Indian garment exporters are right to worry about losing orders due to the uncertainty on the rates of reimbursement under the new scheme to refund exporters duties and taxes embedded in the value of the export.
The delay restricts their ability to price competitively, hurting the garments sector that is dominated by micro, small and medium enterprises. The same holds true for other export sectors as well. The government should swiftly announce the reimbursement rates on the so-called Remission of Duties or Taxes on Export Products (RoDTEP) scheme effective from January 1.
The WTO-compliant scheme will reimburse central and state taxes, duties and cess on petroleum products and electricity, and levies other than the goods and services tax (GST) that are embedded in the value of the export. This is in sync with the principle that countries export goods and services, not taxes.
Export bodies (such as the Cotton Textiles Export Promotion Council and the Garment Exporters and Manufacturers Association) want the Centre to remove the 10% import duty on raw cotton, saying it will make imports of extra-long-staple cotton, particularly from Egypt, expensive.
Basic customs duty is out of the GST chain, unlike countervailing and special additional duties. However, drawback of customs duty should be routine on exports. Clearly, the audit trail that is necessary to link the import duty paid on import of raw cotton to the subsequent stages of spinning into yarn, weaving into fabric and tailoring into garment is faulty. The point is to fix this problem. All indirect taxes must be brought under GST so that exporters only need to claim a refund of the input taxes paid. This would be far more efficient than separate reimbursement schemes.
Source: The Economic Times
The Apparel Export Promotion Council has welcomed the Central government’s speedy response to the request to reduce cotton prices.
Cotton yarn prices have consistently increased in the last four months. High prices of cotton yarn and unpredictability in its availability were affecting the entire value chain and having an adverse cascading effect on garment exports.
“We wholeheartedly thank Textiles Minister Smriti Zubin Irani for her help in getting Cotton Corporation of India (CCI) to reduce cotton prices,” said a statement quoting A Sakthivel, Chairman, AEPC.
Irani met the industry representatives on March 18, 2021, to discuss the issue of yarn price increase. Today, CCI has come out with an announcement that cotton price has been reduced by around ₹1,500 per candy, he said.
Sakthivel said the Textiles Minister was extending continuous support by taking several initiatives to protect and revive the apparel exporting industry since the outbreak of the coronavirus pandemic.
The move on cotton prices is significant as it will help reduce the burden on garment exporters across the country, he said.
Source: The Hindu Business Line
Around 70 per cent ginning units of the region have shut operations due to lack of availability of raw cotton in spot markets as farmers cleared most of their stocks in early harvesting season.
A drop in spot supplies and pickup in demand from textile mills has pushed raw cotton prices to Rs 6,500-7,000 per quintal as against Rs 5,700 per quintal in January, according to traders and ginners.
Manjeet Singh Chawla, president, MP Cotton Ginners Association said, “Just about 25-30 per cent ginning units are operational while others have shut production due to shortage of raw materials. Availability at ginning units is met through supplies from stockiests and Cotton Corporation of India.”
Daily cotton supplies in the markets of Madhya Pradesh have dropped to around 20,000 quintal as against 1 lakh quintal in October and November.
According to the Association of India cotton output in Madhya Pradesh is seen going up by around 17 per cent to 21 lakh bales (each of 170 kg), though the country’s production is pegged down 4 lakh bales at 356 lakh bales as against the past year.
There are around 175 ginning units in Madhya Pradesh of which around 125 units are located in the leading cotton cultivating belt stretching from Burbhanpur to Dhar.
The association for ginners has urged the government to develop clusters for textile in the cotton producing belt and allow all related industries in the cluster including ginning units to complete the supply chain from cotton to fiber.
Chawla said, “Many tax exemptions given to ginning units in the VAT regime have been discontinued and tax liabilities have also gone up in the new tax regime. The government should extend tax benefits to the sector to help survive the hardships.”
Source: The Times of India
The Apparel Export Promotion Council (AEPC) on Monday urged cotton mill owners to cut yarn prices by ₹20 per kg following reduction in cotton prices by about ₹2,500 per candy in the last two months.
“I am requesting all the mill owners to bring down the yarn price by ₹20 per kg with immediate effect,” said A Sakthivel, Chairman, AEPC, in a statement.
AEPC’s request comes soon after Cotton Corporation of India reduced cotton prices by around ₹1,500 per candy earlier on Monday.
“I bring to your kind notice that in the last two months cotton prices have come down by ₹2,500 per candy including today’s reduction,” Sakthivel said in his letter.
Source: The Hindu Business Line
From being the crime capital of north India till the turn of the century, Gorakhpur is now set to develop as a garment industry hub, giving an impetus to the industries in the eastern Uttar Pradesh.
The Gorakhpur Industrial Development Authority (GIDA) will be providing four-acre land on which a flatted factory will be built and will make it available for entrepreneurs.
Chief Minister Yogi Adityanath is taking keen personal interest in the project.
Yogi Adityanath has said that the business of readymade garments is such that it employs more people with less capital.
The Chief Minister has said that over 15,000 people have got direct employment in readymade garments' business with a capital of Rs 350 crore in Gorakhpur alone.
"This is possible only through this traditional enterprise through MSMEs," he pointed out and added that the target was to take the number of employment of 15,000 to 50,000 persons.
According to official sources, in the Covid lockdown, 10,000 migrant workers working in the readymade garments sector had returned to Gorakhpur.
"After having included readymade garments in ODOP, it helped migrant artisans to work in Gorakhpur itself. The entrepreneurs are taking interest and administration has also come forward to help them," the government spokesman said.
The Chief Minister has already issued comprehensive guidelines to the authorities to ensure easy availability of loans to MSMEs in the 'aatmanirbhar package'.
"In four years, we have explored the possibilities to give market to the traditional and local products and an action plan is being prepared accordingly," the spokesman said.
The Chief Minister, meanwhile, has asked entrepreneurs to pay attention to quality and training as well as making preparations according to the requirement of the market.
The Northern India Textile Research Association (NITRA), an organisation of the Union Ministry of Textiles, is training entrepreneurs here.
Gorakhpur, at present, has a textile market of about Rs 2,500 crore, out of which the readymade garments worth Rs 2,000 are supplied from outside. "In the coming days, the entrepreneurs may grab this external market by producing and market the locally made garments," he said.
Gorakhpur has a total population of about 55 lakh and there are about 25 lakh women who can be encouraged to take up entrepreneurship.
"The readymade garments business can become the basis of self-reliance of women," the Chief Minister said.
This initiative of the Uttar Pradesh government includes building a flatted factory which will not only boost the textile industries but will also generate employment opportunities for the workers who have returned to the state during the lockdown.
Additional Chief Secretary MSME, Navneet Sehgal, said the state government has started a serious exercise to build garment parks and textile parks here.
Source: The Daijiworld.com
The Directorate General of Foreign Trade (DGFT) will soon be completely digitised with the rollout of newer IT systems in a phased manner, enabling virtual offices to be created that are faceless, contactless and paperless, Commerce Secretary Anup Wadhawan has said.
The Commerce Secretary also said that the Ministry was preparing a district export plan to boost shipments and the DGFT will assist States/UTs in preparing an annual “Export Ranking Index” of different districts to rank each district on its export competitiveness. This would provide for agile trade policy formulations that are more responsive to changing scenarios of international trade, a paper on electronic governance and trade facilitation reforms put together by the Commerce Department pointed out.
DGFT would be moving to a paradigm where business would lead and not be held back while waiting for specific confirmations. The usual process of queuing up for benefits and approvals would be removed wherever possible. The exporter or importer would not have to wait on DGFT for any business approval. DGFT would be implementing post-issuance audit systems for managing any risks for such a business-friendly, flexible system, the paper said.
On the initiative of developing districts as export hubs, Wadhawan said that the idea was being seriously pushed at all fronts since every district has products and services that are being exported, and can be further promoted, along with new products/services. This would increase production, grow exports, generate economic activity and achieve the goal of Atmanirbhar Bharat, Vocal for local and Make in India.
The DGFT is working with State/UT governments in a phased manner to achieve this objective. “In the initial phase, product/services (GI products, agricultural clusters, toy clusters, etc) with export potential in each district have been identified and institutional mechanism in the form of State Export Promotion Committees at the state level and District Export Promotion Committees (DEPCs) at the district level are being created to provide support for export promotion and to address the bottlenecks for export growth in the districts,” according to an internal paper on ‘districts as export hub’.
State/UTs will also be assisted by DGFT in preparing an annual “Export Ranking Index” of different districts in a particular State/UT to rank each district on its export competitiveness.
The five-year Foreign Trade Policy to be announced shortly is likely to have a focus on developing districts as export hubs.
Source: The Hindu Business Line
A few 'teething troubles' are holding up the government from notifying the tax refund rates for the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme, Commerce Secretary Anup Wadhwan has said. Addressing a press briefing on March 22, Wadhawan however stressed that exporters already broadly know what to expect from the scheme.
Going live from January 1, 2021, the RodTEP scheme is the government's foremost export incentive scheme now after the shutdown of the erstwhile Merchandise Exports from India Scheme (MEIS). It aims to refund to exporters the embedded duties and taxes such as VAT on fuel used in transportation, Mandi tax and Duty on electricity used during manufacturing, that were so far not being refunded. While the government has clarified that the rebate would be claimed as a percentage of the Freight on Board value of exports, it is yet to bring out the specific refund rates.
However, sources say that the rates are taking longer to be finalised given that the Commerce Department is working with a smaller-than-expected budget for the scheme. In the last national budget, Finance Minister Nirmala Sitharaman announced an initial allocation of Rs 13,000 crore for the RoDTEP. In 2020, the Finance Ministry had promised an outlay of Rs 50,000 crore, along with a similar formula as MEIS.
Exporters remain particularly irked at the government for not announcing the rate of tax benefits for even a single product under RoDTEP more than three months after it went live. Remaining in the dark about the amount of government support they may receive, exporters are unable to estimate their cost of production and therefore are currently facing difficulty in taking up foreign orders.
Moreover, exporters are yet to receive at least Rs 25,000-30,000 crore worth of tax refund under the erstwhile MEIS, according to apex exporters body the Federation of Indian Export Organisations (FIEO)."This will remove uncertainty from the minds of the trade and industry thereby forging new contracts with the foreigner buyers," FIEO President Sharad Kumar Saraf said.
District focus
At the same event, the Director General of Foreign Trade (DGFT) Amit Yadav said products and services with export potential have been identified in 725 of the 745 total districts in the country. In his Independence Day speech in 2019,Prime Minister Narendra Modi had called for the conversion of each district into an export hub.
The move aims to involve state and district level stakeholders in export promotion activities. This decentralisation aims to boost local production and tap into the key insights from the grassroots. As a result of the greater synergy, district-wise export data is now being generated by the ICEGATE/DGCIS to track the export performance from each districts, the government said.
The DGFT added that institutional mechanism in the form of separate export promotion councils at state and district levels are being created to address the bottlenecks for export growth. Specific action plans to boost outbound trade are also being finalised by them in each district, with draft action plans having been prepared by DGFT's regional authorities in 451 districts.
Source: The Economic Times
From being a little-known entity in the business, it has spun an amazing yarn of success to become the world's second-largest exporter of readymade garments, just behind mighty China.
The textile sector contributes around 20 per cent of the country’s GDP now. The RMG (readymade garments) sector currently accounts for 80 per cent of Bangladesh’s net exports.
Just before the coronavirus pandemic hit, industry circles were abuzz with achieving the target of $50 billion in RMG exports by 2021 and doubling it to $100 bn by 2025.
A casual scan of the textile sector would suggest that cheap labour was an advantage, with minimum wages still lower than China, India, Vietnam and others. But that would be an oversimplistic explanation of a success story. Bangladesh has been using different factors to its advantage to become a garmenting powerhouse.
While supportive government policies continue to play a part in encouraging foreign direct investment in the textile sector, Bangladesh has also used preferential access to the European Union market to its advantage.
With its Least Developed Country status, Bangladesh enjoyed duty-free access to markets in over 50 countries.
In particular, the EU’s duty-free, quota-free exports policy under its ‘Everything But Arms’ mandate helped Bangladesh increase its apparel exports from $7 bn in 2007 to over $21 bn in 2017.
But what makes Bangladesh an enduring success story is the willingness of the industry to adapt to the changing environment.
While 37 universities in the country now produce textile graduates every year, FDI in setting up spinning and weaving factories is being encouraged to meet the raw material demand internally, cutting dependency on countries like China and India.
Learning from Vietnam, Bangladesh remains acutely aware that its labour cost advantage will fritter away in the years to come.
The CEO of Bangladesh Apparel Exchange, Mostafiz Uddin, recently pointed out that the country will lose its labour advantage to automation sooner than later.
It must, therefore, be ready with adequate investment in research and development and well-educated professionals to provide tech solutions for the industry to adapt and grow, he said.
It is with this keen eye on the future that in 2019, Bangladesh decided to create the RMG Sustainability Council to ensure workplace safety in the garment sector.
If done and delivered right, the safety and sustainability monitoring system could be the country’s calling card in a highly competitive market in the years to come.
Source: Wionews
