Pakistan’s cotton ginning industry is facing a renewed crisis as several ginning factories have begun shutting down shortly after the start of the 2026-27 cotton season, with industry stakeholders blaming the continuation of the 18% sales tax on cottonseed and oil cake under the Finance Act, 2026.
According to industry representatives, a number of cotton ginning factories in Tando Adam have already suspended operations, while more closures are feared in key cotton-producing districts, including Sanghar. Factory owners say declining cotton prices combined with higher tax costs have made business operations financially unsustainable.
The crisis follows the federal government’s decision to retain the 18% sales tax on cottonseed and oil cake despite repeated requests from the All Pakistan Textile Mills Association (APTMA) and the Pakistan Cotton Ginners Association (PCGA) for tax relief before the FY2026-27 federal budget. Industry leaders said they had expected the government to reduce the tax burden, but no such relief was announced in the Finance Act, 2026.
Market conditions have further intensified the pressure on the cotton sector. The Karachi Cotton Association’s spot rate has declined by Rs4,000 to Rs17,500 per maund, while cotton prices in Punjab have fallen to around Rs17,800 per maund.
Cottonseed prices have also dropped significantly, decreasing from Rs4,800 to Rs3,400 per maund. Similarly, oil cake prices have fallen from Rs5,200 to Rs3,500 per maund, reducing profitability for ginning factories already struggling with higher taxation.
Industry officials said recent heatwaves have further damaged cotton quality and reduced lint recovery, increasing production costs and squeezing already thin margins. They warned that continued factory closures could limit market access for cotton farmers and encourage undocumented trading outside the formal economy.
The Pakistan Cotton Ginners Association has also expressed concern over alleged market manipulation, claiming that some digital platforms are publishing unverified cotton price data that creates uncertainty in the market. The association has urged traders and stakeholders to rely only on verified transaction-based pricing information.
The cotton industry continues to face documentation challenges as well. According to the Cotton Ginners Forum, official PCGA data recorded 5.5 million cotton bales during the 2025-26 season, while actual production was estimated at nearly 7 million bales. This suggests that approximately 1.5 million bales remained outside the documented economy.
The Pakistan Cotton Ginners Association is expected to release its first cotton arrival and production report for the 2026-27 season on July 18, which will provide an early indication of crop performance and market conditions.
