Pakistan's cotton industry is reeling from a severe crisis after several cotton ginning factories in Sindh suspended operations barely a month after reopening, with industry representatives attributing the collapse to the federal government's taxation policy. According to Dawn, ginning units in Tando Adam and other cotton-producing towns have begun closing after the government retained an 18 per cent sales tax on the cotton ginning sector in the federal budget.
Tax policy blamed for price collapse
Industry stakeholders argue that the decision has accelerated a sharp fall in cotton prices, placing immense pressure on farmers, ginners and textile businesses. Before the budget was presented, representatives of the All Pakistan Textile Mills Association (Aptma) and cotton ginners had urged federal authorities to ease the tax burden. Officials had assured industry representatives that taxes on cottonseed and oil cake would be removed and levies on raw cotton would be reduced. However, despite multiple amendments to the Finance Bill, no relief measures were introduced.
Cotton prices plummet across Pakistan
The absence of tax concessions has coincided with a steep decline in cotton prices across Pakistan. The Karachi Cotton Association's benchmark rate reportedly dropped by PKR 4,000 per maund to PKR 17,500, while prices in Punjab and Sindh also witnessed significant declines. Cottonseed and oil cake prices have similarly fallen sharply, with market participants warning that further reductions remain possible.
Heatwaves worsen losses for ginners
The crisis has been aggravated by extreme weather conditions. Tando Adam Cotton Ginners Association President Hareesh Kumar said prolonged heatwaves have affected cotton quality and reduced lint recovery, further increasing operational losses. He warned that more factories in Sanghar and other cotton-producing districts could suspend operations if conditions do not improve, leaving growers with limited buyers and encouraging undocumented trade, as highlighted by Dawn.
Misleading price information spreads online
Meanwhile, the Pakistan Cotton Ginners Association has cautioned against the spread of misleading cotton price information on digital platforms. The association has instructed market information providers to publish only verified transaction data, alleging that inaccurate pricing reports are distorting market sentiment and benefiting select traders, as reported by Dawn.
