IHSAN UL HAQ
February 14, 2025
Rahim Yar Khan - A surge in sales tax-free cotton and yarn imports has plunged Pakistan’s domestic cotton industry into crisis, with record import volumes threatening local farmers, ginners, and textile mills. Between July and January, Pakistan imported over 1.5 million bales of cotton* and 1.25 million bales of cotton yarn, sidelining domestic production and creating severe financial distress across the sector.
The unrestricted import of cotton and yarn—exempt from sales tax—has led to a virtual halt in domestic cotton and seed cotton (phutti) trade. Ginning factories are overflowing with unsold cotton, while traders and farmers are stuck with record-high phutti stocks.
The situation has driven several ginning factory owners toward bankruptcy, while over 40 percent of spinning mills have reportedly shut down. Experts fear a drastic reduction in cotton cultivation in the upcoming season, exacerbating the crisis.
Pakistan Faces Worst-Ever Cotton Sector Collapse
Industry insiders blame government policies for the turmoil. Senior cotton ginners told The Nation that an 18 percent sales tax on locally produced cotton and yarn—compared to a zero-tax policy on imports—has forced textile mills to completely halt domestic purchases.
Data from the All Pakistan Textile Mills Association (APTMA) reveals that between July and January 2024-25, textile mill owners imported 169 million kilograms of yarn—equivalent to approximately 1.25 million bales of cotton yarn. Meanwhile, sources confirm that during the same period, 1.5 million bales of cotton were imported from the United States and Brazil.
For the first time in history, Pakistan has emerged as the largest global buyer of American cotton, while China remains the top supplier of imported yarn. Market sources indicate that Pakistan has already signed contracts to import 3.5 million bales, with forecasts suggesting total imports could reach 5 million bales by the end of the 2024-25 cotton year, including yarn.
Pakistan’s domestic cotton production is projected at just 5.55 million bales this year50 percent below the target and 34 percent lower than last year’s yield Despite record imports, local ginners still hold 500,000 unsold cotton bales, a 31 percent increase from last year, due to a sharp decline in demand.
This oversupply, coupled with falling cotton and phutti prices, has fueled fears of a further drop in cotton cultivation. Traditionally, the Federal Committee on Agriculture (FCA) announces national cotton production targets and sowing estimates in early February, but in a surprising development, the committee has yet to meet this year. This unprecedented delay has left the industry in limbo, with no official targets set for the 2025-26 cotton season.
With the cotton sector facing one of the worst economic downturns in its history, industry leaders warn that without urgent government intervention, Pakistan’s cotton farmers and ginners may struggle to survive, further deepening the country’s economic and industrial woes.
(Source: https://www.nation.com.pk)