KARACHI, Oct 14: The initial reports of pest attack on cotton crop and a bumper sugarcane crop have turned off Pakistan’s fabulously rich textile tycoons and sugar barons. Owners of textile and sugar mills want the government to provide them financial help from taxpayers’ money. There is total panic in the textile sector as spot prices of cotton jumped to Rs3,200 a maund on Tuesday.

Textile mill owners used to demand duty free import and export of cotton. But as prices of cotton touched Rs3,100 and Rs3,200 a maund this week after reports of pest attack on the crop, Federation of Pakistan Chambers of Commerce and Industries president Riaz Tata has demanded of government to “immediately import 1.5 million bales of cotton from Central Asian republics and make it available to the local textile industry at international competitive prices.” The FPCCI chief issued a statement on Tuesday and blamed ‘a few middlemen’ for “speculation and hoarding”.

A very conservative estimate put import cost of 1.5 million cotton bales anywhere near Rs25-26 billion. Reports suggest that cotton prices in Uzbekistan are over Rs4,500 a bale and actual import cost may be even much higher. Mr Tata represents rich textile community who in the last three years earned more than $16 billion through textile exports only. It means that textile exporters earned more than Rs960 billion from exports in the last three years. They want the government to provide Rs25-26 billion from public money for cotton import. A demand to provide this imported cotton at “competitive prices” means involvement of subsidy. Textile dealers also want a ban on cotton export. The textile mill owners reap rich profit from domestic market also all these years. But the entire textile sector pays hardly Rs300 million tax every year on their personal and corporate incomes.

Like the textile tycoons, the sugar barons also want the government to use public money to export their sugar. Roughly, export of a ton sugar involves Rs6,000 subsidy. They are now reluctant to go ahead with sugarcane crushing from November 1. There are reports of a bumper sugarcane crop. A delay will force the growers to dispose of their crops at much less price than Rs43 a maund fixed by the government. But a delay in lifting sugarcane from fields will also delay wheat sowing. Farmers sow wheat in moisture laden sugarcane fields immediately after the crop is lifted to harvest crop next spring.

Even after complaining that they have unsold stocks of over 700,000 tons of sugar with them, the owners of sugar mills cut down heavily on supplies to their dealers in the market. Retail sugar price is already Rs20 a kg two weeks ahead of Ramazan and is expected to go up further. How would one explain this? Are sugar barons in panic or they are out to create panic in the market?

Now that Pakistan’s top business players are in total panic or are out to create panic, one can predict an all round severe crisis in days to come. Pakistan may be forced to import wheat and cotton. Industrial and agricultural production and exports may suffer a setback and economic growth target of 5.3 per cent for 2003-04 could remain unachieved.

Reports of damage to cotton crop was initially taken as a routine annual growers gimmick. Every year in August and September growers want to project a depressed size of crop and traders and textile mill owners pin for a large sized crop. Reasons are obvious. Reports of depressed crop push up cotton prices for few days till cotton arrivals in ginneries stabilize it. But this year, the reports of pest attacks came in October and it appears that things are pretty serious.

Sugar season has already begun with a bitter note. Owners of 31 sugar mills in Sindh have defaulted on payment of Rs1 billion to the growers for the last crop. Of these owners of five big sugar mills owe Rs550 million to the growers. The remaining 26 mills share a default of Rs450 million.

Talking to Dawn on Monday, Sindh Agriculture Minister Arif Jatoi did not rule out arrests of the owners of those five big sugar mills who are big defaulters and “if they continue to default”. He specified names of these five mills. Arif Jatoi had several meetings with the millers in the last few weeks and is apparently confident that crushing will begin from November 1. He was able to get this assurance only after the TCP was ordered to lift 100,000 tons more sugar from the millers’ inventory.

“Millers deliberately delay purchase of sugarcane from the growers every year,” Shah Mahmood Qureshi, leader of the Pakistan Association of Farmers (PAF) told Dawn by telephone from Islamabad. He said the millers took advantage of growers capacity to hold their crop for long. The growers are even denied the prices fixed by the government. Shah Mahmood is a powerful voice of the growers interest from Multan. He was a minister in the Punjab government and later in the federal cabinet.

He said that pest infestation of cotton crop was widespread and would cause serious shortages. He cited ineffective government policy and lack of coordination between the federal and Punjab governments on issue of pesticide. There was a serious shortage of pesticides and whatever available in the market in name of pesticides was a counterfeit product.

“It is not growers’ gimmick to magnify minor crop losses to get higher prices for cotton,” he reacted sharply when told that damage to the crop may not be as big as it is being projected. He said that with course of time textile mills had developed their own private surveys of the crops and it was on the basis of such reports that mills are making heavy purchases when cotton prices have touched Rs3,100 and Rs3,200 per maund prices.

An ex-chairman of the Karachi Cotton Association, who refused to be named, ridiculed textile mills demand to put a ban on cotton export. “They demand open market system and want free import and export,” he said while referring to the demand by Aptma leaders on the issue of yarn export.

He recalled that three years back, the prices of cotton came down to as low as Rs1,000 and Rs1,100 a maund and phutti was sold at Rs450 a maund when grower’s production cost was Rs600 and Rs650. “Who compensated grower then,” he said.

But market watchers are convinced that with cotton prices soaring at Rs3,100 and Rs3,200 a maund there is no possibility of an export contract in the near future. With cotton prices soaring, the prices of yarn are also reported to have increased by about 8 to 10 per cent. “But cotton prices have jumped up by 35 per cent and those of yarn by only 8 to 10 per cent,” Anwar Tata, former chairman of Aptma, said.

But at present there is total confusion and a virtual panic buying of cotton. The government has not taken any step which could bring an end to this confusion.

Textile business made handsome gains in the last four years. They reaped rich bonanza in 2002-03 when exports of 10 products increased by as much as 30 per cent and touched almost a figure of $6.5 billion. The State Bank of Pakistan made heavy buying of dollars to keep its price pegged at Rs57 and Rs58 a dollar so that textile exporters may not suffer much losses. This too was done at the taxpayers’ cost.

A few textile mill owners believe that damage to the crop is hardly five to 10 per cent and there will be in any case 10.55 million bales available in the market. Most of the mills have about four to six weeks cotton requirement with them. A rough estimate put this carryover stock at about 600,000 to 800,000 tons. They believe that cotton prices would come down to Rs2,600 to Rs2,800.