Sunday December 10, 2023

Need for prudent planning

September 24, 2022

LAHORE: Textile industry is in trouble due to the global cotton crisis as around 50 percent of the spinning mills in India, the largest cotton producer, have closed; despite the fact India is importing cotton from China.

India is a big market, and it can use Chinese cotton for the local market because the products produced from Chinese cotton are banned in the United States. Cotton crop production in India has drastically reduced, but in Pakistan it has largely been destroyed particularly in Sindh and Southern Punjab.

Spinners in Pakistan are also operating on low capacity and many have closed. Cotton prices in Pakistan are not viable, but imports are more expensive.

Import of cotton from India even if permitted by the government of Pakistan will not be possible because of its own shortages.

This is not the only issue. Government policies are also an issue. Traditionally, governments in Pakistan take timely decisions. Actions are announced when any crisis reaches its peak. To sustain exports and keep the apparel industry and other value-added sectors vibrant there is a need to make a paradigm shift in the import policy.

The import of all yarns and fabrics must be allowed at zero duty and sales tax to ensure that weavers and value-added do not face shortages of their basic raw materials.

If the government failed to act promptly then there would be no use if permission is granted when local yarn supplies completely dried.

It might hurt some spinners, but they have already curtailed their workforce.

The loss of jobs would be much less if value-added jobs are secured. Spinners provide livelihood to only 15 percent of the textile workforce, while the rest comes from value-added sectors.

If fabric import is liberalized, the garmenting sector would get a chance to increase its product range and accelerate exports. The local spinners already deprived of raw material would also come up with different blended varieties of yarns so that weavers could produce more varieties of fabric.

The government of Pakistan is already doing an excellent job by providing matching grants to SMEs for purchasing stitching machines. These SMEs would need fabric that might not be available due to shortage of cotton and yarn.

Big millers could survive a lean period of one year, but most of the SMEs cannot because they are starved of cash and other resources. The garmenting industry is on the go and planners must ensure that this momentum is not disturbed.

Pakistani spinners may use the cotton crop that has been salvaged, but importing cotton is going to be pretty expensive. Imports of cotton would be a drain on the exchequer as well.

The same foreign exchange could be used to facilitate import of yarns and fabrics which are the basic raw material of weavers and value-added exporters. It would not only save jobs but create new jobs in the garmenting sector.

The central bank could facilitate the spinners by granting a moratorium on their loans for a year. Flood ravaged Pakistan needs prudent planning to save jobs instead of public appeasing measures that could destroy jobs.