The Karachi Cotton Association (KCA) on cotton policy in federal budget 2012-13 proposed Federal Finance Minister Dr Hafeez Shaikh to announce start of hedge trading through KCA floor as the federal government accorded its approval in March 2005.
Former Securities and Exchange Commission of Pakistan chairman Razi-ur-Rehman at an All Pakistan Textile Mills Association (APTMA) meeting on February 28, 2008 in Lahore announced the commencement of hedge trading contracts would start within four months.
In budget proposals, KCA Karachi Cotton Brokers Forum said the government should buy commodity for buffer stocks to meet the exigency of local trade through 320 licensed cotton brokers of KCA.
The government should also ensure the availability of quality cottonseed and mature the accord signed with Monsanto for introducing Bollgard-II technology on April 10, 2010 in the country.
A thorough study and research is needed to discuss the contents of the memorandum of understanding signed in connection with the long awaited agreement for introducing cottonseed technology (BG-II and RRF) in the country, it said
Memorandum of Understanding was signed between Monsanto and the government of Pakistan, which provides a framework, to continue discussions focused on introducing BT cotton to Pakistan.
The forum said in absence of hedge trading, cotton market has seen wild fluctuations in price and supply, which resulted in defaults in local trade and exports.
Federal Minister Textile Makhdoom Shahabuddin said the government considered textile and cotton as the prime sectors of the economy.
The textile and cotton sectors’ contribution to the country’s exports stands at around 60 percent and a major foreign earning segment of the national kitty, he maintained.
A cotton expert said the Karachi Cotton Exchange (KCE) has full and comprehensive infrastructure and adequate by-laws for hedge trading in cotton inclusive of storage capacity of cotton bales in Karachi, more than 320 licensed cotton brokers, who have their own offices at the cotton exchange to facilitate trading of cotton with the ginners, spinners and exporters.
KCE is the member of the International Cotton Association, it is the world’s leading international cotton trade association and arbitral body.
Hedge trading is a special segment of trade. Hedge trading performs an economic function by providing a cover against the risk of fluctuations in price, thereby facilitating smooth flow of national and international trading in cotton.
The utility of hedge trading in cotton has been re-affirmed by three Cotton Hedge Enquiry Committees set up by the government in 1953, 1965 and 1971.