Pakistani Textile Sectors Battle Over Yarn Export Duty

A standoff between two of Pakistan’s major textile sectors, with spinners on one side and value-added on the other, is contributing to a major drop in cotton prices over the last week. Uncertainty on whether or not the government will extend the 15% duty on cotton yarn exports—it is currently set to expire on July 26, 2010—is a major reason for the market’s volatility. Seasonal lulls and sluggish worldwide economic activity also contributed to the drop of 45 cents per kilogram over a three-day period.

Arguing that the duty should be allowed to expire next week as originally planned, the All Pakistan Textile Mills Assn. (APTMA) wants the forces of supply and demand to help the market reach its natural equilibrium price point. The organization claims that a quota kept cotton yarn exports to a two-month total of 35,000 tons, and as a result, there should be no problem meeting domestic supply demands.

The value-added sector, on the other hand, wants the government to extend the duty for an additional two months. In addition, sector representatives point out that current cotton stocks are virtually nonexistent, and that the duty should be extended to cotton exports, as well.
The export duty has already been extended two times, from June 30 to July 13, and again until the current deadline of July 26.