Abolition of sales tax has caused Pakistan’s cotton imports to rise sharply in the 2024-25 Cotton Year. The rise is also impacting local cotton and seed cotton (phutti) prices, causing grave concerns amongst farmers and cotton ginners

Ehsan-ul-Haq, Chairman, Cotton Ginners Forum, explains, the 2024-25 federal Budget exempted imported cotton and yarn—specifically for the export-driven textile sector—from the 18 per cent sales tax. However, cotton purchases made within the country remained subject to this tax.

Additionally, the excessive cultivation of sugarcane in traditional cotton-growing areas led to a degrading of the quality of domestically produced cotton. He adds, this is compelling textile mills to increase their reliance on imports, with projections of contracts for nearly 6 million bales of imported cotton being secured during this cotton year. Pakistan has already finalised contracts for around 3 million bales, say reports.

So far, Pakistan has imported over 1.3 million bales of cotton, causing local cotton prices to drop significantly. Over the past week, cotton prices have fallen by PKR 500 per maund, with prices now at PKR 17,500 per maund in Punjab and PKR 17,300 per maund in Sindh. Seed cotton prices have also declined sharply, leading to an accumulation of cotton stocks at ginning factories and a substantial rise in seed cotton stocks in the market.

Its record increase in cotton imports has made Pakistan the largest buyer of US cotton for the first time. The country is expected to import between 4.5 to 5 million bales from the US during the current season, while additional imports are coming from Brazil, Argentina, Tanzania, and Afghanistan.