Decline in Cotton Production and Market Dynamics

Cotton production in Pakistan has experienced a significant downturn, registering a 33% decrease compared to the preceding year, with Sindh province bearing the brunt of the impact, according to Sajid Mahmood, Head of Transfer of Technology at the Central Cotton Research Institute Multan. The cotton market has witnessed an overall price correction, with rates in Sindh and Punjab declining by Rs. 200 to Rs. 400 per maund. In Punjab, cotton prices fluctuated between Rs. 16,400 and Rs. 16,700 per maund.

Impact of Sales Tax and Import Trends

Experts anticipate that implementing a sales tax on imported cotton could stimulate demand for domestically grown cotton, a measure expected to benefit local farmers, as stated by Makhdoom Sohail Talat. Ahsan ul Haq, Chairman of the Ginners Forum, highlighted that cotton imports have, for the first time, outstripped local production volumes. Sources familiar with cotton import activities indicate that approximately 7.5 million bales have been contracted from international suppliers, with additional imports currently in progress.

Cotton Cess Agreement and APTMA’s Appeal

The Cotton Cess Payment Agreement is being lauded as a pivotal step towards revitalizing cotton research initiatives in Pakistan. Sajid Mahmood noted that this agreement is poised to foster innovation and development within the cotton sector. Furthermore, APTMA has urged the Finance Minister to promptly honor the commitments pertaining to the cotton sector as outlined in the budget speech.

Government’s Commitment to Revitalize Cotton Industry

Federal Minister for Maritime Affairs, Muhammad Junaid Anwar Chaudhry, during his visit to the Karachi Cotton Association (KCA), underscored the imperative to rejuvenate Pakistan’s cotton industry and tackle the challenges confronting the sector. He pledged that the government would undertake all essential steps to modernize the cotton industry.

Market Softening and Supply Disruptions

The local cotton market experienced a general softening of prices in the past week, even as trading volumes remained consistent. Major mill groups have exhibited heightened interest in local cotton; however, intermittent rainfall in various cotton-producing areas of Sindh and Punjab has hampered supply. The constrained arrival of phutti (seed cotton) has led to several ginning factories operating at reduced capacity, with some producing only one lot every two days. Anticipated rainfall has made many ginners wary of purchasing phutti, further straining supply chains.

Export Facilitation Scheme and Import Volumes

Finance Minister Muhammad Aurangzeb has declared the cessation of the Export Facilitation Scheme (EFS), though an official notification is still awaited. Cotton imports have surged significantly this year relative to local production. Import agents estimate that approximately 6.5 million bales of cotton (each weighing 155 kg) were imported in the previous year (2024-25). For the new year (2025-26), contracts for approximately 1 million bales have already been secured, bringing the total to roughly 7.5 million bales. This surge has resulted in foreign exchange expenditures ranging from $2 to $2.25 billion. Significant amounts of oil, yarn, and fabric have also been imported.

Regional Cotton and Phutti Prices
  • In Sindh, cotton prices range from Rs 16,100 to Rs 16,300 per maund, while phutti is priced between Rs 6,700 and Rs 6,900 per 40 kg.
  • In Punjab, cotton rates fluctuate between Rs 16,400 and Rs 16,700 per maund, with phutti priced at Rs 6,800 to Rs 7,400 per 40 kg.
  • In Balochistan, cotton is priced between Rs 16,100 and Rs 16,300 per maund, and phutti ranges from Rs 6,900 to Rs 7,200 per 40 kg.
Spot Rate and International Market

The Spot Rate Committee of the Karachi Cotton Association (KCA) maintained the spot rate at Rs 16,300 per maund.

Karachi Cotton Brokers Forum Chairman Naseem Usman indicated that international cotton prices have remained stable, with New York cotton trading between 66 and 69 cents per pound. According to the USDA’s weekly export and sales report, 5,500 bales were sold for the 2024-25 season. Vietnam purchased 7,060 bales, including 500 bales switched from South Korea, Peru bought 5,900 bales, while Bangladesh acquired 1,200 bales. For the 2025-26 season, sales reached 73,000 bales, with Honduras leading purchases at 22,800 bales, followed by Nicaragua with 13,200 bales, and Pakistan securing the third position with 8,900 bales.

PCGA Report: Declining Cotton Arrivals

The current cotton production scenario in Pakistan is increasingly concerning. As of July 15, 2025, a total of 297,751 bales have reached ginning factories across the country, compared to 442,041 bales during the same period last year. This signifies a decline of over 32%, posing serious issues for the agricultural economy and the textile sector, according to the latest report by the Pakistan Cotton Ginners Association (PCGA).

Regional Performance Disparities

Punjab has demonstrated relatively stronger performance, reporting 145,101 bales—nearly a 27% increase compared to last year. Key contributions were made by Vehari (33,950), Khanewal (28,825), Dera Ghazi Khan (19,397), and Rajanpur (9,200). Multan (3,700), Faisalabad (3,037), and Layyah (3,970) also reported moderate figures. However, Rahim Yar Khan reported only 15 bales—a decline of over 99% compared to last year.

In contrast, Sindh’s performance has been unfavorable, with only 152,650 bales received so far this season, compared to 327,666 bales last year—a steep decline of over 53%. Sanghar leads with 130,037 bales, but this is still less than half of last year’s volume. Mirpurkhas (5,100), Nawabshah (1,100), and Jamshoro (1,500) reported minimal arrivals, and several districts have yet to report a single bale.

Balochistan’s figures are also discouraging, with only 5,100 bales reported, compared to 11,200 bales last year—a 54% decrease.

Reasons for Sindh’s Decline and Future Prospects

While Punjab shows signs of partial recovery, the overall national supply chain is significantly impacted by Sindh’s sharp decline. Key reasons for this downturn in Sindh include acute water shortages, substandard seed quality, pest outbreaks, and adverse weather conditions.

Amidst this crisis, the recent Memorandum of Understanding (MoU) between the Pakistan Central Cotton Committee (PCCC) and the All Pakistan Textile Mills Association (APTMA), facilitated by the Ministry of National Food Security & Research, offers a glimmer of hope. Textile mills have agreed to resume payment of the long-pending cotton cess, which could enable the revival of stalled cotton research.

If implemented transparently, this MoU could significantly restore research capacity and stabilize cotton production.

Record Cotton and Yarn Imports

Pakistan has witnessed a historic surge in cotton and cotton yarn imports during FY25, with import volumes surpassing total domestic production for the first time, a development attributed to policy distortions and adverse weather conditions, raising concerns among industry stakeholders.

Textile Export Growth vs. Import Surge

While textile exports posted a modest growth of 7.22pc, reaching $17.88bn, imports of textile-related products jumped to $4.24bn, reflecting a record increase of 61pc compared to the previous fiscal year, according to data from the Pakistan Bureau of Statistics.

Industry sources attribute this import spike to factors such as duty- and sales tax-free imports of cotton and yarn, high taxation on the domestic ginning industry, neglect of crop zoning regulations, and unfavorable climatic conditions that severely hampered local output.

Ginners Forum on Import Surge and Policy Distortions

Chairman of the Cotton Ginners Forum, Ihsanul Haq, stated that Pakistan’s cotton and cotton yarn imports have surged dramatically in the fiscal year 2024-25 due to record-low domestic production. Over the past few years, the textile industry has relied on imports due to tax-free unlimited cotton and yarn imports, excessive taxes on local cotton ginning, non-implementation of crop zoning laws, and adverse weather conditions.

This year, textile mills imported approximately 4.5 million bales of cotton and an equivalent of 1.5 million bales of cotton yarn from abroad. Pakistan’s total cotton production hit a historic low of only 5.5 million bales, yet over 100,000 bales of ginned cotton remain unsold, largely due to the 18% sales tax imposed on local cotton.

Haq urged the government to enforce crop zoning laws, banning sugarcane cultivation and sugar mill operations in declared cotton zones to revive cotton farming and save foreign exchange.

Impact of Tax Policies on Textile Sector

In FY 2024-25, Pakistan’s textile exports reached $17.88 billion, a 7.22% increase from the previous year. Textile imports soared to $4.24 billion—a 61% surge, according to the Pakistan Bureau of Statistics.

The recent federal budget withdrawal of sales tax exemptions on cotton and yarn imports may provide some relief to the domestic cotton industry. However, Haq stressed that the government must also revoke the over 86% sales tax on ginning factories to revive the sector. With over 1,000 ginning factories and around 1,250 non-operational oil mills, industry recovery could boost cotton demand, improve farmer incomes, and strengthen the economy.

Additionally, imposing sales tax on imported cotton is expected to increase demand for locally produced cotton, supporting domestic growers.

APTMA’s Call for Policy Implementation

The All Pakistan Textile Mills Association (APTMA) has urged Federal Finance Minister Aurangzeb Khan to implement the commitments made during the budget speech, emphasizing the need to impose an 18% sales tax on imports of cotton fiber, all types of yarn, and grey fabric while keeping these items under the Export Facilitation Scheme (EFS).

In a letter dated July 18, 2025, APTMA Chairman Kamran Arshad reminded the finance minister that the association’s original demand was to completely exclude these raw material imports from the EFS to protect the local industry. The government pledged to ensure tax parity between local and imported supplies for exports during the budget announcement.

APTMA is now urging the government to honour this promise to address challenges faced by the domestic industry and boost exports. Over a month has passed since the budget speech, and nearly three weeks have elapsed since the budget’s approval.

Minister’s Visit to Karachi Cotton Association

Federal Minister for Maritime Affairs Muhammad Junaid Anwar Chaudhry visited the Karachi Cotton Association (KCA) on Thursday, accompanied by Gwadar Port Authority (GPA) Chairman Noorul Haq Baloch.

Chairman KCA Khwaja Zubair, board members, senior brokers, and stakeholders were present at the meeting.

An in-depth discussion was held on key challenges facing the cotton industry, such as poor seed quality, farmer difficulties, and the decline in national cotton production. Participants shared insights and proposed strategies for industry revival and sustainability.

Minister Junaid Anwar Chaudhry emphasized the need for coordinated efforts between the public and private sectors, reiterating cotton’s role as a backbone of Pakistan’s economy.

He encouraged stakeholders to collaborate with the government for the cotton sector’s modernization, assuring them of his support in industry improvement and farmer welfare.