BY : Mohammed Arifeen.
arifeenmohammed@gmail.com
During the fiscal year, textile mills imported around 4.5 million bales of cotton and yarn equivalent to 1.5m bales,
despite domestic production standing at just 5.5m bales —the second lowest in Pakistan’s history. The steep 18pc sales tax imposed on local cotton is seen as a major disincentive for buyers. Adding to the concern, over 100,000 bales of unsold cotton reportedly remain stockpiled at ginning factories.
Textile imports surge by record 61pc in FY25 despite modest export growth of 7.2pc Stakeholders are now calling for urgent structural reforms.
“The government must sincerely implement a ‘Cotton Revival’ programme to curb this overdependence on imports and save precious foreign exchange,” said Cotton Ginners Forum Chairman Ihsanul Haq. He also pointed out that the country spends billions of dollars annually on edible oil imports, partly due to the decline in cottonseed production.
Mr Haq urged the federal and provincial governments to enforce crop zoning laws and impose a ban on sugarcane cultivation and the construction of sugar mills in designated cotton-growing regions. “This would not only stabilize cotton production but also contribute to macroeconomic stability,” he argued.
While the federal government’s recent decision to withdraw sales tax exemptions on imported cotton and yarn may support partial recovery of the local industry, Mr Haq emphasized that further steps are essential. “The government should eliminate the over 86pc sales tax currently levied on the ginning sector to help revive over 1,000 closed ginning factories and about 1,250 dormant oil mills,” he said.
Such measures, he added, would stimulate domestic demand, strengthen cotton pricing, improve farmers’ income per acre, and ultimately contribute to national economic growth.
PAKISTAN’S cotton economy is in a crisis. Production has fallen from a peak of 14m bales 10 years ago to 5.5m bales during the last crop cycle, increasing the reliance on imports to meet the textile industry’s demand and, in the process, further straining Pakistan’s meager foreign exchange reserves.
There are multiple reasons for the cotton crop’s decline: climate change, poor quality seeds, higher input costs,
invasion of traditional cotton areas by the more profitable sugarcane, price volatility, etc.
Guided by the success seen with hybrid rice and maize in the country, several private firms have lately renewed efforts to introduce hybrid cotton to obtain higher yields at much lower costs. Nearly 150 acres of land in Punjab and Sindh are reported to have been planted with hybrid cotton, following the lifting of a ban on the import of hybrid seed imports a few months back. Some cotton sector stakeholders, including the agriculture scientist community, are skeptical of the success of hybrid technology. Their doubts stem more from past failed attempts to introduce this than the results of present trials, which will not be known before the start of the harvest.
There is no doubt that most hybrid cotton trials, conducted both in the public and private sector, failed to produce the desired results in the past. However, this failure was due primarily to the incompatibility of the hybrid varieties cultivated here under local climate conditions. Also, seed companies do not expect hybrid cotton production to fully match the success seen with hybrid rice and maize. Yet the new hybrid varieties being tried this year are expected to yield a significantly higher output than the local but weaker short- fibre varieties. While past failures must guide future efforts, they should not impede renewed efforts to revive the nation’s cotton economy.
Rather than oppose the push for hybrid cotton, our agriculture scientists must accept their failure to develop high- yield cotton varieties, which is a major factor responsible for driving farmers to other crops. Pakistan’s dependence on cotton-based exports is no secret. We have seen textile export margins being squeezed in recent years due to the increased dependence on the fibre’s import because of its falling domestic output. It is time that the efforts to introduce new high-yield, quality seed varieties — whether or not hybrid — is fully supported.
Cotton woes hurt textile exports. Rising imports, US trade deal tensions hit sector despite monthly growth. The textile exports, however, posted a strong month-on-month (MoM) recovery in May 2025, surging by 25% compared to April 2025,
driven by improved shipments of cotton yarn, value-added textile products, and made-up articles such as art silk and other specialty textiles. According to a report by Taurus Securities, total textile exports during May 2025 reached $1.53 billion.
Basic textile exports showed a noticeable fall on a yearly basis, totalling $181 million — a decline of 24% YoY. The
slump mainly stemmed from reduced exports of raw cotton products such as yarn and cotton cloth. In contrast, value- added exports demonstrated resilience, posting a marginal 2% YoY increase to $1.2 billion, while other textile exports rose to $177 million.
Cotton imports during the first eleven months of FY25 reached $1.18 billion, showing a substantial increase of 2.2 times compared to $370 million in the same period last year. The surge was triggered by a sharp 34% YoY decline in domestic cotton arrivals due to poor crop output.
Despite this, local cotton prices remained relatively stable in May 2025 at Rs16, 700 per maund, indicating that the market absorbed the supply shortfall without significant price volatility.
Looking ahead, the outlook for cotton production in FY26 is optimistic. Analysts expect an increase in cultivation areas and average yields, aided by early sowing activities in Punjab. This anticipated rise in domestic cotton availability could reduce dependence on costly imports and restore balance to the local supply chain.
The government's recent move to impose an 18% sales tax on imported cotton yarn under the FY26 budget is intended to bolster local yarn manufacturers. However, other critical raw materials like cotton remain exempt from sales tax and GST when supplied locally — a policy inconsistency that continues to squeeze domestic producers and distort market competitiveness.
The ongoing US-Pakistan trade negotiations are seen as a double-edged sword for the textile industry. While Pakistan has agreed to increase imports of US cotton to secure greater access to American markets for its finished textile products, this commitment may lead to added stress on local cotton growers and spinners by intensifying import reliance.
The textile sector's mixed performance in May highlights the competing forces shaping Pakistan's largest export industry:
strong global demand for value-added products versus domestic supply constraints in raw cotton. Taurus Securities suggested that a recovery in local cotton production, supportive policy adjustments, and successful trade talks with the US will be critical to sustaining export growth and preserving industry competitiveness in FY26.
