By Staff Reporter
KARACHI: Several cotton ginning factories in Sindh province have shut down within a month of starting operations, industry officials told Dawn newspaper, after the federal government failed to reduce an 18% sales tax on the sector in its latest budget, deepening a price collapse that is rattling farmers and millers across Pakistan.
The closures in Tando Adam and other towns in Sindh’s cotton belt mark what industry representatives describe as the first such shutdowns of newly operational ginning units in the country’s history, underscoring the severity of the downturn facing a sector central to Pakistan’s textile exports.
Industry groups, including the All Pakistan Textile Mills Association (Aptma) and cotton ginners, had lobbied ministry officials before the budget for relief from the tax, which applies to raw cotton, cottonseed and cottonseed oil cake. Federal ministers and senior bureaucrats indicated after the budget speech that the tax on cottonseed and oil cake would be scrapped and the levy on raw cotton substantially cut, according to industry representatives. The government made roughly 30 last-minute amendments to the finance bill but did not alter the tax treatment of the ginning sector, they said.
The absence of relief triggered a sharp sell-off in cotton markets nationwide. The Karachi Cotton Association’s spot rate fell by 4,000 rupees to 17,500 rupees per maund. Cotton prices in Punjab dropped 5,000 rupees to 17,800 rupees per maund, while Sindh cotton fell 4,000 rupees to match the spot rate.
Byproducts were hit harder still. Cottonseed, known locally as phutti, fell from 4,800 rupees to 3,400 rupees per maund, while oil cake dropped from 5,200 rupees to 3,500 rupees per maund. Traders said further declines were likely.
The price collapse has coincided with extreme heat that has damaged crop quality, compounding losses for the industry. Hareesh Kumar, president of the Tando Adam Cotton Ginners Association, said in a video statement that the combination of taxation and heatwave conditions had reduced both the quality of cotton and the lint yield extracted from the seed, squeezing margins for ginners already struggling with weak prices.
The resulting losses have forced some factories to close, and industry officials said they expect the shutdowns to spread to Sanghar and other major cotton-growing districts in Sindh. That would leave farmers with fewer buyers for their crop and risks pushing more trade into undocumented channels, they said.
Market manipulation claims
Separately, the Pakistan Cotton Ginners Association (PCGA) has moved against what it says is manipulation of cotton price data circulating online. PCGA Chairman Sham Lal Manglani sent a warning letter to social media pages that publish market information, demanding they report only verified transaction rates.
The association said some pages were deliberately publishing understated prices to benefit certain buyers, damaging broader market confidence. The PCGA cited a previous episode in which district authorities in Bahawalpur filed criminal complaints against social media pages accused of circulating false cotton price data.
Ihsan-ul-Haq, chairman of the Cotton Ginners Forum, said the lack of tax relief was also undermining the accuracy of national crop data by pushing more trade underground. He said the PCGA had officially recorded 5.5 million bales of production in the 2025-26 cotton year, while actual output was closer to 7 million bales — leaving roughly 1.5 million bales unaccounted for in official figures.
The PCGA is due to publish its first official arrival and production data for the 2026-27 cotton year on July 18, tracking factory arrivals and the number of operational ginning units.
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