Indian exporters of sugar, cotton and yarn are awaiting the fine print of Pakistan’s decision on Wednesday to lift a one-and-a-half-year ban on imports from India to meet its domestic demand.

Pakistan’s newly-appointed Finance Minister Hammed Azhar told the media that Islamabad had decided to import cotton and sugar from India as the commodities imported from other countries were priced higher.

“The price of sugar in our neighbouring country is cheap,” he said, adding that cotton imports from India would be permitted from June this year.

Pakistan media also reported that the its Economic Coordination Committee had cleared import of five lakh tonnes (lt) sugar from India till June 30 this year.

No clarity on duty

Razak added that the committee’s decision will be placed before Pakistan Cabinet for approval before a notification is issued. However, there was no clarity on the Customs duty part for these imports from India.

Industry players said that the duty factor will be the key for Pakistan to get the Indian commodities at a competitive price despite the fact that New Delhi is already offering these at prices far lower than the prevailing global market rates.

All India Sugar Traders Association Chairman Praful Vithalani told BusinessLine that the Indian government has no objection to exporting sugar to the neighbouring nation and exporters are confident of shipping the five mt.

Sugar exports sop

“The Centre will provide a subsidy of ₹4,000 a tonne for export of sugar by land to Pakistan and ₹6,000 a tonne by sea,” he said.

The subsidy is part of the ₹3,500-crore assistance offered by the government for sugar exports for up to 60 lt during the current season to September. This translates into ₹6,000 a tonne.

Last season, the Centre had offered ₹6,300 crore that helped export 57 lt of sugar with each tonnes being shipped get an average subsidy of ₹9,750 a tonne.

The development to allow import by the private sector comes on the heels of a thaw in Indo-Pakistan relations with Indian Prime Minister Narendra Modi and Imran Khan desiring peace in their communication to one another.

In May last year, Pakistan lifted the ban on the import of medicines and their raw materials from India so that there was no shortage of essential drugs amid the novel Coronavirus pandemic. Sugar, cotton and yarn imports are allowed from other destinations, but they have not helped curb the price rise in these commodities.

Asked about India quoting a higher price of $410-415 a tonne for white sugar, Vithalani said the sellers and buyers would negotiate for the best terms before a deal is struck.

White sugar is currently quoted at $425.50 (₹31,150) a tonne in London, whereas domestic prices in Pakistan are ruling at Pakistani rupees 105-110 a kg or about $700 a tonne.

The decision also comes after Pakistan failed to get a good response to its two 50,000 tonnes global tender to buy sugar with sellers quoting over $500 a tonne (₹36,600).

India should not have any problem meeting Pakistan demand as it can still afford to export 10-15 lt of sugar of the 60 lt that qualify for the subsidy. So far, Indian exporters have struck deals to export 43 lt of sugar.

Cotton export prospects

On the other hand, cotton and yarn exporters prefer to await the Pakistan notification. “The cotton situation in Pakistan is bad and the Indian government has not imposed any restrictions to export (to Islamabad),” said Cotton Corporation of India Chairman-cum-Managing Director PK Agarwal.

Cotton prices in Pakistan are literally on fire as its production for the current marketing year (August 2020-July 2021) is 24 per cent lower at 60.19 lakh bales (of 170 kg). It is expected to import at least 10 lakh bales from India.

Agarwal said CCI was open to Pakistan traders bidding for its global sales tender. “It will take a couple of days before we get a clear picture,” he said. “We are the most competitive in the global cotton market and the developments over the next couple of days could even see domestic cotton prices moving up,” said Rajkot-based Anand Poppat, a trader in raw cotton, cotton wastes and yarn.

Cotton prices in New York are ruling at 79.13 cents a pound (₹45,800 for a candy of 356 kg) compared with India’s export benchmark Shankar-6 price of ₹45,000-45,200. Raw cotton or kapas is priced around ₹6,000 a quintal against the minimum support price of ₹5,515 fixed by the Centre for this season.

For the current season, the Committee on Cotton Production and Consumption (CCPC), a body comprising all stakeholders including the government, has projected the output at 371 lakh bales (of 170 kg). The CCPC has also projected cotton exports at 75 lakh bales (50 lakh bales) and a carryover stock of 97.5 lakh bales (120.95 lakh bales).

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