LAHORE: Cotton industry is facing mounting pressure amid allegations that large quantities of fabric imported from China under the Export Facilitation Scheme (EFS) are being diverted to the open market after under-invoicing while widespread rains and looming floods threaten to inflict fresh damage on the standing cotton crop.
Cotton Ginners Forum Chairman Ihsanul Haq warned on Sunday that the industry, already grappling with declining cotton production, soaring energy costs, heavy taxation and expensive bank financing, could face further deterioration if alleged loopholes in the EFS were not addressed. He claimed that after reports of under-invoiced cotton yarn imports from China being sold in the local market, similar concerns had now emerged regarding fabric imports under the same mechanism.
Haq urged the federal government to carry out a strict audit of all imports made under the EFS to prevent further damage to the domestic textile and cotton sectors.
The All Pakistan Textile Mills Association (Aptma) had earlier provided the Federal Board of Revenue (FBR) with data regarding millions of kilograms of yarn allegedly imported through under-invoicing under the scheme. He said the domestic cotton industry had been in decline for several years due to shrinking cotton production and quality, high taxes, record electricity and gas tariffs, and costly bank borrowing. As a result, export-oriented textile mills had become increasingly dependent on imported cotton.
Call for strict audit of all imports, including cotton, under EFS
Ihsanul Haq also expressed concern at the expansion of sugarcane cultivation in traditional cotton-growing areas, saying it had contributed to environmental conditions that had adversely affected cotton quality. He claimed that, owing to quality concerns, Pakistani textile mills had signed substantial import agreements for cotton from the United States and Brazil this season. He said textile mills had contracted to import around 280,000 bales of US cotton during May while imports from Brazil were expected to exceed that volume.
The Cotton Ginners Forum chief also warned that the continuation of high sales tax on the ginning industry could encourage undocumented cotton trading this season. He feared that several hundred thousand bales could remain outside the documented economy, resulting in lower officially recorded national cotton production and damaging Pakistan’s credibility in international cotton markets.
He called upon the government to substantially reduce the sales tax burden on the ginning sector to discourage undocumented transactions and support the formal economy.
Meanwhile, cotton trading remained subdued over the past week due to persistent rains in major cotton-growing regions. Cotton prices declined by Rs300 to Rs500 per maund, with prices falling to around Rs18,700 per maund in Punjab and between Rs18,000 and Rs18,200 per maund in Sindh.
Cotton prices fell sharply in the local market during the past week after a brief rally driven by a temporary shortage of seed cotton (phutti), as ginners resumed selling amid improved arrivals.
Karachi Cotton Brokers Chairman Naseem Usman said cotton prices initially rose by Rs500 to Rs600 per maund in the opening days of the week due to reduced phutti supplies. The shortage was attributed partly to several ginners who had previously sold large quantities of cotton at lower prices and subsequently either shut down or partially operated their ginning factories to delay deliveries under those contracts. The reduced market supply triggered panic buying and pushed prices higher.
However, as phutti arrivals improved slightly, ginners accelerated sales, causing prices to retreat from their weekly highs.
In Sindh, cotton prices, which had climbed to Rs18,500-18,600 per maund, fell back to Rs17,800-18,000 per maund by the end of the week. Similarly, in Punjab, prices declined from Rs19,200-19,500 per maund to Rs18,600-18,700 per maund.
The official spot rate also fluctuated during the week in line with changing market conditions.
According to market sources, deliveries of around 25,000 bales sold earlier at lower prices are still pending, suggesting that supply-related pressures may continue to influence trading in the coming weeks.
Published in Dawn, July 27th, 2026