ECC may allow state-run corporation to sell cotton at retail markets

KARACHI: The Economic Coordination Committee (ECC) of the Cabinet on Thursday would discuss the proposal, seeking permission to allow the state-run trading firm to sell the procured 85,600 cotton bales at retail markets instead of inviting tenders, a source said on Wednesday.
"The Trading Corporation of Pakistan (TCP) has received no bids in its last tender to offload the procured cotton," the source said.
He said the corporation has invited as many as eight tenders in the last three months to sell 96,400 bales (170 kilograms each). However, it could sell only 10,800 bales in two tenders, as it received no or poor response in the remaining six tenders.
"The TCP has sold the bales at Rs4,800 to Rs4,900/maund (37.324 kilograms) through tenders," he said.
Majority of textile mill-owners have not participated in the tenders to avoid paying 10 percent refundable tax on the purchase of cotton through tenders, while there is no such tax applicable at the retail buying.
"Although this is a refundable tax, but cash-strapped mill-owners do not want to block their working capital for at least one-year...the government has not been paying refunds to majority millers for years," he said.
He said the Trading Corporation of Pakistan cotton is of prime quality, while it has been demanding average price quoted at the Karachi Cotton Exchange these days. However, the mill-owners gave very poor response.
"TCP has procured best quality cotton with the aim to export it. However, prevailing low prices at world markets has convinced it to sell the cotton at local markets," he said.
The source said it is good time for TCP to offload remaining bales with it, as at present the commodity price is hovering around this season's (June-March) at Rs5,700/maund.
Moreover, millers would jump to buy the Trading Corporation of Pakistan cotton - at current prices because of its prime quality – at a time when growers are reporting short crop this year.
Brokers have estimated crop size at 12-13 million bales (of 155 kilogram each) this year as compared to 14.9 million bales last year.
The Trading Corporation of Pakistan has procured the 96,400 bales from ginners at Rs6,864 per maund last fiscal year (2014-15).
The bales were bought to revive cotton price during the year.
The commodity was trading at Rs5,000 to Rs5,300 at retail markets when the government approved to procure the bales.