TCP scraps second cotton tender as it received offer below reserved price

Trading Corporation of Pakistan (TCP’s) issued second cotton tender on August 1, 2015 to offload remaining 88,600 cotton bales (crop year 2016-15) including 1,000 bales of super grade, 24,200 of grade-one 62,400 of grade-two and 1,000 cotton bales of grade-three, after the sale of 6,800 cotton bales through first cotton tender, which was scrapped as it received offers lower than the reserve price set for the sale of the commodity.

The second cotton tender was opened on August 10, 2014, attracted a healthy participation as overall it received offers for sale of 22,000 cotton bales compared to 7,000 cotton bales in the first tender, opened on July 29, 2015.

In response to the second cotton tender, some five parties submitted 8 bids for procurement of 22,000 cotton bales at price ranging from Rs 4,550 to Rs 4,905 per maund against the offered quality of 88,600 cotton bales. As per the tender’s terms and conditions, the offered price was linked with Karachi Cotton Association (KCA) spot rate.

Out of eight bids, M/s Naveena Exports’s first offer was Rs 4,600 maund for 1,000 bales of grade-two 1-3/32″ an0d second was Rs 4,550 per maund for 2,000 bales of grade-two 1-1/16″. Reliance Weaving Mills Multan’s first bids was Rs 4,650 per maund for 5,000 of grade-two 1-3/32″ and second offer was Rs 4,700 per maund for 10,000 bales of grade-one 1-3/32″.

M/s Equity Textile Mills Karachi quoted a price of Rs 4,905 for 2,000 bales of grade-one 1-3/32″ and M/s Suraj Cotton Mills offered a price of Rs 4,905 for 1,000 bales of grade-one 1-3/32″. M/s Nagra Spinning Mills Faisalabad submitted two bids….the first was Rs 4,850 per maund for 200 bales of super staple and the second Rs 4,800 per maund for 800 cotton bales of grade-one 1-1/8″.

All bids were responsive and as per the terms and conditions of the TCP tender, but these bids could not met the reserve price set by the state-run grain trader. Therefore the tender evaluation and award committee, in its meeting on August 11, 2015, decided to reject all bids and scrapped the tender.

The TCP’s reserve price for grade two 1-3/32″ was Rs 4,927 per maund, Rs 4,827 per maund for grade two 1-1/16″, Rs 5,027 per maund for grade one 1-3/32″, Rs 5,227 per maund for super grade and Rs 5,127 per maund for grade one 1-1/8″. An official confirmed that TCP has scrapped the second cotton tender.

The first tender offers were almost equal or higher than the reserve price, therefore, TCP accepted bids for 6,800 cotton bales. The prices, on which cotton was sold, were much lower than procurement prices as the federal government has already pledged to pay price differential.

Following the directives of the federal government, the state-run grain trader procured some 95,400 cotton bales from ginners at Rs 6,864 per maund to support farmers and stabilize the cotton prices in the domestic market.

However, TCP is likely to issue a fresh cotton tender to offload the remaining cotton bales. TCP procured some 95,400 cotton bales in second quarter of FY15 to support the farmers and domestic market.