The textile sector is on a path of swift recovery following the devastation caused by Covid-19 but the improvement comes on the back of a surge in cotton imports.
The textile industry recovered sharply in September and October 2020 with exports increasing around 16% and 9% respectively on a monthly basis compared to a massive decline in August 2020 owing to torrential rains, said Insight Securities analyst Muhammad Saad Ziker.
In a research report released on Tuesday, the analyst pointed out that the much-needed growth was being achieved through the import of cotton and man-made yarn.
On the other hand, the government is pushing hard for the growth of exports as it aims to lift them to $50 billion by 2030, according to the textile policy 2020-25.
To achieve this, the government has eliminated 5% regulatory duty on the import of cotton, provided subsidised energy to industries and announced loans under the Long-Term Financing Facility (LTFF). Pakistan, being an agriculture-based economy, imported cotton worth $290 million in July-October 2020 compared to just $47 million in the same period of last year, revealed data of the Pakistan Bureau of Statistics (PBS).
Giving the example of a listed textile company, the analyst pointed out that Nishat Chunian faced a massive decline in revenue and profit in the second half of fiscal year 2019-20 due to cancellation of export orders, halt to local sales and weak demand from the spinning sector.
“The firm witnessed a huge improvement in revenue and gross profit in the first quarter of fiscal year 2021, following the resumption of operations.”
The value added segment is expected to grow on the back of huge export orders, which will be delivered by May 2021.
“Domestic production of cotton is being neglected,” Sindh Abadgar Board Senior Vice President Mahmood Nawaz Shah told The Express Tribune. “Local production of the crop may go below 8 million bales this year from 14.8 million bales last year.”
Although cotton was a major Kharif crop of Pakistan which consumed less water than paddy and sugarcane but still authorities were not paying due attention to it, he said. “The import bill will soar to billions of dollars if the country keeps on buying cotton from abroad, which is the main raw material for the textile sector.”
He emphasised that Pakistan’s weather and environment suited cotton production the best. Apart from growers, ginning and allied businesses would also bear the brunt of imports as their cost would soar, said Shah.
He argued that if the trend persisted, the textile industry might become dependent on external sources of cotton and it might cease production at times when shortage of cotton was witnessed worldwide.
“It’s a fact that the strategy to safeguard and sustain domestic production of cotton is neither undertaken by the provincial nor the federal government,” he lamented.
Published in The Express Tribune, December 9th, 2020.
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