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Thursday, 13 October 2016, 00:00:00
SPEECH BY THE OUTGOING CHAIRMAN, THE KCA

My Colleagues on the Executive Committee

And

Distinguished Members of the Association,



It gives me great pleasure to welcome you to the Ordinary General Meeting of the Members of the KCA. A brief is given below about Cotton Situation and activities of KCA during our tenure.



LOCAL COTTON SITUATION FOR 2015-16:



The target of cotton production in Pakistan for 2015-16 (in terms of bales of 375 lbs. each) was initially fixed at 15.49 million bales (Punjab 10.50 million bales, Sindh 4.40 million bales, Baluchistan 0.588 million bales and KPK 0.00152 million bales) from an area of 3.13 million hectares.

According to the final Report of the PCGA for the year 2015-16, the total arrivals of cotton in ginneries as on 15.04.2016 were 9.768 million bales.

According to Pakistan Bureau of Statistics, the exports of cotton during the year 2015-16 (Aug.-July) was recorded about 56,000 M.T, imports of cotton about 490,000 M.T. and Mill consumption at about 16.016 million bales as per Textile Commissioner’s Organization.



COTTON SITUATION FOR 2016-17: The target of cotton production for 2016-17 was fixed by the Government at 14.101 million bales (Punjab 9.50 million bales, Sindh 4.50 million bales, Baluchistan 0.098 million bales and KPK 0.003 million bales). However, the Cotton Crop Assessment Committee (CCAC) in their meeting held on 06.09.2016 slashed cotton production estimates by 20 percent i.e. to 11.27 million bales against the initial estimates of 14.1 million bales for the cotton season 2016-17. Province Expected Production Million Bales (170 kg) Punjab 7.500 Sindh 3.733 Baluchistan 0.001 Khyber Pakhtunkhwa 0.00295 Pakistan 11.272



INTERNATIONAL COTTON SITUATION (2015 -16 as on August 2016 ):



According to the USDA, the world cotton production in 2015-16 had considerably declined to 96.926 million bales (480 lbs. each) from 119.099 million bales in 2014-15 due to decline in production in Brazil, China, India, Pakistan, Turkey and USA. Production declined in Brazil to 6.10 million bales from 7.00 million bales, China to 22.00 million bales from 30.00 million bales, India to 26.40 million bales from 29.50 million bales, Pakistan to 7.00 million bales from 10.60 million bales, Turkey to 2.650 million bales from 3.20 million bales and USA to 12.888 million bales from 16.319 million bales. The world cotton consumption, however, slightly increased to 110.19 million bales from 110.13 million bales in 2015-16. The ending global stocks for 2015-16 also declined to 99.175 million bales from 112.407 million bales in 2014-15 i.e. 13.232 million bales lesser than the previous year.



INTERNATIONAL AND NATIONAL PRICE FLUCTUATION: The New York Cotton Futures latest delivery month recorded as US˘ 65.36 per lb. at the beginning of the season on 03.08.2015, increased to the highest level of US˘ 74.16 per lb. on 29.07.2016. However during the month of August 2016, the New York Cotton Futures latest delivery month recorded as US˘ 65.32 per lb. as on 31.08.2016. During the year of 2015-16, the farmers got fair price for their produce as the Ex-Gin price of cotton recorded between Rs.4,500/- to Rs. 6,200/- on an average basis.



GUESTS AND OTHER ACHIEVEMENTS:



Mr. Dhiren N. Sheth, President, Cotton Association of India (CAI) visited the KCA on 06.01.2016 and held a meeting with the Executive Committee and senior members of the Cotton Trade and discussed matters of mutual interest, especially matter relating to strengthen relationship between two old trade Associations of the sub-continent. Chairman informed the participants of the meeting that India and Pakistan were the major players in Cotton Market of the Sub-Continent. He also informed that Pakistan and India were expecting further expansion in their spinning sectors as a very large percentage of the global cotton economy depends upon Pakistan, India and China to meet their requirements of cotton.



In response to the Address of Welcome presented by Chairman, the KCA, Mr. Dhiren N. Sheth, Chairman, CAI thanked Chairman, members of the Executive Committee and prominent members of the KCA for extending a warm welcome to him on his visit to the KCA. He made a detailed presentation on Development of Indian Cotton and highlighted the role and contribution of other stakeholders in promoting Agriculture, most particularly, cotton and textile sectors of India.

He also briefed the members of the KCA about the progress made by CAI towards the setting-up of Cotton Museum. In this regard he gave detailed briefing on the Cotton Museum being set up by CAI and explained different aspects/features of the antiques to be displayed at Cotton Museum.



2. Mr. Jean-Marc Derossis, President and Mr. Kai Hughes, Managing Director of International Cotton Association visited the KCA and held a meeting with the Executive Committee and senior members of the Cotton Trade to discuss matters relating to safe business practices, trade and arbitration etc.

Khawaja Tahir Mahmood, Chairman, the KCA presented the address of welcome and thanked the worthy President and Managing Director of the ICA for visiting the KCA despite their busy schedule in Karachi and highlighted the role and function of the KCA in regulating cotton marketing and trading. He further explained that now a days, the majority of the world's cotton was traded under ICA Bylaws & Rules. The rules had changed with time, but their aims were remained the same that was to create a safe trading environment. Mr. Jean-Marc Derossis, President, the ICA briefed about the activities and initiatives taken by them to promote and explore avenues for strengthening relationship between the two Associations in trade and arbitration in the world. Mr. Kai Hughes, Managing Director, ICA also briefed about purpose of visiting Pakistan, development taking place in the global world, the cotton trading, arbitration and membership of the ICA etc.

Chairman, KCA specially thanked Mr. Derek Tanner, Ex-President, ICA for imparting trainings and conducting under mentioned workshop. The KCA hosted a Dinner in honor of ICA delegation in Karachi. The Executive Committee and senior members of the trade also joined the occasion.





3. Mr. Derek Tanner, Ex-President, the ICA conducted Workshop for two days on 26.01.2016 and 27.01.2016 at Marriott Hotel, Karachi on “Avoidance and Settlement of Cotton Disputes”. More than 50 delegates participated in the said Workshop. These workshops were unique in the history of Pakistan. The ICA leadership with the collaboration of the KCA had arranged successfully these workshops in Karachi.



4. Ms. Rubina Wasti, Senior Joint Secretary, Ministry of Textile Industry, Government of Pakistan, Islamabad visited the KCA on 29-03-2016 and held a meeting with the Executive Committee & Senior Members of the Cotton Trade and discussed matters relating to Cotton/Textile sector. Highlighting the role of the KCA in marketing of Cotton, Chairman informed that the KCA has an inherent and transparent mechanism of fixation of daily Spot Rates which reduces speculative trade and credit risk for the borrowers. He also informed that it safeguards the interest of the financial institutions while advancing funds to ginners. He apprised that it is a unique Association in the sense that it represents all segments of the cotton trade and well reputed Organization both nationally and internationally. Chairman, KCA also informed the house, that in present scenario, our survival of Textiles Industry has been placed at stake. Unless the Government allow the textile and value added products with attractive incentives and redress the grievances of the Textile sector, it would be hardly possible for Pakistan Textile Industry to compete with its competitors.

Ms. Rubina Wasti, Senior Joint Secretary, Ministry of Textile Industry, Government of Pakistan thanked the Chairman, the KCA and Executive Committee for inviting her to visit the KCA and giving an opportunity to explain and discuss the various issues, activities and programs being carried out by the MINTEX and also assured her full cooperation and assistance in boosting the Exports of cotton and value added textile products from Pakistan.



5. Mr. Kaukab Iqbal, Chairman, Consumers Association of Pakistan visited the KCA on 26-04-2016, held a meeting with the Executive Committee, and discussed matter relating to Consumers Rights in Pakistan.

Mr. Kaukab Iqbal briefed the house in detail about the Consumers Rights in Pakistan and explained the obstacles being faced by the peoples of Pakistan in getting their rights being consumers and discussed on various aspects of implementation of related Laws in Pakistan.





6. Mr. Neil Forrester, Entomologist and B.T Cotton Expert, visited the KCA on 19-05- 2016, held a meeting with the Executive Committee and senior members of the Cotton Trade to discussed and shared his experiences relating to Pakistan Cotton. Chairman apprised that Mr. Neil Forrester is a B.T Cotton Expert. Trained as an entomologist, and had a vast experience of resistance management for synthetic insecticides and Bt cotton. He had worked with various public and private sector research organizations and had also served at the Board of Cotton Research and Development Corporation, Australia.

Mr. Neil Forrester made a comprehensive presentation on the issues of (i) Pakistan Cotton Market, (ii) Pakistan Textile Sector, (iii) Direct Benefit of better cotton, (iv) in adequate seed provisions system its problem & solution, (v) Insect pest problems and solution, (vi) Government Cess on spinners/ginners, (vii) Pink Bollworm, (viii) strike force, (ix) weeds and (x) water problem etc. to the members of the Executive Committee & Senior members of the Cotton Trade.





ONE DAY CONFERENCE ON COTTON, ORGANIZED BY THE KARACHI COTTON ASSOCIATION ON 15-03-2016 AT MARRIOTT HOTEL, KARACHI One Day Conference on Cotton was organized by the Karachi Cotton Association with the participation of Private Sector and the Government, was held on 15-03-2016 at Marriott Hotel, Karachi to determine the actual causes of cotton crop failure in 2015-16 season and evolve necessary plan of action for better cotton crop next year.

The Conference was presided-over by Chairman, the KCA and attended by Shaikh Khalid Tawab, Senior Vice-President, FPCCI, Karachi, Mr. Tariq Saud, Chairman, APTMA, Mr. Shahzad Ali Khan, Chairman, PCGA, Malik Afaq Ahmed Tiwana, CEO, Famers Associates of Pakistan, Mr. Khalid Mahmood Khokhar, President, Pakistan Kissan Ittehad, Dr. Khalid Abdullah, Cotton Commissioner, MINTEX, Dr. Mohammad Ali Talpur, Director Marketing and Economic Research, PCCC as well as prominent members of the KCA, PCGA and APTMA.

After detailed discussion, the participants listed the following as causes of cotton crop failure for 2015-16 season :-



1 Non Availability of proper certified cotton seed

2 Insufficient government advisory

3 Heavy Pest infestation mainly "Pink Bollworm"

4 Climate Change

5 Substandard pesticides

6 Low seed-cotton prices, disheartened growers

7 Untimely heavy rains

8 Timing for sowing of crop

9 Improper Crop Management

10 Sowing of Sugar cane in cotton growing areas

11 Poor Marketing system for cotton growers. Forced sale at harvest time.



The Conference also unanimously passed the following Resolutions to get better cotton crop in next cotton season as well as in subsequent cotton seasons:-



1. To ensure supply of Certified Cotton Seed to the growers by the government through local and international companies.

2. Provincial Extension departments of governments of Punjab and Sindh to be activated for optimal performance.

3. To remove tax on import and subsidy on export of Sugar as in the case of cotton.

4. To ensure enforcement of Cotton Control Act by the government in letter and spirit.

5. To declare Agriculture / Cotton Emergency by the government.

6. Eliminate / remove all taxes on Agriculture Inputs including GST.

7. Amalgamate Agricultural Research and Extension Services under the leadership of Agricultural University System and increase funding, if needed.

The Conference, with a unanimous decision, formed a Task Force. The mandate of the Task Force is to take all actions necessary for getting better cotton crop in the next year. Syed Muhammad Sameer, Vice chairman, the KCA thanked the participants of the conference.



OTHER DEVELOPMENTS: i) LEVY OF SINDH SALES TAX ON RENTING OF IMMOVABLE PROPERTY The Sindh Revenue Board, Government of Sindh has imposed Sindh Sales Tax (SST) on “Renting of immovable property services” at the rate statutory 14% and initially make effective @ 6% under tariff heading 9806.3000 w.e.f 01.07.2015. The services, taxes and charges provided or rendered to any person in relation of renting of such immovable property are also subjected to Sindh Sales Tax. The recipient of these services (tenants) probably are also made as ‘sales tax withholding agent’ by the SBR, who requires to deduct whole amount of sales tax, whether the service provider is a registered or unregistered person. The matter referred to above was taken up with the Sindh Revenue Board and Federation of Pakistan Chamber of Commerce and Industry to waive the SST on the rent of immovable property immediately as the KCA was of the view that the basic rent, land and building taxes are not subject to SST on Renting of Immovable Property Services. However, Service Charges, Lift Charges and Security Charges etc do squarely fall within the ambit of “renting of immovable property service” which are taxed at the effective rate 6%.



II) LEVY OF SINDH SALES TAX ON COTTON BROKERAGE COMMISSION Under clause 22-A as contained in definition of “Commission Agent” Section 2 of the Sindh Sales Tax on Services Act 2011 [Act], the Cotton Brokers involved in cotton brokerage business are subject to payment of 14% Sindh Sales Tax. The matter was taken up with FPCCI with the request to kindly approach the government to withdraw 14% SST as SST does not apply to "Cotton Brokers" who assist the cotton buyers and sellers in cotton transactions on a very thin margin / commission and are regulated by Federal Laws. Subsequently, the FPCCI taken up the matter with the Chairman, SRB and recommended that the request of the KCA to withdraw 14% SST on services of the Cotton Brokers be considered sympathetically.

III) LEVY OF SINDH SALES TAX ON INDENTER Under the Tariff Heading 9819.1200, as contained in Schedule II of Sindh Sales Tax on Services Act 2011, the Indenters including Cotton Indenters are made liable to payment of 14% Sindh Sales Tax.

The KCA was of the view that he levy of 14% SST does not apply to “Cotton Indenters / Indenting Houses” who earn foreign exchange from foreign suppliers / producers and are regulated by Federal Laws. The KCA was also of the view that such service by the person / indenter in Pakistan is rendered to a person outside Pakistan and consideration is also received separately from principals in foreign currency and in substance represents an export of service, the cost of which is built in the “import cost of the foreign product”. The KCA was also of the view that such Indenting commission is classified as “Exports’ and therefore it is taxed under section 154(2) of the Income Tax Ordinance 2001 where tax at the rate of 5 percent is withheld at the time of realization of proceeds on account of commission like any other exports. Therefore, subjecting the import Indenting commission earned by the Cotton Indenters to Sindh Sales Tax is resulted in overlapping taxation and hence it is unjustified.

The matter was also taken with FPCCI with the request to kindly approach the Government to withdrew 14% SST imposed on cotton indenters.





IMPORT OF HVI 1000 M1000 In order to obtain necessary permission to open L/C for import of HVI 1000 M1000 for the KCA’s Fibre Testing Laboratory, I alongwith Secretary General met the CEO of TDAP twice. The CEO, TDAP had kindly listened our case and assured to resolve the same at the earliest. Subsequently, the TDAP had granted permission to open L/C with National Bank of Pakistan.

After receiving permission to open L/C from TDAP, the KCA approached the National Bank of Pakistan, Nadir House Branch, Karachi for opening of necessary L/C for import of HVI 1000 M1000 for the KCA’s Fibre Testing Laboratory. Various queries made by the National Bank of Pakistan from time to time in the case were replied. It is hoped that necessary L/C would be established shortly.



AGREEMENT TO LEASE

The Agreement to Lease signed with the tenants were expired since a long time. In order to sign New Agreement with the Tenants, some time ago on the recommendation of the Building and Finance Committee, the Executive Committee approved a New Agreement to Lease for execution. Lately, some observations were made by some of the Tenants which were addressed by the Building and Finance Committee and approved by the Executive Committee for incorporation the same in the New Agreement to Lease. Revised Agreement to Lease incorporating the observations of the some of the Tenants was forwarded to the Legal Advisors of the KCA for vetting the same. The vetted draft of revised Agreement to Lease has been received from the Legal Advisors yesterday i.e. 26-09-2016 and the same is being placed before the E.C. for approval.

TO BRING IMPROVEMENT IN WORKING OF PCCC In order to bring improvement in the working of PCCC so as to achieve the desired results, the KCA, vide its various communications, advised the PCCC as under:-

a) We, the private sector are main contributors to the revenue of PCCC through payment of cotton cess. Thus, our role in the management of PCCC should be more than existing in the greater national interest and to take advantage of our expertise.

b) Efforts should be made by PCCC in collaboration with Provisional Governments to increase acreage under cultivation of cotton.

c) Key Performance Indicators (KPI) should be developed to assess the performance of PCCC as well as its Staff including assessing the competency of Officers / Scientists of PCCC.

d) In the high level meeting held on 26-07-2016 at Islamabad to identify the reasons of cotton crop failure during season 2015-16, Mr. Ahsan Iqbal, Federal Minister for Planning Development and Reforms, chairing the meeting decided that cotton yield of Pakistan (stated to be 560 kgs / HA) should be increased to make equivalent to yield in China (1524 Kgs/ HA during 2015-16) in the next few years. It is suggested that the PCCC should take a note of this and add this task in its top level goals to achieve the desired results in the interest of cotton economy of country.



Before closing my speech, I congratulate the new Executive Committee on their election for the year 2016-17 and hope that the new Committee would meet the day to day challenges, problems which might come during their tenure, effectively in the best interest of the Association and cotton trade.

I express my deep thanks to Khawaja M. Zubair, Senior Vice-Chairman and Syed Muhammad Sameer, Vice-Chairman, the KCA for the dedicated and devoted services rendered by him to run the affairs of the Association effectively. I also express my deep thanks to my colleagues on the Executive Committee and members of the Association for providing all assistance, co-operation and guidance during my tenure as Chairman.



I record my appreciations for the efficient, dedicated and devoted services rendered by Mr. Aftab Alam, Secretary General, Mr. Muhammad Ali, Assistant Secretary (Stat.), Mr. Hassan Haider, Account Officer, Sh. Abdul Qadir Ahmed, BA/MO and Other Officers and staff of the Association during the year under review.

I also express my thanks to the Press for extending their full co-operation in covering the activities of the Association during my tenure as Chairman, The KCA.

I thank all of you once again.



PAKISTAN PAAINDABAD



(KHAWAJA TAHIR MAHMOOD)



Chairman

The Karachi Cotton Association

Karachi. 27.09.2016


 


 

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