Lahore [Pakistan] June 18 Pakistan's cotton market has witnessed a sharp downturn over the past four trading sessions, with prices falling by as much as Rs2,500 per maund after the federal government failed to announce key relief measures for the cotton ginning and textile sectors in the Budget 2026-27, as reported by Dawn.
According to Dawn, industry representatives have urged the government to immediately revise the proposed taxation structure by reducing sales tax, income tax, and fixed electricity charges before the finance bill is approved. The Karachi Cotton Association (KCA) reduced its official spot rate by Rs2,000, bringing it down to Rs19,500 per maund.
Open market prices fell even further, touching Rs20,000 per maund in Punjab and Rs19,000 per maund in Sindh. Cotton Ginners Forum Chairman Ihsanul Haq stated that the sector is currently facing an overwhelming tax burden, with cumulative sales taxes exceeding 86 per cent. He said senior government officials had assured industry representatives before the budget that taxes on major ginning segments would be removed and broader incentives introduced.
However, those commitments were absent from the final budget proposals, triggering widespread disappointment across the sector. In addition to heavy taxation, rising electricity fixed charges have intensified financial pressures on ginners, creating severe liquidity challenges.
Haq stated that excessive taxation could push businesses toward undocumented operations, reducing government revenue instead of increasing it. The crisis has been aggravated by unfavourable weather conditions in cotton-producing regions. Industry experts fear that extreme heatwaves and irregular rainfall may significantly reduce domestic cotton output this season, as highlighted by Dawn.
International developments may further weaken local prices. Improved prospects for shipping through the Strait of Hormuz following reduced Iran-US tensions could facilitate cheaper cotton imports. Meanwhile, trade circles expect the possible arrival of 300,000 to 400,000 bales of Afghan cotton through expanded Pak-Afghan trade routes, adding fresh pressure on an already struggling domestic market, as reported by Dawn.