Pakistan puts cotton imports from India on hold as tensions mount

Pakistan has suspended cotton imports from its top supplier, India, saying shipments failed to fulfil phyto-sanitary certification, threatening the $822 million-a-year trade, government and industry officials told Reuters.

Traders say rising hostility between the neighbours might have prompted Pakistan to restrict imports. The decision will help other cotton suppliers such as Brazil and the United States to increase exports to Pakistan.

"We had received some complaints regarding insects, pests, in cotton consignments imported from India, so we have sent samples for tests," Imran Shami, director general of Pakistan's Plant Protection Department (DPP), told Reuters on Wednesday.

"If results show non-compliance of phyto-sanitary requirements, we would have to stop the imports from India."

Pakistan had put on hold cotton consignments from India, he said, adding that if tests confirmed the presence of pests, "these consignments will go back or would have to be destroyed", he said.

In 2015/16, Pakistan surpassed Bangladesh to become India's biggest cotton buyer, accounting for 40 percent of exports.

"Officially there is nothing on the record, but on the ground, there is an unannounced ban on cotton imports from India," said Ihsan ul Haq, chairman of Pakistan Cotton Ginners Forum.

Indian exporters have signed contracts to export 350,000 bales to Pakistan since the start of the marketing year on Oct.1 and out of that nearly 300,000 bales for shipments in December and January could get stuck, three exporters said.

"Out of the contracted quantity, a very small amount has been dispatched so far as the season has just started," Cotton Association of India President Dhiren Sheth told Reuters.

Supplies from the new season crop usually start rising from November in India. But this year, supplies are negligible after a government move to ban high-value currency notes prompted farmers to postpone sales.

"Buyers and sellers are not cancelling contracts. They are waiting for some positive response from the government," said Chirag Patel, chief executive officer of Indian exporter Jaydeep Cotton Fibers.

The nuclear-armed rivals have seen tension increase in the past few months over the disputed region of Kashmir.

Last year, Pakistan bought 2.7 million bales from India and supported Indian cotton prices at a time when China was cutting imports, traders said.

"It will be big problem for us if Pakistan stops buying. Other countries could not absorb the entire surplus," said an exporter based in the western state of Gujarat.

Along with Pakistan, India mostly exports cotton to Bangladesh, China, Vietnam and Indonesia.

Pakistan, the world's third-largest cotton consumer, has not stopped imports from other countries, said Shami of the DPP.

But importers say buying the fibre from other suppliers like the United States, Brazil and West Africa will prove costlier and time consuming.

"From India, imports come across within 10 days and sometimes within a week consignments used to cross the Wagha border," said ul Haq, referring to the main border crossing near the Pakistani city of Lahore.