MULTAN, Sept 27: Federal Ministry of Commerce is reportedly considering a proposal to maintain a 'buffer stock' of cotton to keep the market stable both in case of short and surplus crop.
A well-placed source in the ministry told Dawn that a proposal in this regard had been made on the orders of Federal Commerce minister Hamayun Akhtar Khan. "The minister wants a meaningful role of the Trading Corporation of Pakistan to provide a level-playing field to all the cotton market stakeholders," he said.
He said that the idea of buffer stock was floated when a sharp contrast was observed in the prices of cotton during the last few years. Lint prices plummeted to all time low to Rs1200 per maund (37.324kg) and phutti (seed cotton) to Rs 450 per 40kg in the year 1999-2000, then they shot up last year to all time high to Rs3600 per maund in case of lint and Rs1600 for phutti.
Besides other factors, he continued, the demand-supply factor played a vital role in bringing the cotton prices to the two extremes as in the year 1999-2000 the crop was surplus than the demand while in the later year the situation was opposite to it.
He said the state-owned buffer stock of about one million bales would not only ensure the farming community a fair return in case of surplus crop, it would also ensure availability of cotton to the spinning and textile sector in case of a short crop against the domestic demand. "This will reduce chances of a crisis like situation in either case," he averred.
He said this year again the prices of phutti had been fallen below the officially announced minimum price of Rs925 per 40 due to the forecasts of a fairly good crop. He said the idea of buffer stock had been floated mainly to safeguard the interests of small cotton growers who owned more than 80 per cent of the area under cultivation of the silver fibre in the country.
The source, however, anticipated stiff opposition from the strong lobby of textile millers as they would feel a threat to their monopoly as the single-largest buyer of the domestic cotton in the country. "The millers dictate their terms in the cotton market and they can not see their status being eroded," he commented.
He said to materialize the idea of maintaining a buffer stock of cotton, funds of Rs15 billions would be needed. "This is not a big deal while keeping in view the pivotal role of cotton in the country's economy," he argued. Most of the cotton market analysts interviewed by this correspondent supported the idea of maintaining a buffer stock of cotton.