Pakistan’s spinning and cotton textile sector is confronting what industry leaders describe as the worst economic crisis in its history, as punitive taxes, record-high energy tariffs and unchecked under-invoiced yarn imports accelerate the shutdown of mills and undermine export performance.
According to Cotton Ginners Forum Chairman Ihsanul Haq, more than 100 spinning mills and over 400 ginning factories have ceased operations. The collapse has sharply reduced raw-cotton procurement, pushing national cotton output down to 5.5 million bales—well below historical levels of 15 million. Farmers are selling cotton at distress prices of Rs 8,000 per 40 kg, while some 800,000 bales remain unsold due to weak demand.
Haq warned that a surge of under-invoiced yarn, primarily from China, has devastated domestic spinners. Despite APTMA’s alerts to the Federal Board of Revenue regarding millions of kilograms of under-priced yarn entering monthly, enforcement remains absent. Some importers reportedly sell yarn without invoices, causing loss of revenue and further eroding domestic value chains. Chinese firms are now establishing local offices to expand direct yarn sales in Faisalabad.
On the cost side, the sector faces cumulative taxes of up to 86 percent on cotton, cottonseed and oilcake, while textile units are being asked to clear decade-old gas dues. High power tariffs—among the highest in the region—have rendered production uncompetitive against India and Bangladesh.
Parallel to this, the Pakistan Textile Exporters Association (PTEA) reported a fourth consecutive monthly decline in textile exports. Export earnings dropped 6.39 percent between July–November 2025, falling from USD 13.7 billion to USD 12.8 billion. The sector has failed to sustain the USD 19.3 billion peak achieved in FY2021, with exports slipping year after year.
The contraction exposes deep structural weaknesses. Declining exports narrow Pakistan’s fiscal space, weaken foreign-exchange reserves, and make it harder to meet external debt obligations. Persistent under-invoicing and weak border controls distort markets, deter investment and accelerate de-industrialisation. High taxes and energy costs have erased Pakistan’s cost advantage, allowing regional competitors to capture orders.
Industry leaders warn that prolonged stagnation discourages innovation, adoption of new technology, and long-term capital investment — all critical for market survival in a hyper-competitive region.
Haq urged the government to immediately impose at least a 20 percent duty on yarn and fabric imports, reduce power tariffs, rationalise taxes across the cotton value chain, and provide urgent relief to ginning, spinning and textile units. Without decisive intervention, Pakistan risks deeper industrial attrition, rising unemployment and a sustained collapse of export competitiveness.
The worsening crisis now demands coordinated policy action that restores cost competitiveness, strengthens enforcement against under-invoicing, stabilises cotton markets and rebuilds confidence across the textile value chain.
