LAHORE: Already hit hard by imposition of 18 per cent sales tax, the local cotton industry is panicked on the reports of re-review of GSP Plus status by the European Union.

The GSP Plus status had been granted by the European Union in 2014 leading to a 108pc hike in Pakistani textile exports to the EU due to concessional tariff.

The status was later extended to 2027 a few years ago.

However, during the recent visit of an EU delegation to Pakistan, it was announced that the economic bloc would review this status in June this year, causing a wave of concern in the entire cotton industry.

A communication with the local representative of the EU by a concerned businessman revealed that though the generalized tariff preferences (GSP) had been extended until Dec 31, 2027, new regulations are likely to enter into force much earlier than that.

“GSP Monitoring is a continuous process. The inter-services monitoring mission is expected in mid-2025 as part of the ongoing process,” the EU representative said in response to the query on Feb 2.

The businessman from the textile industry, who requested not to be named, apprehends that any negative review of the GSP Plus status could further plunge the sector into crisis because in the hope of sending more textile products’ export consignments to Europe after winning handsome contracts in the recent textile fair in Germany, textile mills have purchased duty-free cotton and cotton yarn in large quantities from abroad.

As import of cotton and cotton yarn is duty free, while there is an 18pc tax on the trade of local cotton, the millers have been importing the commodities in large quantities from abroad this year at the cost of local cotton growers, ginning and spinning sectors.

The data released by the Pakistan Bureau of Statistics reveals that from July to December 2024, the country imported cotton and yarn worth $1.91 billion, which is a record $0.610 billion more than the same period last year.

Reports suggest that large shipments of cotton and cotton yarn are also expected during January-March 2025 at the cost of precious foreign exchange reserves.

Cotton Ginners Forum Chairman Ihsanul Haq stated that while domestic cotton production this year has fallen 50 per cent short of the target and is 34 per cent lower than last year, cotton stocks in ginning factories have increased. As of January 31, at least 486,000 bales of cotton were held by ginners — 31 per cent (114,000 bales) more than during the same period last year.

Despite this, textile mills have purchased only 4.978 million bales from local ginning factories so far this season—35 per cent (2.7 million bales) less than last year’s purchases during the same timeframe.

Published in Dawn, February 6th, 2025