ICCI shows concerns over government move to intervene in cotton market

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The Islamabad Chamber of Commerce and Industry has shown concerns over the government proposal to induct Trading Corporation of Pakistan (TCP) in the cotton market for procurement of lint cotton from the ginneries at support price as this approach would be against the principles of free market economy and create more distortions in the cotton market.
Sheikh Pervez Ahmed Senior Vice President, Islamabad Chamber of Commerce and Industry said that instead of extending any benefit to the cotton growers, the intervention of TCP in the cotton market would give rise to corrupt practice, cause unnatural shortage of quality cotton, inflate prices of cotton unnecessarily and render the textile and downstream industry uncompetitive.
He said the experience of involving TCP in the procurement of cotton has already flopped as Government procured lint cotton through TCP during crop year 2014-15 which was still lying with TCP and it has now become almost impossible to sell the stock at reasonable prices.
He said cotton was Pakistan’s main foreign exchange earner and a life line for the agrarian economy as it provided vital raw material to the textile industry. Therefore, the more prudent approach would be that the government should let the market forces to determine the price level of the commodity. He was afraid that the government intervention in cotton market would negate the policy of free trading in cotton being followed successfully for the last more than a decade. It also safeguarded the interests of all the stakeholders of the cotton economy, including the growers
He said that TCP in the past had procured raw cotton from the ginneries at higher than market price, but the desired benefits were not passed on to the cotton growers. He said the better option to compensate the cotton growers in adverse circumstances would be to provide them direct subsidy by subsidizing electricity, fertilizer and pesticides in order to reduce their cost of production. Such an approach would not only ensure direct benefit to the cotton growers without any middlemen or malpractice, it would also help lessen losses to the government.
He said TCP lacked infrastructural facility to hold the cotton lint and mandating it to procure lint cotton from ginneries would be tantamount to wastage of public funds. He stressed that government should desist from any such move as could lead to further decline in cotton exports and cause closure of textile industry with incurring losses of billions of rupees to the exchequer.

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