Cotton ginning units begin shutting down as prices crash after tax relief delay

Several cotton ginning factories in Tando Adam and other cotton-producing areas have started shutting down only a month after beginning operations, as the sector faces falling prices, heavy taxation and weaker crop quality, Dawn reported. 

Industry representatives say the shutdowns have followed the federal government’s decision not to reduce the 18% sales tax on the cotton ginning sector in the recent federal budget.

Representatives of the All Pakistan Textile Mills Association (Aptma) and cotton ginners had met senior ministry officials before the budget to seek relief from the tax burden.

According to industry representatives, they were later assured by federal ministers and senior bureaucrats that the 18% sales tax on cottonseed and oil cake would be abolished, while the tax on raw cotton would be reduced. However, despite 30 last-minute amendments to the finance bill, no relief was provided to the sector.

The decision has affected cotton prices across major markets. The Karachi Cotton Association’s spot rate has fallen by Rs4,000 to Rs17,500 per maund.

In Punjab, cotton prices have dropped by Rs5,000 to Rs17,800 per maund, while prices in Sindh have declined by Rs4,000 to Rs17,500 per maund.

Prices of related products have also fallen. Cottonseed, or phutti, has dropped from Rs4,800 to Rs3,400 per maund, while oil cake has fallen from Rs5,200 to Rs3,500 per maund.

Hareesh Kumar, President of the Tando Adam Cotton Ginners Association, said in a video statement that taxation, extreme heatwaves and reduced lint yield had affected the quality and commercial viability of cotton processing.

He said financial losses were forcing ginning factories to close, adding that the shutdowns could spread to Sanghar and other cotton-producing districts in Sindh.