KARACHI, June 5: Trading activity on the cotton market on Thursday failed to pick up as both the ginners and the spinners remained pre-occupied with analysing the impact of some of the fiscal incentives widely rumoured in the business circles ahead of the budget.

Although the federal budget is due on June 7, the market is flooded with conflicting rumours about the incentive package for the textile sector to boost exports, dealers said adding “what seems to have enthused both the spinners and the ginners was the rumour about the sales tax waiver for the both.”

The sales tax is being deducted on ginned cotton by the ginners at the rate of 15 per cent, while the spinners claim it under the head of duty drawbacks after submitting physical export documents to sales tax department.

“An amount of Rs60bn is reported to have involved both ways and the finance ministry plans to do away with the system, which hinders smooth flow of export trade without matching gains,” they said.

They said leading ginners and spinners were locked in heated discussions on the budgetary rumours about the finance bill and did not indulge in physical trading.

Indications are that spinners are expected to resume normal market operations during the post-budget sessions as by that time the impact of most of the fiscal steps will be known, says a floor broker.

Moreover, both are now worried over the supply position as ginners have exhausted bulk of their unsold stocks, while spinners are in a pretty happy stock position after having imported 0.9m bales to make up for the local crop shortfall.

Ginners also hold an unsold stock of fine lint cotton barely enough for about three weeks consumption of the textile sector and also happily placed in a comfortable position.

The activity is expected to be heated up after the budget as some of the local spinners will try to grab the unsold stocks irrespective of the asking prices.

Meanwhile, New York cotton futures resisted fresh decline on active speculative short-covering at the lower levels, although the ruling July contract again traded below the benchmark rate of 50 cents per lb at 49.04, up 1.01 cents per lb.

The new crop October was traded higher by 0.45 cents at 52.10 cents per lb followed by modest forward business.

Local official spot rates remained pegged at the overnight levels in the absence of ready business.