KARACHI: The cotton sector in Pakistan is grappling with a worsening crisis marked by volatile trends, declining stock market activity, and restricted business operations. The Export Facilitation Scheme (EFS) issue has further intensified, compounding challenges for stakeholders.
Despite Prime Minister’s directives to ensure a “level playing field,” industry leaders from the Pakistan Cotton Groomers Association (PCGA) and the All Pakistan Textile Mills Association (APTMA) report that 120 spinning mills and 800 ginning factories have shuttered nationwide, with government negotiations failing to yield solutions.
Cotton farmers warn that current EFS policies threaten their livelihoods, demanding immediate intervention. Experts emphasize the urgent need for a comprehensive national policy to revive cotton cultivation and stabilize the sector.
Head Transfer of Technology Central Cotton Research Institute Multan Sajid Mahmood stressed, “Policy is the key to development,” underscoring that revitalization remains impossible without structural reforms. The government’s inaction and widespread industrial shutdowns have not only strained the economy but also deepened unemployment, sparking calls for unified action.
Amid escalating tensions, stakeholders across the industry, including farmers, mill owners, and analysts, are urging authorities to implement concrete measures to address the crisis. The situation underscores a pressing demand for cohesive strategies to rescue Pakistan’s cotton sector from collapse.
The local cotton market showed mixed trends during the past week, although spot rates were reduced. Business remained relatively better in the last two days. Cotton deals were finalized between Rs 15,500 to Rs 17,500 per maund, depending on quality and payment conditions. Throughout the week, discussions continued regarding the Export Facilitation Scheme (EFS), as an important meeting on EFS was held on April 11, attended by Federal Minister Ahsan Iqbal, Commerce Minister Jam Kamal, cotton ginners, and APTMA officials. In this crucial meeting, it was stated that the EFS had been abolished in principle, but Prime Minister Shehbaz Sharif would confirm this decision. Various rumours circulated throughout the week.
On Thursday, in a statement, Prime Minister Shehbaz Sharif said that increasing national revenue through exports is among the government’s top priorities. He emphasized ensuring a level playing field for local industries and consulting with industrial and business organizations for the upcoming budget, incorporating their suggestions. The Prime Minister made these remarks while chairing a review meeting on the Export Facilitation Scheme (EFS). During the meeting, interim recommendations from the committee formed to enhance the effectiveness of EFS and ensure its benefits for the export sector were presented.
The Prime Minister directed that further consultations with sector experts be ensured regarding the committee’s recommendations to make the scheme more effective in facilitating the import of raw materials and machinery for export industries. He instructed the committee to finalize its interim recommendations after further consultations and submit the report soon.
However, on the other hand, the chairmen of PCGA and APTMA expressed their grievances during a press conference, stating that the government is delaying its decision regarding EFS. In a concerning statement, APTMA Chairman Mian Kamran Arshad said that 120 spinning mills and 800 cotton factories have shut down in Pakistan. They have been negotiating with the government on EFS for a year, but these discussions have proven fruitless. In the presence of EFS, cotton farmers in Pakistan see a bleak future ahead.
Additionally, there are mixed opinions circulating regarding the sowing of cotton for the new season, with complaints of severe water shortages being raised.
Another piece of news is also circulating that the Cotton Council International (USA) has sounded the alarm over the use of Chinese cotton from Xinjiang in Pakistan. Discussions are also taking place about what potential impacts this may have.
In the provinces of Sindh and Punjab, the price per maund ranged between Rs 15,500 to Rs 17,500 based on quality and payment conditions. The spot rate committee of the Karachi Cotton Association reduced the spot rate by 300 rupees per maund, closing it at 16,500 rupees.
Naseem Usman, Chairman of the Karachi Cotton Brokers Forum, stated that the international cotton market showed mixed trends. The futures price of New York cotton increased, remaining between 66 to 67 cents per pound.
According to the USDA’s weekly export and sales report, sales for 2024-25 reached 115,100 bales. Vietnam remained at the top by purchasing 64,800 bales, followed by Turkey with 19,100 bales, and Thailand in third place with 7,500 bales.
For the year 2025-26, 18,900 bales were sold. Honduras led with 6,600 bales, Vietnam followed with 6,600 bales, and El Salvador secured the third position with 4,300 bales.
The All Pakistan Textile Mills Association (APTMA) has demanded an immediate ban on the import of yarn and cloth under the Export Finance Scheme (EFS), warning of a deepening crisis in the domestic textile sector.
Addressing at a press conference in Islamabad, APTMA Chairman Kamran Arshad – accompanied by Dr Jassu Mal, Chairman of the Pakistan Cotton Ginners Association (PCGA), and former PCGA chairman Sohail Harral — said that despite year-long negotiations with the Federal Board of Revenue (FBR) and the Ministry of Finance, the industry’s concerns have gone unaddressed.
“The EFS was introduced in 2021 and performed well for the first 18 months, helping textile exports reach $19.5 billion. But for the past three years, exports have stagnated,” Arshad said.
Under the FY25 Finance Bill, the government removed the sales tax exemption on locally sourced inputs under EFS, while keeping imported raw materials exempt from both sales tax and customs duties. This, APTMA argued, has created an uneven playing field.
“Imports of textile raw materials have surged. As a result, 120 textile mills and 1,200 ginning units have shut down,” Arshad stated. “We’ve made consistent efforts to revive the EFS framework but have not been successful.”
While the 18 percent sales tax on local inputs is technically refundable, the APTMA maintains that the refund process is plagued by delays, incomplete payments, and high compliance costs—particularly harming small and medium-sized enterprises (SMEs).
“Only 60–70 percent of refunds are processed, and the rest remain stuck in manual systems for years,” said Arshad.
This disparity has prompted exporters to shift toward imported inputs, undercutting local suppliers. According to the APTMA, textile exports increased by $1.5 billion in FY25, but imports of cotton, yarn, and greige cloth rose by a larger margin of $1.6 billion — widening the trade gap.
The association highlighted that over 100 spinning units — representing 40 percent of total capacity — have shut down, while the remaining units are operating at below 50 per cent capacity and are on the verge of closure. The crisis is expected to spill into downstream sectors soon.
SMEs, which lack the infrastructure to import materials directly, are hit hardest as they pay taxes at every stage of production, unlike integrated units that benefit from structural efficiencies.
The APTMA also pointed to a growing crisis in cotton farming. In the absence of a support price and amid falling demand from local spinners, many farmers are switching to water-intensive alternatives. Pakistan’s cotton production has fallen to a historic low of five million bales and is expected to decline further.
“The cotton economy supports $2–3 billion in rural incomes, especially for women in cotton picking,” Arshad said. “Thousands of livelihoods are at risk. Policy adjustments could boost net foreign exchange earnings by $1.5–2 billion.”
The APTMA also warned that the United States has indicated it may impose a 29 per cent tariff on all Pakistani exports unless the country addresses its trade surplus with Washington. Cotton remains Pakistan’s largest import from the US, which has shown willingness to export up to 1.5 million bales to Pakistan — but only if the local spinning industry can absorb it.
Although interest rates have declined from 22 percent to 12 percent and electricity tariffs have been reduced by Rs7.69 per unit, the APTMA argued that these gains are being neutralised by policy setbacks related to the EFS.
“If the domestic spinning sector isn’t revived, the additional US cotton won’t be importable,” Arshad said, stressing the urgency of reinstating sales tax exemptions on local raw materials and banning all yarn and cloth imports under EFS.
The longstanding issues facing Pakistan’s key cash crop, cotton, can only be resolved through a comprehensive, long-term, and farmer-friendly policy.
Speaking to renowned cotton analyst Naseem Usman, Sajid Mahmood, Head of the Technology Transfer Department at the Central Cotton Research Institute (CCRI) Multan, said, “Policy is the key to the lock, and until we have the key, the lock will not open.”
He emphasized that cotton is a crucial source of livelihood for millions of farmers and a backbone of the country’s textile industry and foreign exchange earnings. However, he regretted that cotton has been in decline for several years. The causes of this decline include water shortages, climate change, the cultivation of unapproved seeds, lack of research funding, and uncertainty in the market. Yet, the most significant gap remains the absence of a clear and coordinated cotton policy.
Sajid Mahmood explained that crops like sugarcane, rice, and maize are becoming more attractive compared to cotton because they benefit from institutional support, guaranteed prices, and assured buyers. On the other hand, cotton farmers lack access to quality seeds, modern scientific guidance adapted to climate shifts, and adequate market support—resulting in a continuous decline in the area under cotton cultivation each year.
Copyright Business Recorder, 2025
