India’s $782-million worth of cotton exports to Pakistan is likely to come to a halt, with exporters keen to divert shipment to other cotton scarce countries, following talks of withdrawal of the Most Favoured Nation (MFN) status to its neighbour.

India had granted MFN status to Pakistan in 1996 to enhance trade between the two nuclear neighbours, which Pakistan never reciprocated to India. A meeting, chaired by Prime Minister Narendra Modi, was scheduled to be held on Thursday in New Delhi to reconsider MFN status that Pakistan enjoys for around 20 years. But the meeting got postponed and is now rescheduled for next week.

According to trade sources, India exported around two million bales (1 bale = 170 kilos) of cotton to Pakistan in 2015-16, constituting over 10 per cent of overall exports of the natural fibre from India. Pakistan’s cotton imports from India jumped sharply in 2015-16 due to crop failure there.

“Pakistan is short of two million bales this year as well (October–September), which they seek from India. But, if the relations between the two countries deteriorate further, it would be difficult for India to ship cotton to Pakistan. Textiles mills in Pakistan have to import cotton from the US, which would prove to be a costly proposition,” said M B Lal, a city-based cotton exporter and a former chairman of the Cotton Corporation of India.

While cotton exports from India attract “zero” duty due to surplus availability of the natural fibre here, Pakistan gets favourable treatment under the MFN status to which Indian exporters prioritise shipment. However, with India preparing to withdraw MFN status to Pakistan, Indian cotton exporters are readying to divert their cotton shipment to other countries, including Bangladesh, China, Taiwan, etc.

“We would like India to withdraw all trade ties with Pakistan. We have decided to stop cotton exports to Pakistan. A lot of alternative options are available for India for cotton exports,” said Arun Sakseria, a city–based cotton exporter.

Going a step further, Indian cotton traders have decided not to participate in the 75th plenary meeting of International Cotton Advisory Committee (ICAC), scheduled to be held from October 30–November 4 in Islamabad.

Pakistan got the opportunity after 55 years to host this annual event for the entire value chain in cotton trade, including production, export, import and consumption. Earlier, Pakistan hosted ICAC plenary session in 1951.

“We are not going to participate in this session, following the decision of the government to boycott Saarc (South Asian Association of Regional Co-operation) Summit in Pakistan,” said a senior trade official scheduled to participate in this event.

Of the 400 delegates expected from 48 countries to participate in the ICAC plenary session, registration from India is estimated at 10 per cent.

Sources :.business-standard.com