The recent permission given by the Securities and Exchange Commission of Pakistan (SECP) to the Pakistan Mercantile Exchange Limited (PMEX) for introduction of the futures contract in cotton may negatively impact the textile sector, according to an expert from the Pakistan textile industry.

The decision to grant approval to the PMEX was taken unilaterally by the SECP without consulting any major stakeholder from the export-oriented textile sector.

Since the buying share of textile sector in total cotton crop stands at 95 percent, it would have been natural for the SECP to consult the major stakeholders from the Pakistan textile industry and seek their feedback.

But, the representatives of All Pakistan Textile Mills Association (APTMA), Karachi Cotton Exchange (KCE), Karachi Cotton Association (KCA), and Pakistan Cotton Ginners Association (PCGA) were not consulted.

It may be noted here that cotton and its allied products account for about 66 percent of Pakistan’s export earnings and hence it is often termed as the backbone of the Pakistan’s economy.

Moreover, the marketing of cotton involves a tremendous business risk. Hence, it is necessary to have some kind of price insurance to reduce the risk of volatile fluctuations in prices.

An official of SECP, however, has disclosed that no final decision would be taken on the matter without consulting all segments of the cotton and textile sectors. He added that efforts are being made to gather all stakeholders on a single platform to discuss the effects of granting permission to PMEX.