Daily Times

KARACHI: The Ministry of Textile remained reluctant to allow transforming the Karachi Cotton Exchange (KCE) into the Pakistan Cotton Exchange (PCE) and proposed launching of the Cotton Price Index (CPI), while the start of hedge trading has remained in the cold storage.

The matter of proposed launching of the CPI and resumption of hedge trading in Pakistan has been pending since 2010 with the government, senior members of the Karachi Cotton Association (KCA) and former chief of Pakistan Cotton Ginners Association Rana Abdul Sattar and Ghulam Rabbani said.

The KCA wanted to launch a CPI that would be an independent and unbiased indicator of lint prices in the country, they asserted.

Only India and Pakistan are among the top producing countries in the world, which have no CPI system, they maintained.

Pakistan is the only country where a cotton trading body was not allowed to make and plan programmes on its own in the region, despite the fact that Pakistan is the fourth larger cotton grower in the world.

The proposed CPI and hedge trading can be launched within 10 to 12 months along with KCA’s new cotton contracts that had already been given final touches when this demand was made for the approval to the ministry concerned.

The KCA has full and comprehensive infrastructure and adequate by-laws for CPI and hedge trading in cotton, inclusive of storage capacity of cotton.

Cotton marketing involves a tremendous business risk. It was, therefore, necessary that there should be some form of price insurance to reduce the risk of volatile fluctuations in prices.

The utility of the CPI and hedge trading in cotton has been re-affirmed by three Cotton Hedge Enquiry Committees set up by the government in 1953, 1965 and 1971, they informed.

A senior fibre analyst, Fazal Ahmad, said the CPI and hedge trading perform an economic function by providing a cover against the risk of fluctuations in price, thereby facilitating smooth flow of national and international trading in cotton.

World cotton trade is projected to increase slightly in 2017 to 6.3 million tonnes and a small reduction in cotton ending stocks is also expected in the near future.

The financial mangers and agriculture planners at the federal ministry have been responsible for this long delay. Positive and concrete steps in this direction would streamline the lint trade and even provision of better credit line to growers.