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  • The domestic market: a micro view

    Chapter 6 - Market profiles - Pakistan 

     
     

    The players in the market

    The Pakistan cotton market consists of:

    • Growers;
    • Brokerage houses;
    • Ginners;
    • Karachi Cotton Association (K.C.A.), trading house;
    • Trading Corporation of Pakistan (public sector organization), exporter of surplus raw cotton;
    • Agents;
    • Spinning mills and composite units.

    Selling of seed cotton and lint is done through agents and brokerage houses. Customer ginning is done for progressive growers to maintain fibre quality and purity of seed for growing purposes. The Karachi Cotton Association is the only trading house registered with the Government. Its members have to deal with each other through licensed brokers.

    Free trading in cotton export and import has been allowed by the Government since 1994/95. Sometimes, Government intervention is necessary to protect the interests of growers. This is done through the Trading Corporation of Pakistan, which performs a price stabilization role by purchasing lint cotton at a price level on parity with seed cotton (guaranteed by the Government) when the seed cotton price falls below the support level. Such cotton is sold in the local market or is exported through tenders. The corporation is also entrusted with a developmental role.

    Cotton procurement practices

    Importing of cotton is mostly through international merchants who have their representative agents in Pakistan. These agents are responsible for contract performance, which includes price negotiations and finalization of deals.

    Specific cotton contracts used in the market

    No specific contracts are used for commercial transactions. Local buying and selling is done on verbal contracts. However, written contracts are prevalent in the Trading Corporation of Pakistan, a public sector organization. For export purposes, until 1992/93 Liverpool Cotton Association (LCA, now ICA) rules were applicable for arbitration in case of any dispute between the buyer and the exporter. In 1992/93 there was a production shortfall in Pakistan and the Government suspended shipments. But ICA gave awards in favour of buyers. The Trading Corporation of Pakistan, not getting a satisfactory response from ICA, appealed in the local court and the matter is now sub judice.

    Cotton finance and payment requirements

    Cotton purchases are financed by the commercial banks according to the buyers’ credit limits. Payments are made to the ginners through bank drafts. In some cases, a local letter of credit is opened.

    Consumer preferences for specific fibre types and blending

    Specific fibre requirements differ from mill to mill depending on production patterns, local and international demands, and textile machinery. Locally produced cotton has a staple length up to 30mm, which is used for producing up to 40s counts. For higher counts, long and extra-long staple (ELS) cotton is imported. Other fibre characteristics such as colour, micronaire, strength and grade are important factors in cotton selection. Contamination-free cotton is of highest priority. 

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    Cotton Exporter's Guide

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