills association but the Pakistan Cotton Growers Association and other stakeholders were also opposed in principle to futures trading in cotton.

The disadvantages of cotton hedge trading far outweighed the ostensible logic of futures trading, namely the coverage of price fluctuation risk in raw cotton, advanced by its advocates.

The rationale for futures trading in cotton was also non-existent because the country was dependent on imports to cover more than 20 per cent shortfall in its production, he added.

He said that a few traders enjoying control of the cotton market and manipulating prices was a scenario that was fraught with dangerous consequences for the textile industry. “Even our stock exchanges had not been immune from volatility and turmoil on account of absence of proper and adequate regulatory mechanisms and monitoring,” he added.

With a fibre mix ratio of 80 to 20 in favour of cotton and that, too, with a consumption of 15 million bales, the industry could not afford to be subjected to the uncertainties of a speculative market, the Aptma chief thought.

He pointed out that the freely operating market forces were imperative for a futures market to operate credibly. Shortages, interventions and manipulations were not conducive to the credible operation of futures contract.

The profit-driven manipulations skewed the proper functioning of even the well-regulated New York Futures Market, the largest in the world. He apprehended that hedge contracts in cotton trade will create a third buyer that would adversely affect the smooth functioning of the textile industry all along the value chain, which was bound to dent Pakistan’s competitiveness further in the international market place.