Pakistan's cotton sector plunges into crisis as tax policy triggers factory shutdowns
Lahore, July 4
Pakistan's cotton industry is facing a deepening crisis after several cotton ginning factories in Sindh reportedly suspended operations barely a month after reopening, with industry representatives blaming the federal government's taxation policy for pushing the sector toward severe financial distress, as reported by Dawn.
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.
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. 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 Pakistani Rupees (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.
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. (ANI)
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.
— ANI
Reader Comments
GST on cotton ginning at 18% is really high. Even in India, we have our share of tax issues in the textile sector, but at least there are some exemptions for small units. Pakistan needs to rethink its tax structure—pushing the entire burden onto ginners and farmers will only lead to black marketing and smuggling. The fact that prices dropped by PKR 4,000 per maund is alarming. This could push many small farmers into debt. 😔
From a business perspective, this makes no sense. Cotton is a raw material for textiles—a major export for Pakistan. Taxing it heavily just kills the industry before it can compete globally. The heatwave factor adds to the misery. I've seen similar issues in our cotton belt in the US; when weather and policy conspire against farmers, it's devastating. Pakistan needs immediate relief measures, not just promises.
"Assured relief but no action"—this is a story we know too well in India too. Politicians promise the sky but deliver nothing. The real loser here is the small farmer who has no buffer against price crashes and heatwaves. And the warning about undocumented trade? That's a direct admission that bad policy drives people to the black market. Pakistan should study how India handles cotton procurement through CCI (Cotton Corporation of India) to stabilize prices. Just saying.
The heatwave + tax combo is brutal. But I'm also struck by the mention of "misleading cotton price information on digital platforms." Fake news affecting commodity markets is a global problem now. In Australia, we've seen rumors crash wool prices. Transparent data is key—Pakistan's Cotton Ginners Association should push for real-time verified pricing like what MCX does in India. Otherwise, traders will keep manipulating sentiment.
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