The cotton season of 2020-21 has almost come to an end, and has been pretty eventful for the Cotton Corporation of India (CCI). Pradeep Kumar Agrawal, CMD, CCI, spoke to Nanda Kasabe of FE about the season that initially commenced with low cotton prices and is going onto surpass the minimum support price (MSP). Excerpts:
How would you describe the cotton season of 2020-21 and how has it augured for the Cotton Corporation of India?
It has been a good year for the Cotton Corporation of India (CCI). Cotton farmers have gained this year. During the cotton season of 2020-21, CCI has procured 92 lakh bales under MSP operations. For the last six weeks, cotton prices have been ruling much above MSP, and currently they are 15-20% above MSP. Therefore, the intervention of the agency has not been required after mid-February. So, farmers are getting Rs 6,400 to Rs 6,500 per quintal as against the MSP of Rs 5,825 per quintal. Initially, it was expected by the trade and market sources that CCI may be required to buy at least 1.5 crore bales but since the farmers are getting good price from the market forces itself, MSP intervention is not required now.
How would you describe the price behaviour of the commodity this season?
Initially, cotton prices were well below the MSP but now they are ruling 15-20% above the MSP. Indian prices are still the most competitive in the world. Indian cotton is still the most reasonably priced globally, and the industry is also getting good quality cotton at consistent price. That is why I think they are getting good margins in yarn, too. It has been reported by mills that they are getting good margins for the first time.
What are the reasons behind the price hike? The season began with cotton ruling below MSP and this later went up?
The prices were lower during the last year because of the pandemic, when the mills were closed for almost two- and-a-half months. It was not only in India but across the globe. The international prices at that time had come down to the level of 50 cents per pound, which has gradually improved, and now the international prices have touched the peak level of 96 cents per pound because of the demand. But, for the last few days, it has gone down 10 cents again, and is still ranging in 84-85 cents per pound, which is around Rs 50,000 per candy.
But Indian cotton is still available at Rs 46,000 to Rs 47,000 per candy, and is still competitive. Because of the pandemic, the demand has increased as Indian cotton is competitive. Another factor that has led to the price rise is that the Pakistani crop has been damaged badly. Also, stocks, which had piled up during the pandemic, have started depleting. At the start of the season, the stocks were in the range of 120 lakh bales, which is expected to come down to 90-95 lakh bales. At present, CCI hardly has 47 lakh bales.
CCI has declared a price correction of cotton this week. Can you share some details on it?
CCI has reduced the selling price of cotton as a “one-time correction” by Rs 800-Rs 1,100 per candy. International cotton prices had risen almost 12% in the last two months and dropped at the same rate. CCI did not increase the prices to that extent. Since CCI prices went up only by about 2%, it has reduced the prices by [about] 2%. The amount of reduction in prices differs according to the variety of cotton. Therefore 29 mm cotton is now available at around Rs 42,000 per candy.
How is the export demand of cotton and what is your market view?
India has been able to export good quality cotton this year to Bangladesh, China, among other nations. The country has been able to export 45 lakh bales. Another six months are left. Cotton exports may go up to 65-70 lakh bales. Indian prices are competitive. Bangladesh will hold an exhibition. It may attract cotton firms from India. Also, geologically and geographically, it is very competitive. We have also sent around 20,000 bales to Bangladesh by train. The MoU with the government is in the process. This sale has been made through a global tender. Other exports are through merchant tenders i.e. traders are buying from us and exporting.
How about the commercial sales of CCI?
The improvement in prices has helped in reducing MSP losses. Otherwise, it would have entailed more burden on the government. Overall loss will be there but it has helped mitigate losses to some extent.
Do you see any further hike in prices?
In my opinion, prices are at a very reasonable level. Rs 45,000 to Rs 46,000 per candy is a normal price level after the peak season every year. There is no abnormality in the price. Industry itself is paying Rs 6,000 per quintal for Kapas (raw cotton). It means cotton is viable to them at these rates and they are getting reasonable margins in the spinning segment. Otherwise, CCI would have continued MSP operations.
What have the cotton arrivals been like to date and the Indian crop size in 2020/21 season?
Arrivals have been in 320 lakh bales range and the crop, as per estimates of the Committee on Cotton Production and Consumption (CCPC) — a body represented by growers, traders, textile industry and officials of the ministries of textile and agriculture — is 371 lakh bales. The CCPC meeting is likely to be held shortly. The arrivals have tapered down substantially. Arrivals, which were around 2 lakh bales to 2.5 lakh bales a day, has come down to 50,000 bales a day. By April-end, arrivals will be completely wiped off. Only some summer crop of 5-6 lakh bales from states like Gujarat, Tamil Nadu Karnataka may still continue. Most of the arrivals should be completed by April.
Source: The Financial Express
Improved yarn prices due to a sharp rebound in demand in the second half of this fiscal will help maintain the operating profitability of Indian synthetic (polyester1 and viscose2) yarn firms at nearly 10 per cent this fiscal, despite the pandemic effects, according to a study of 75 CRISIL-rated spinners, accounting for close to 40% of the industry revenue.
Prices of polyester yarn and its key input, purified terephthalic acid (PTA), fell after the onset of the pandemic. But those rebounded between September 2020 and January 2021, with the price of yarn rising faster than PTA, thus aiding profitability, CRISIL said in a press release.
In fact, the spread—or the difference between the price of yarn and its raw material—rose to a three-year high of around ₹26 per kg in the December 2020 quarter.
On the other side, prices of viscose yarn and its raw material input have remained largely steady, supporting spreads. Although some softening in the polyester spreads is expected over the next two quarters, it is still likely to remain higher than that in the corresponding periods of last fiscal as the tide of demand continually rises. This is likely to support operating profitability next fiscal as well.
Synthetic yarn is used mostly in athletic and leisure (athleisure) wear, and home textiles. Demand from these segments went on a tailspin in the first half of the fiscal, but rebounded sharply thereafter, driven by the ‘work-from-home’ shift.
India’s athleisure market worth close to ₹50,000 crore and home textiles market worth ₹55,000 crore saw a sharp demand recovery owing to health and comfort needs, along with consumer spending on home improvement.
“Operating rates for synthetic yarn spinners are expected to be in the range of 65-70% this fiscal, even with strong order flows in the second half. But that should not be a concern to spinners, given that the spreads are attractive this fiscal. In fact, the low rates provide spinners enough headroom to absorb additional demand next fiscal, without immediate need to increase capacities,” says Dinesh Jain, director, CRISIL Ratings Ltd.
Overall, the industry is expected see a contraction in volume to 5.5 million tonne this fiscal from 6 million tonne last fiscal. Spinners are expected to mitigate this impact by tightening their working capital cycles, with faster collections and better inventory management.
Gearing levels of synthetic spinners will be comfortable at 0.5 time this fiscal versus 0.8 time last fiscal. Further, reduced interest outgo and stable profitability will ensure interest coverage ratio remains healthy at over 4 times, aiding an improvement in credit profiles. With players expected to sustain profitability next fiscal, credit profiles should get a boost. Continued order flow from end-user segments and steep increase in raw material prices will bear watching.
Source: Fibre2Fashion News
State governments wants farmers to shift from paddy
After topping Gujarat to become the second-largest State in cotton acreage, Telangana now wants to consolidate its position by adding another 15-20 lakh acres in the upcoming kharif season, taking the area under the fibre crop to 75-80 lakh acres.
While asking the farmers to increase the acreage, Chief Minister K Chandrashekar Rao has asked the officials of the Agriculture Department to make arrangements to mobilise the seeds required for the kharif.
Farmers generally use two packets (of 450 gm each) in an acre, pegging the total requirement at 1.50-1.60 crore packets.
The State, which had experimented with the Regulated Cropping System last year, had dramatically increased the cotton area to 60 lakh acres from the previous record of 46 lakh acres in 2019. As they achieved the target of 60 lakh acres, the Telangana farmers had surpassed Gujarat, the second largest cotton player, which grows cotton on about 56 lakh acres.
In 2019, Gujarat cultivated cotton on 66 lakh acres, while their peers in Telangana grew the crop on 46 lakh acres. Maharashtra, with 1.04 crore acres, tops the list in cotton acreage.
Cut likely in paddy area
Meanwhile, the State wants its farmers to grow redgram (pigeon pea) on 20-25 lakh acres, more than double the area from last kharif.
The additional stress on cotton and redgram indicates that the State wants its farmers to reduce their excessive dependence on paddy. During the last kharif, farmers grew paddy on 53 lakh acres out of the total cropped area of 1.36 crore acres.
Source: The Hindu Business Line
The government is expected to further extend the existing foreign trade policy (FTP), which is scheduled to lapse from April 1 this year, for few more months, an official said.
FTP provide guidelines for enhancing exports to push economic growth and create jobs.
On March 31, 2020, the government had extended the Foreign Trade Policy 2015-20 for one year till March 31, 2021, amid the coronavirus outbreak and the lockdown.
The official said that stakeholder consultation is going on for the new policy and the existing policy could be extended for few more months.
In such a policy, the government announces support measures for both goods and services exporters.
Exports during April-February this fiscal dipped by 12.23 per cent to USD 256 billion. Imports during the period too declined by 23.11 per cent to USD 340.8 billion, leaving a trade deficit of USD 84.62 billion.
Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said that the current situation is fluid and it is good consideration to extend the FTP for few more months.
“Currently the global trade situation is fluid and we would prefer that the new FTP should come when the situation stabilises. It will be a good decision to extend it further,” Sahai said
Source: The Financial Express
FICCI and ThinkThrough Consulting Bangladesh announced partnership to jointly promote and commercialize grassroot technologies developed in India and Bangladesh.
The announcement was made as part of the RuTAG Technology Commercialization Programme which is led by the Office of the Principal Scientific Advisor to the Government of India and implemented by FICCI.
A bouquet of 49 technologies received under the RuTAG (Rural Technology Action Group) programme will be offered to industry, social Start-ups and NGOs in Bangladesh.
These technologies have been developed at RuTAG centres housed across seven Indian Institutes of Technology (IITs) in India and focus on problems associated with marginal communities in rural areas.
RuTAG innovations such as floating fish cages for inland aquaculture, powerless solar dryer for food processing, cold storage powered by pico hydro among others respond to real life problems faced by rural populations.
The technologies are across a wide range of sectors including environment, agriculture and farming, textiles, manufacturing, food processing and aquaculture among others.
Besides technology transfer, capacity building support and virtual training sessions will also be provided to Bangladesh entrepreneurs to seamlessly absorb the Indian technologies.
The announcement was made on the side-lines of the visit of Prime Minister, Mr Narendra Modi's visit to Bangladesh.
K Vijay Raghavan, Principal Scientific Adviser to the Government of India stated, "Science and Technology collaboration between India and Bangladesh is towards social and economic development in the region. Both nations can gain immensely through knowledge exchange and technology partnerships. The RuTAG program provides a wide range of grass root innovations that have the ability to create rural livelihood opportunities in Bangladesh."
Ketaki Bapat, Senior Scientist and Co-ordinator RuTAG program, at the Office of the PSA said, "The RuTAG technologies have been developed at the finest institutions in India. We wish to share these technologies with social entrepreneurs in Bangladesh assuring complete handholding support and leveraging digital technologies for successfully adopting these technologies."
Sanjay Nayak, Chair, FICCI S&T Committee and MD, Tejas Networks reiterated, "Through the RuTAG Program, FICCI remains committed to scale Indian innovations in BIMSTEC countries with a special focus on Bangladesh. Bangladesh has been a long-standing development partner of India and there is tremendous potential for our nations on collaborating on the technology front."
Speaking on the partnership, Parul Soni, Global Managing Partner, Think through Consulting stated, "We are delighted to partner with the RuTAG Technology Commercialization Programme. Technological innovations can help rural communities in the world by increasing their income and their yields. While these reduce their risks arising on account of climate change and other natural disasters, these increase their opportunities too."
Source: SME Times
Rising cost of cotton, the basic raw material, pushes up yarn price
Steep hike in prices of raw materials in the last few months is emerging as a major issue in the textile clusters across Tamil Nadu, which will go to polls next month.
Tamil Nadu, the textile capital of the country, employs directly almost 60 lakh people and has clusters across the textile value chain -- spinning, weaving, processing, and garment making.
The prices of cotton, which is the basic raw material for spinning mills, is up and that has pushed the prices of yarn, say the spinners. Coupled with increase in demand and speculation, the prices shot up, they say.
In the last three to four months, yarn prices have increased by ₹100 a kg. And there is no certainty on the prices. The government should take at least temporary measures to bring stability to yarn prices. Weaving is a labour-oriented industry. Already the prices of textile products such as towels are up, says a fabric manufacturer in Salem.
There was no special package for textiles even when the Central government announced relief measures after the lockdown, he adds.
“Yarn prices should be brought under control and weavers should get yarn at affordable prices,” says M. Varadarajan, a handloom weaver and general secretary of Erode District handloom weaving workers union.
The handloom weavers also want the State government to give orders for free dhoti and sarees scheme to the handloom sector. “This will give us business throughout the year and youngsters will remain in the weaving sector,” he said.
The textile processors in Tiruppur say they have appealed to all the political parties to bring down GST for processing and to convert the ₹200 crore interest-free loan given to Common Effluent Treatment Plants to grant.
A garment exporter in Tiruppur says hike in prices of diesel and yarn is likely to impact voting. After moving up for nearly four months, yarn prices have remained stable during the last week and supply is becoming regular.
Housing for workers
According to Raja M. Shanmugham, president of Tiruppur Exporters' Association, Tiruppur's main demand to political parties is to support the manufacturers in the construction of houses for workers. A medium-sized garment exporting unit employs nearly 500 workers. Housing for these workers can be developed jointly by the government and the industry. Most of the workers in Tiruppur are from other districts or States and now live in dormitories and rented houses, he says.
The spinning mill owners add that removal of Market Committee cess is a long-pending demand with the State government. Electricity, pollution control, and labour come under the State government purview for textile mills. The mills need industry-friendly energy policies to attract investments, they say. Further, yarn produced in States such as Gujarat, Telangana and Andhra Pradesh cost less than that of Tamil Nadu because of the incentives offered by the respective governments. Tamil Nadu should have policies that will make textile production competitive and attract investments, they say.
According to Ashwin Chandran, chairman of Southern India Mills' Association, the yarn price issue should be addressed jointly by all the stakeholders in the textile sector. The Association has appealed to all its members to not increase the prices any further and to supply yarn at the committed price, he said.
Source: The Hindu Business Line
The central government has released Rs 30,000 crore as goods and service tax (GST) compensation to states for FY21, the finance ministry said Tuesday.
Finance Minister Nirmala Sitharaman had said last week in Rajya Sabha during her reply in Budget session that states will get Rs 30,000 crore as GST compensation within March, while GST compensation due to states prior to Covid pandemic was already paid.
With the amount released on March 27, the total compensation released for FY 21 comes to Rs 70,000 crore. The Centre has also released an additional Rs 14,000 crore as adhoc settlement of integrated GST. This was released on March 30.
“Taking into account the release of GST compensation, back to back loan and adhoc IGST settlement, a balance of Rs 63,000 crore GST compensation is pending to states/UTs for FY 2020-21,” the finance ministry said.
The amounts are in addition to Rs 1.10 lakh crore that the Centre released to states as back-to-back loans to make up for GST compensation shortfall in collection of GST. This was done after the decision of the GST Council in October last year and the full amount was issued by mid of the month.
According to estimates of ratings agency ICRA NSE -0.17 %, the GST compensation requirement of state governments for FY2022 would be at Rs 2.7-3.0 lakh crore, and the shortfall relative to the assessed cess collections at Rs 1.6-2.0 lakh crore.
GST collections have been clocking above Rs 1 lakh crore consistently since October 2020 on the back of economic recovery and impact of various measures taken by tax administration to improve compliance. Revenue collection crossed Rs 1.1 lakh crore-mark in March, for the third time in a row.
Source: The Economic Times
Pakistan’s textile ministry headed by Prime Minister Imran Khan has recommended the lifting of a ban on the import of cotton from India to bridge the raw material shortfall the country’s textile sector was facing, according to a media report on Tuesday.
The Ministry of Textile Industry has sought permission from the Economic Coordination Committee (ECC) of the Cabinet to lift the ban on import of cotton and cotton yarn from India, the Dawn News reported, quoting official sources. ”We already submitted the summary to the ECC more than a week ago to lift the ban,” an official said, adding the decision of the coordination committee will then be placed before the federal Cabinet for formal approval.
Prime Minister Khan, as in-charge of the Commerce and Textile Ministry, has already approved the summary to be placed before the ECC, the report said.
The low yield of cotton bales in Pakistan has created problems, paving the way for import from India. The government’s decision to consider lifting the ban from India came as a big relief for the value-added textile sector, which seeks access to cheap raw materials. Currently, cotton and yarn imports are allowed from all countries except India.
Pakistan suspended trade ties with India after New Delhi revoked the special status of Jammu and Kashmir in 2019. Pakistan has been unsuccessfully trying to drum up international support against India for withdrawing Jammu and Kashmir’s special status and bifurcating it into two Union territories in August, 2019.
In May 2020, Pakistan lifted the ban on import of medicines and raw material from India to ensure there is no shortage of essential drugs amid the COVID-19 pandemic. This was the first step of reversing the complete suspension of trade with India.
Commerce Adviser Razak Dawood tweeted, ”A meeting was held with the Prime Minister @ImranKhanPTI escalating prices of cotton yarn were discussed. He was sympathetic towards the value-added sectors & advised that in order to ease the pressure on yarn and keep momentum of value added exports.” ”All steps be taken through cross-border imports of cotton yarn including by land. A summary will be presented at the next ECC to ensure availability of cotton and yarn in the coming months,” the commerce adviser said in another tweet.
The textile sector has hailed the government’s move. Pakistan Textile Exporters Association Chairman Khurram Mukhtar in a tweet said that import of raw cotton, yarn and grey fabric from India will bridge the gap in demand and supply. It will enable Pakistani exporters to continue growth momentum, he said.
According to reports, against the annual estimated consumption of minimum 12 million bales, the Ministry of National Food Security and Research expects only 7.7 million bales production this year. However, cotton ginners have given the lowest production estimates of only 5.5 million bales for this year.
There is a minimum shortfall of six million bales and Pakistan has so far imported roughly 688,305 metric tonnes of cotton and yarn, costing USD 1.1 billion, according to the Pakistan Bureau of Statistics. There is still a gap of about 3.5 million bales that needs to be filled through imports.
Due to shortage of cotton and yarn, the users were compelled to import them from the United States, Brazil and Uzbekistan.
Imports from India would be far cheaper and would reach Pakistan within three to four days. Importing yarn from other countries was not only expensive but would also take one to two months to reach Pakistan.
Source: The Financial Express
HCM City has set itself an export target of US$108 billion by 2030, up from the last year’s $40 billion.
It is encouraging newly established firms to focus on key sectors like rubber, plastic, food and foodstuffs, IT-electronics-telecommunications, garments and textiles, and pharmaceuticals.
It wants to improve the industry and become involved in global value chains especially in the electronics, mechanical, and wood products, which it considers a key to its exports.
It plans to upgrade export infrastructure, and reform public administration directly related to foreign trade.
Head of the city's Statistics Office, Huỳnh Văn Hùng, said Covid-19 has largely been controlled in Vietnam, causing a recovery in manufacturing.
But exporters continue to face difficulties since many major trading nations have yet to open their markets, he said.
The municipal Department of Industry and Trade is working with other relevant parties to develop the supporting industry supply chain, helping businesses cut input costs and improve their competitiveness.
It plans to enhance trade promotion and help businesses reach out globally.
Nguyễn Phương Đông, director of the department, said despite facing numerous challenges, exports of five goods last year exceeded $1 billion each: computers, electronic products and components ($17.8 billion); garment and textile ($4.3 billion); footwear ($2.2 billion); machinery and equipment and parts ($2.2 billion); and the rest ($6.9 billion).
Its key export markets remained China, the US and Japan.
China accounted for $10.5 billion worth of the city’s exports, up 23.7 per cent from 2019. Exports to the US and Japan were worth $6.7 billion and $2.8 billion, down 0.2 and 16 per cent.
Source: Vietnam News
Vietnamese textile-garment exports contracted by 10.5 per cent last year due to the pandemic, raking in $35 billion, in contrast to regional rivals that endured a decline of 15-20 per cent. The sector is poised to fully recover from the crisis in the third quarter of 2022 at the earliest possible time, says Le Tien Truong, group general director of Vietnam National Textile and Garment Group (Vinatex).
This is the first major setback for the sector after 25 years of penetrating the global market, he said. Though the global market is showing signs of recovery, the number of orders and prices remain modest, he said.
Several local enterprises, including Vinatex, have received orders up until the end of April or even July and August for some commodities such as knitwear and other popular items, he told a Vietnamese newspaper.
Truong observed that garment firms are unlikely to fulfil signed contracts, and more importantly, the sector’s position in the global supply chain is also threatened.
During the course of the year ahead, the domestic textile and garment sector is forecast to achieve an export turnover of approximately $39 billion.
Source: Fibre2Fashion News
Some multinational clothing companies have announced they will not use cotton from the Xinjiang Uygur autonomous region, citing "forced labor" as the reason.
But as the Commerce Ministry has said, "forced labor" is a fiction the anti-China forces have fabricated. Relevant enterprises should respect the market law and facts, and stop politicizing commercial issues.
The open attacks on the cotton industry in Xinjiang expose some Western countries' intention to destroy China's textile industrial chain and weaken the status of Chinese textiles in the global market.
Statistics show the scale of China's textile industry accounts for more than 50 percent of the global industry and China's chemical fiber output accounts for 70 percent of the world's total. The country's trade in textile goods accounted for one-third of the global total last year.
With a complete industrial chain and advanced technology in the textile industry, China is the world's largest textile and garment market, the largest consumer of cotton and the second-largest producer of cotton.
China produces about 5.95 million tons of cotton, and consumes around 7.8 million tons of cotton a year. It imports about 1.85 million tons of cotton. Xinjiang accounts for 87 percent of China's output of cotton.
Despite this, the cotton industry and market is dominated by the Better Cotton Initiative, a nongovernment organization supported, if not dominated, by the US government. The BCI has acted as an accomplice with the United States in the latter's organized smearing of Xinjiang cotton.
Although the BCI ban will not deprive Xinjiang cotton of its market as all of it can be consumed at home, the almost unbounded power of the BCI, which means that it can arbitrarily ban a country's exports of cotton, deserves the vigilance of the whole world.
Also, it must be noted that China's textile and garment enterprises rely heavily on foreign trade, as most of them are original equipment manufacturers for foreign brands. With the rising prices of labor and resources in China, the country will gradually lose its comparative strengths in the labor-intensive textile and clothing industries to countries in Southeast Asia, South Asia and Africa.
So rebutting the lies and hypocrisy of the BCI's scheme targeting Xinjiang cotton is one thing, to build Chinese clothing brands and move the country up the industrial value chain is another. The latter being more important in the long run.
The country's textile and clothing industries should show more foresight and courage so they hold their fates in their own hands.
Source: ChinaDaily.com
