KARACHI: The government has decided to regulate export of cotton yarn to safeguard the interests of the value-added textile sector which is the highest foreign exchange earner for the country.

The ministry of commerce through an order issued on Wednesday (Nov 25, 2009) has made it mandatory upon cotton yarn (all sorts) exporters to register their export orders with the Trade Development Authority of Pakistan (TDAP).

Through an amendment made in Schedule II of the Export Policy Order, 2009, wherein already 18 items are being regulated or permission has to be sought and other conditions have to be met prior to export, the ministry of commerce has added under item 19 all sorts of cotton yarn.

Though the MoC has not imposed ban or fixed quantitative ceiling on export of cotton yarn but registration with the TDAP is being taken to regulate its exports so that its availability in the domestic market is ensured.

Analysts believe that by putting a condition of registration on export contracts of cotton yarn, the government wants to monitor and regulate cotton yarn exports and do not allow its exports to exceed previous year’s volume as was demanded by the value-added textile sector.

Under the Export Policy 2009, export of cotton was already being indirectly regulated because all export consignments of raw cotton has to be registered with the TDAP and the State Bank of Pakistan on paying one per cent security deposit of the contract value.

The sudden surge in cotton yarn exports and prices have compelled the government to take this step and according to official figures, in the past there used to be around 4.5 million kgs of yarn export per month but the same has increased to 7.2 million kgs.

The value-added textile sector had been agitating for the non-availability and high prices of cotton yarn in the domestic market. However, spinners were of the view that since the cotton economy had been operating on market forces since last one decade, there was no need for government intervention.

The spinners came out with a strong argument that if they could import raw cotton to meet their shortages, there was no reason as to why the value-added textile sector could not import cotton yarn under a free market mechanism.

The spinning industry also warned the government not to intervene because this would retard the growth of the industry and the planned future expansion and increase in spinning capacity would be derailed.

They were of the view that since the industry had been suffering losses for the last two to three years it was the opportunity to reduce their accumulated losses and bank defaults.

However, the value-added textile sector which is losing export contracts approached the ministry of textile industry and sought minister’s intervention. As a result, the minister of textile Rana Mohammad Farooq Khan last Wednesday convened a meeting of all stakeholders.

As the meeting could not reach a decision, the minister ultimately informed the participants that he would be taking the matter in the next meeting of the Cabinet to sort out the issue.

As a result of this, the ministry of commerce on Wednesday issued an order asking cotton yarn exporters to register with the TDAP so that exports could be monitored through a system of registration to be notified by the authority.