LAHORE, Oct 10: Amidst worries that higher cotton prices may undo recent achievements of the textile sector, some spinners have called for “restraining” the export of the commodity till as late as December to stabilize the market.

“It is correct that we are in favour of free market mechanism, but reckless speculators should not be allowed to cause losses to the textile industry which is the largest foreign exchange earner and contributes about 70 per cent to the country’s exports and at least 10 per cent to GDP,” Punjab Aptma senior vice-chairman Adil Mahmood told Dawn.

He pointed out that when a similar situation arose in Egypt — where cotton is the major foreign exchange earner for the country — it had also stabilized the situation for its domestic industry by restricting export of cotton to 50 per cent. “In India, export of raw cotton is allowed only after the needs of its own industry have been fulfilled. If we resort to any such measure in the best interest of our major industry, we would not be violating norms of free trade. We must rescue the textile industry from the clutches of speculators and make efforts to rationalize the cotton rices.”

Mr Adil said the industry could face a similar conditions that it confronted in 1993 and hugely default on bank loans if steps were not taken to check the prices surging to “unviable levels”.

Former Aptma chairman Abid Farooq attributed the sharp rise in prices to a higher international rate at New York cotton futures. “It has resulted from speculations due to the entry of China in a big way in the cotton market this year.”

He was hopeful that the cotton prices would fall and stabilize at the “rational level as the demand tapers off and supply surges with new arrivals”. But, he warned, the prices would not plunge to last year’s levels when they ranged between Rs1,900 and Rs2,600 per maund. “The prices would not fall to last year’s levels since New York cotton futures are still very high.”

He further said the spinners had also decided to “rationalize” their buying (after an informal meeting between major spinners in Lahore on Thursday).

The cotton prices dipped to Rs2,800 on Friday though some deals were reported to have been done at Rs32,000 per maund. “It was due mainly to the millers’ decision to wait for an increase in supply and build-up of the cotton stocks at mills for the next some days or so,” said a spinner.

Mr Abid said there was no evidence that the crop was going to be short this year in spite of the pest attack in some areas. “It is more a speculation than a reality. Hence the prices should not come under pressure on this account.”

Most spinners were hopeful that the situation in cotton market would stabilize in the next one week or so. However, the increase in the prices by the hour has resulted in “panic and uncertainty” in the textile sector, added Yahya Saleem, a senior Aptma member. “The industry is in a panic and large-scale closures, reduction in exports and losses to the economy are being feared,” he said.

“These are uneasy time. We should avoid getting panicky and go buy cotton at the rates set by speculators. We can bring down the prices should spinners rationalize their buying,” added a leading spinner.

Lahore Chamber of Commerce and Industry executive member Khalid Rafique said the weaving industry would be highly impacted by the rising cotton prices. “We are sandwiched between the spinners and the value-added sector. We will get expensive yarn and sell fabric at a lower rate,” he said.

Former Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) chairman Pervez Hanif said “though the value-added sector would feel the pinch due to the surge in the prices, it would not affected much”.

“If the international cotton rates remain as high as they are, we will be able to ask the price accordingly from our buyers,” he said.

However, he said, the profit margins of exporters of value- added products, especially of towels and bed linen, would squeeze due to higher cotton rates.