TRADE
Textile industry that was in the process of revival after uninterrupted supply of RLNG for power production, is now facing bureaucratic hurdles in getting clearance for basic raw material at the Wagah border.
Pakistan always produces less cotton than required by its domestic industry and has to import 1.5-2.5 million bales annually. The year 2015-16 was the worst year for the cotton crop in Pakistan, as its production declined by over 30 percent, requiring higher imports.
Government of Pakistan has restricted cotton import from India through the Wagah border, to only half a million bales per year. However, Pakistani spinners can import an unlimited quantity of cotton through the sea.
The textile mills based in Karachi and nearby cities import cotton from India by the sea route. On the other hand, the spinners from Punjab prefer to import the necessary raw material via the Wagah border as the transportation cost is the same as it is from the southern parts of the country.
When the cotton crop is normal in Pakistan unlimited import of cotton by spinners based in central Punjab put Pakistani farmers in stress. It was for this reason that import of only half a million bales of cotton was allowed through this route. This quantity was much less than the cotton that Pakistan has to import yearly to make up for the lesser domestic supplies. The current year was an exception when the shortage of this vital fibre was much higher to operate the textile industry smoothly.
In previous years, Pakistani spinners hardly imported the permitted quantity of cotton through this route. An interesting point in this regard is that it is the government of Pakistan that has to keep record of the quantity of cotton that is imported from India through this route. For this purpose, they issue import permit to each importer.
It is on the basis of this permit the spinners open the letter of credit. Since the half million bales limit was never breached, the concerned departments continued issuing import permits.
When the cotton imported on these permits started reaching the border, it dawned on some bureaucrat that the allowed cotton import limit has already been breached. After this, not only the clearance of Indian cotton at Wagah custom post was stopped but the Pakistani authorities did not allow the cotton consignment from Attari, the Indian side of border.
This created congestion at the Indian check post. The Indians retaliated by refusing to accept scores of trucks loaded with Pakistani gypsum, after which cotton was allowed inside the Wagah border.
Now, according to the industry circles, on Saturday May 21 around 50,000 bales of Indian cotton are lying at Wagah with no clearance in sight. The importers individually, and through their association, approached the Minister of Commerce, Federal Board of Revenue officials, and officials of the Textile Ministry to resolve the issue.
The minister is said to have promised a week ago that one time waiver would be given to all the consignments that have arrived at Wagah, but the notification in this regard has not been issued yet. This lethargic behaviour has created panic in the industry.
The customs as usual would charge demurrage for the period the goods remain uncleared at Wagah. This would increase the cost of cotton.
Cotton crop is not available in Pakistan. Whatever is left with spinners or ginners is trash and could not be used to produce quality yarn. The import of cotton from India at this time is not causing any harm to the local farmers as the new crop has just been sown and would take two to three months to mature. Import of cotton from sea would take time and cost would also be higher.
This brings into question the lethargic attitude of our bureaucracy and the ruling elite in resolving a vital issue impacting the most vital export sector of the country. The RLNG was supplied to the textile industry in March this year. Prior to that, over 110 spinning mills were closed down as they could not operate on costly state supplied power.
In the past 75 days, around 70 of the closed units have revived as producing yarn at low cost energy was feasible. These are the mills that did not have cotton stocks and were arranging imports from other countries, including India.
If the clearance is further delayed they might go sick again and some may not be able to revive. This has happened with 40 of the 110 mills that were closed before March.
Pakistan is perhaps the only country in the world that is highly dependent on cotton. Pakistan uses 75 percent cotton in its products and only 25 percent manmade fibre. The fibre mix in India is 50 percent cotton, 46 percent manmade fibre and four percent other fibres.
Globally the fibre mix in textiles has 27 percent cotton, 65 percent manmade fibre, and seven percent other fibres. The high use of cotton by Pakistan in its textile products calls for free availability of this fibre to ensure smooth operations of the industry.
When trade with India was restricted, Pakistani spinners used to import cotton from far away countries like Australia, United States and Egypt to produce finer products from the long staple cotton that these countries produce. Pakistan produces short staple cotton. India after late 90’s developed long and medium staple cotton varieties through use of biotech and hybrid cotton seeds. It is currently the largest producer of cotton in the world. Availability of quality cotton across the border facilitated the Pakistani spinners that could order small consignments for a week’s consumption from across the border. This saved them high inventory cost that they had to incur when they had to import large quantities from far away countries.
While the bureaucracy is dilly dallying on cotton stuck up at Wagah, some spinners are seriously thinking of challenging the attitude of customs authorities in the courts. Their contention is that they imported cotton on legitimate permits issued by the concerned authorities. Since the total cotton imports made through Wagah is never made public they were certain that their imports were within the limits permitted by the government through the Wagah border. Some saner elements however are persuading them to wait a little as the minister of commerce has personally assured of early resolution of the issue.
The writer is a staff member
