Cotton prices plunge sharply due to failure to reduce sales tax in the cotton ginning sector

Despite assurances from the Finance Minister, the relevant Senate Standing Committee and other relevant authorities, the failure to reduce sales tax for the cotton ginning sector in the federal budget has led to anxiety among the entire cotton sector and farmers. There is a trend of extraordinary decline in cotton and cottonseed prices, while fears of more textile mills and ginning factories becoming inactive have arisen.

Chairman Cotton Ginners Forum Ehsan-ul-Haq said that even before the federal budget, representatives of APTMA and Cotton Ginners had presented demands for a desired reduction in the 86% sales tax imposed on the cotton ginning sector in negotiations with the officials of the relevant ministries, but due to the lack of relief in the federal budget, federal ministers and other relevant authorities assured the representatives of PCGA that the 18% sales tax imposed on cotton seed and oil cake would be abolished and the 18% sales tax imposed on cotton would be reduced.

He said that 30 different amendments were made after the budget but no relief was given to the cotton sector due to which a huge decline in cotton and cottonseed prices is being seen across the country. After the budget, the spot price of cotton per maund of Karachi Cotton Association has decreased by Rs 3,500 to Rs 18,000, the price of cotton in Punjab has decreased by Rs 5,000 to Rs 17,800, while in Sindh it has decreased by Rs 4,200 to Rs 17,300, similarly, the price of cottonseed per maund has decreased from Rs 4,800 to Rs 3,400 and the price of oilcake per maund has decreased from Rs 5,200 to Rs 3,500.

He urged the federal government to take urgent practical steps to revive cotton in the country so that billions of dollars worth of valuable foreign exchange can be earned on the import of cotton and edible oil. The lack of sales tax relief for the cotton sector in the federal budget has raised concerns about the inactivity of more textile mills and ginning factories, while undocumented cotton business will also increase at a record rate.

Chairman Cotton Ginners Forum Ehsan-ul-Haq said that due to the non-release of accurate data on Pakistan’s gross national cotton production, concerns are being expressed at the global level about the continuous record decline in Pakistani cotton production.

He said that for the cotton year 2025-26, the PCGA had released figures of a total national production of 5.5 million bales, while according to reliable information, this year the production was around 7 million bales, which can be a good indication of the volume of undocumented business in Pakistan due to heavy sales tax.