Import duty hike may not hamper India-Pak cotton trade

  • 18-Feb-2019
  • Import duty hike may not hamper India-Pak cotton trade

While the withdrawal of Most Favoured Nation (MFN) status by India and the 200 per cent hike on goods imported from Islamabad has put an end to the import of cement from Islamabad, ginned cotton and cotton yarn exports to the neighbouring country may remain impervious of the current turmoil. A shortage in domestic output and the favourable cotton market provided by India will keep Pakistan a key buyer of Indian cotton. 

“Cotton export is unaffected so far and we don’t expect Pakistan to pose hurdles as their cotton industry requires raw material from India. India is the most accessible and price-lucrative market for them,” Atul Ganatra, president of the Cotton Association of India, told ET. He said that Pakistan is expected to import around one-million bales of cotton from India in the current financial year. 

Traders assuage the possibility of reciprocal hike in duty by Pakistan on the purchase of cotton from India. “It will be detrimental for Pakistan as it faces a shortage in domestic output of the natural fibre and growth of its textile industry will be hampered,” Ganatra said. Exporters believe that the cotton export to Pakistan will continue even in the event of increase in duty as the consignments would be routed via ports in Dubai and Singapore. “It has happened in the past, but we don’t see the possibility of such a step by Pakistan as it will raise the cost of raw material for their local industry,” he said. 

Cotton purchase by Pakistan has grown in recent years due to the growth of the local textile industry and price advantage due to geographical proximity with India. “Consignments from India through road route are available within two weeks to manufacturing plants in Pakistan, while it may take up to twomonths if they are shipped,” a cotton exporter based in Amristar said. 

Wary of turmoil in relations between the two countries, exporters are expecting a temporary slump in flow of consignments for a few days. “ Traders are going slow and may keep a tab on the situation for a week to see if the situation escalates,” Pradip Jain, president of the Khandesh Cotton Gin/Press Association said. Most Indian textile makers feel that the cotton trade will survive the prevailing situation. The cotton yarn export to Pakistan has been unaffected. “Cotton yarn exports will remain untouched as Pakistan gets most affordable fine count cotton yarn from India,” an executive of Vardhman Group, India’s leading cotton yarn maker said. 

Meanwhile, the import of cement from Pakistan has come to abrupt end along the Wagah Attari border. “ The 200 per cent increase in import duty has put an end to cement trade as it has doubled the cost of 50 kg bag to Rs 500 now. The trade will no more be viable and it is the end of cement trade,” DK Trading, a Amritsar-based cement trader said. 

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