The US move to ban use of China's Xinjiang cotton has cranked up India's yarn exports, ratings agency Crisil said.
Besides, the agency expects operating profits of cotton spinners will double next fiscal as revenue spurts 20-25 per cent on higher sales to Asian buyers and appreciation in cotton yarn prices.
Consequently, the credit outlook for cotton spinners, which was negative in the first half of this fiscal, will turn positive next fiscal, as accruals improve and inventory reduces, Crisil said in a study.
According to the agency, with global demand for knitted garments and home textiles recovering faster than expected due to extended stay-at-home period, and sharper focus on health and hygiene, exports of yarn to China, Bangladesh and Vietnam rose 22 per cent, 39 per cent and 51 per cent, respectively, on-year in April-December 2020.
What has also helped is the US move to ban use of Xinjiang cotton, which has cranked up Indian yarn exports, the study said.
Supplementing exports, the agency said is the expectation of revival in domestic demand next fiscal owing to recovery in discretionary spending by consumers.
Resultantly, the overall revenues of cotton spinners, which is set to decline 14-16 per cent this fiscal, should rebound next fiscal.
Spreads, too, have improved, the study said, pointing out that as a rebound in global demand lifted prices of yarn higher than cotton.
Earlier, spreads had narrowed to Rs 80-85 per kg in June-August from as wide as Rs 103 in May, and clawed back to Rs 90-95 in September-December.
This trend should continue in the next fiscal year, given improving demand, the study said.
Capacity utilisation of spinners has also risen from 70-80 per cent in the second quarter this fiscal to 90 per cent in the third, and is likely to remain high next fiscal, too, which supports revenue, said Gautam Shahi, Director, Crisil Ratings.
That, and widening cotton and yarn spreads would mean operating margins of spinners would increase 200-250 bps on-year to 11 per cent next fiscal, and operating profits would almost double.
As per the study, with demand rising, inventory should decline to typical levels of 2-3 months by the end of this fiscal, from around 4 months a year ago.
That would reduce dependence on short-term borrowings, it said.
The credit outlook for cotton spinners is positive as improving cash accrual and lower working capital debt will burnish debt protection metrics next fiscal, said Kiran Kavala, Associate Director, Crisil Ratings.
We expect the credit ratio to improve next fiscal driven by improvement in debt protection metrics such as interest coverage and net cash accrual to total debt of cotton spinners estimated to double to over 4 times and 0.25 time, respectively, next fiscal from an estimated 2 times and 0.12 time, respectively, this fiscal.
In addition, the study cited that higher exports and yarn realisation have helped spinners recover a chunk of the losses incurred in the first quarter of this fiscal.
"That said, China's stance on cotton yarn imports and the sustenance of higher spreads remain the monitorables," the study said.
Source: Sify.com
State Bank of India (SBI) plans to revamp its entire operational setup for lending to micro, small and medium enterprises (MSMEs) with a view to improve turnaround time (TAT) and customer experience while keeping bad loans in check. The bank has floated a request-for-proposal (RFP) seeking bids from consultants to carry out the process.
In the tender document dated March 26, the bank said that it would like to increase its market share in this category, which currently stands at 15%. “With the objective of becoming banker of choice for MSMEs, SBI intends to improve existing processes and structure in the SME space for achieving improvement in market share/enhance the portfolio while ensuring the asset quality,” SBI said.
The document reveals certain gaps in the existing operational flows of the bank. For instance, the credit guarantee fund trust for micro and small enterprises (CGTMSE) journey is entirely manual as there is no interface with the fund’s portal. The bank says that there has been poor offtake in this segment and there is a need to identify deficiencies in on-boarding which are resulting in high non-performing assets (NPAs). SBI also needs to develop analytics tools to generate supply chain financing business from its existing current account (CA) base.
There are four verticals in SBI’s MSME lending operations — SME Centre and relationship managers, supply chain finance, CGTMSE and cluster financing.
At the SME centre, the bank wants to identify gaps in the end-to-end process of loan origination, sanction and monitoring and propose changes in process flow and end-to-end digitisation specific to loans up to Rs 1 crore. They are also looking to reduce the TAT and improve on-boarding. In terms of the relationship manager (RM) enablement, the consultant will be required to benchmark digital offerings of RMs of peers and identify areas of data obtention that can be digitised and centralised, including making available a digital tool to work from anywhere.
In the supply chain finance (SCF) vertical, too, SBI wishes to benchmark current dealer/vendor financing SCF journeys with the “best-in-class world players and identify gaps.” The consultant will be required to develop value chain analytics capabilities, including an analytics framework on the lack of transaction flows of the existing current account (CA) base to generate leads for vendor and dealer onboarding.
The consultant will be tasked with identifying the reasons for poor offtake in CGTMSE schemes and suggesting measures for improvement. They will also have to identify deficiencies in on-boarding which could be hurting asset quality.
In cluster financing, the bank wants to build in risk mitigants. It expects the consultant to suggest a co-ordination mechanism with various government agencies for increased thrust in the cluster portfolio.The consultant will also be expected to bring in new fintechs for partnering with the bank, among other things.
SBI has a 1,770-strong team of RMs to provide specialised services to MSMEs as per their requirements. It has a network of more than 1,100 specialised SME intensive and MSME branches. Its SME portfolio grew 5.6% year-on-year (y-o-y) to `2.94 lakh crore at the end of December 2020. The NPA ratio stood at 6.85% in the SME segment amid an interim judicial order to not recognise NPAs after August 31, 2020. The order has since been lifted.
Source: The Financial Express
MP P R Natarajan has shot off a letter to Union textiles minister Smriti Irani, requesting her intervention to control the rising price of cotton yarn. The yarn price has increased to Rs 62 per kilogram since September and is expected to rise by another Rs 10 in a few months.
Pointing out that the textiles industry was labour-intensive and more than 25 lakh families in the state were dependent on it for their livelihood, the letter said the unsustainable price rise of cotton yarn has sabotaged the whole industry and affected the livelihood of thousands of workers.
Explaining that the businessmen, especially exporters, finalize orders based on the existing yarn price, he said they were forced to cut down on production because of the constant increase in price of the raw materials.
“Their future has become uncertain.” While seeking the intervention both the state and central governments to arrest the price rise on a priority basis, the MP also demanded them to take steps to ensure minimum support price to the cotton growers, procure cotton and ensure its availability to the yarn makers through the Cotton Corporation of India at a reasonable price.
“Before exporting it, cotton yarn should be made available to the domestic textile players. Steps should be taken to keep the yarn price stable at least for a fixed period and the price should be fixed by the government,” he said.
Source: The Times of India
There shall be no hike in yarn price in April 2021. This was decided in a meeting of nationwide regional associations of spinning mills, which was organised by the leading trade body Confederation of Indian Textile Industry (CITI).
Apparel Resources got to know that more than 50 people participated in the virtual meeting where the issue was discussed at length.
As reduction is seen in Intercontinental Exchange (ICE), it would automatically reflect in the cotton as well as cotton yarn prices.
On the other hand, the cotton price in India has also been reduced,and so spinners have been advised to not go for panic buying of cotton and stay calm as the prices of cotton may fall in the coming months.
Hank yarn prices have been coming down since last ten days and the yarn price is also expected to come down.
It is pertinent to mention here that since last few days many stakeholders of the industry are aggressively working to control the unprecedented hike in the yarn price.
The mills, which are in the habit of announcing any ‘LIST PRICE’ at the first day of each month, may defer such announcements at least for some months, to have the market sentiments regain good support.
It was also requested that companies should only buy yarn that’s required rather than buying it for stock.
Source: Apparel Resources
The government on Wednesday extended the existing foreign trade policy (FTP) for six more months up to September 30 this year, according to a notification.
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 existing FTP 2015-20, which is valid up to March 31, 2021 is extended up to September 30, 2021,” the Directorate General of Foreign Trade said in a notification.
Exports during April-February this fiscal dipped by 12.23 per cent to $256 billion. Imports during the period too declined by 23.11 per cent to $340.8 billion, leaving a trade deficit of $84.62 billion.
Source: The Financial Express
Uzbekistan-based Nil-Granit, which sells its products under brand Samo, is going to set up a garment factory in Bishkek Free Economic Zone in neighbouring Kyrgyzstan. The Uzbek company will invest $2 million and rent 2 hectares area to set up a factory with 200 workplaces. The Kyrgyz government will support with necessary infrastructure.
An agreement to the effect was signed by Akrom Ganiev, director of Nil-Granit, and Daniyar Habibullaev, deputy director of Uzbektextileprom, with Kudret Taichabarov, director general of Bishkek Free Economic Zone, according to a Central Asian news agency report.
The new factory will meet all local construction standards. The Kyrgyz government will help in obtaining all necessary permits, the report said.
High-quality clothing meeting global standards would be produced at the factory, and the products would be exported to Eurasian Economic Union member countries as well as other regions.
Source: Fibre2Fashion News
The UK Fashion and Textile Association (UKFT) has expressed disappointment at the announcement that the USA is considering putting tariffs of up to 25% on a host of UK exports in retaliation for a UK tax on technology firms.
These include women’s and girl’s dresses, men’s and women’s coats, men’s shirts, ties and shoes, according to a list published by the Biden administration.
The duties are designed to raise $325 million – the amount the US believes the UK tax will raise from US tech companies. The tariffs are now subject to a consultation in the US over the next few weeks.
“It was only earlier this month that the US removed additional tariffs on some UK-made fashion products so it is hugely disappointing that yet again our manufacturers are threatened with additional tariffs, particularly as the trade dispute has nothing to do with our industry,” said Adam Mansell, UKFT CEO. “At a time when we are trying to start discussions over a UK-US trade deal, it is extremely important that both governments get around the table to remove this threat as soon as possible. With the industry still struggling with the impact of Covid-19 and understanding the new trade arrangements with the EU, an additional burden on our exports couldn’t come at a worse time.”
A UK government spokesperson told the BBC: “Like many countries around the world, we want to make sure tech firms pay their fair share of tax. Our digital services tax (DST) is reasonable, proportionate and non-discriminatory. It’s also temporary. We’re working positively with the US and other international partners to find a global solution to this problem and will remove the DST when that is in place.”
Source: Innovation in Textiles
US-based Lycra has announced the launch of its first performance offerings made from 100 per cent textile waste. Coolmax and Thermolite EcoMade fibres made from textile waste are launched with collaboration between Lycra and Itochu Corporation, a general trading company with strength in consumer-related sectors, including the textile business.
The new offerings pair the brand equity and performance attributes of these leading cooling and warming brands with the sustainability benefits of textile waste, thus helping address a critical industry need, Lycra said in a media statement.
Integrating textile waste technology with Coolmax and Thermolite fibres provides consumers with the performance attributes they seek, while making these industry-leading fibres in a new and responsible way. A unique depolymerisation and refining process is used to convert textile waste, which consists of scraps from garment manufacturers, into fibres with properties comparable to virgin polyester. The new fibres are available in filament and staple forms, suitable for common textile processes and insulations batting uses, Lycra said.
The industry’s preeminent cooling and warming performance solutions, Coolmax and Thermolite fibres, have been made from recycled raw materials such as recycled PET bottles for many years. The company will continue to offer these products in parallel with those made from textile waste. These new products can be purchased from Lycra, except in Japan where Itochu will be responsible for sales and marketing. A variety of mills have access to the new offerings and will shortly begin to develop fabrics with them, according to Lycra.
“We are pleased to announce our alliance with Itochu in helping to address textile waste, which represents a substantial sustainability challenge as the equivalent of one garbage truck of textiles is sent to landfills or incinerated every second. This collaboration exemplifies the synergistic approach we have to develop products and technologies that support a more sustainable future for our vast global customer base,” Julien Born, chief commercial officer Lycra said in a statement.
Source: Fibre2Fashion News
The Biden administration has alleged that US exporters continued to encounter significant tariff and non-tariff barriers that impede the imports of its products into India.
In its annual 2021 National Trade Estimate Report on Foreign Trade Barriers, the US Trade Representative (USTR) said on Wednesday that while the Indian government pursued ongoing economic reform efforts, it also continued to promote programmes like ‘Make in India’ that favour domestic production over importation.
“Additionally, in May 2020, Prime Minister Narendra Modi announced the “Self-Reliant India” (Atmanirbhar Bharat) initiative to increase self-sufficiency by promoting domestic industry and reducing reliance on foreign suppliers,” the USTR said in the India section of the voluminous report running into more than 570 pages.
“The United States has actively sought bilateral and multilateral opportunities to increase access to India’s market,” it said. “Nevertheless, U.S. exporters continue to encounter significant tariff and non-tariff barriers that impede imports of U.S. products into India.”
According to the report, the US goods trade deficit with India was USD 23.8 billion in last year, a 1.7-per-cent increase (USD 389 million) over 2019. The goods exports to India were USD 27.4 billion, down 20.1 per cent (USD 6.9 billion) from the previous year. Imports from India were USD 51.2 billion, down 11.3 per cent. India was the US’ 12th largest goods export market in 2020.
Exports of services to India were an estimated USD 24.3 billion in 2019 and imports were USD 29.7 billion. Sales of services in India by majority US-owned affiliates were USD 33.1 billion in 2018, while sales of services in the US by majority India-owned firms were USD 18.3 billion, the report said.
“US foreign direct investment in India (stock) was USD 45.9 billion in 2019, a 8.1 percent increase from 2018,” it said, adding that the country’s direct investment in India was led by professional, scientific and technical services, manufacturing and wholesale trade.
The annual report provides a detailed inventory of significant foreign barriers to US exports of goods and services, investment, and e-commerce.
The first report of the Biden Administration said that since 2014, the Indian government promoted the ‘Make in India’ campaign, a drive to build the country’s manufacturing capacity in part by cutting barriers to foreign investment and introducing regulatory reforms.
As part of the campaign to encourage domestic production, India has raised duties on two broad groups — an assortment of labour-intensive products; and electronics and communication devices, including mobile phones, televisions, and associated parts and components, it said.
The report alleged that India’s tariff regime was also characterised by large disparities between the World Trade Organization-bound rates and most-favoured-nation-applied rates. India’s WTO-bound tariff rate averaged 50.8 per cent, while its applied MFN tariff for 2019 averaged 17.6 per cent.
“India’s bound tariff rates on agricultural products are among the highest in the world, averaging 113.1 percent and ranging as high as 300 percent. Applied agricultural tariff rates are also high, averaging 38.8 percent,” it said. “While India’s applied tariff rates for certain agricultural products are lower, the rates still present a significant barrier to trade in agricultural goods and processed foods (e.g., poultry, potatoes, citrus, almonds, apples, grapes, canned peaches, chocolate, cookies, frozen French fries and other prepared foods used in quick-service restaurants).
“In addition, while India has bound all agricultural tariff lines in the WTO, nearly 30 percent of India’s non-agricultural tariffs remain unbound,” the report said.
Source: The Financial Express
There are chances that India can start exporting cotton to Pakistan.
Pakistan has recommended the lifting of the ban on the import of cotton from India to bridge the raw material shortfall the country’s textile sector is facing.
After the Pulwama attack (14 February 2019), Pakistan lost its MFN status with India thereby impeding the import of duty-free cotton.
Pakistan withdrew all import duties on cotton on 2 January this year; earlier it had imposed a 11 per cent import duty.
Pakistan’s Textile Ministry, headed by Prime Minister Imran Khan, 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, reports Pakistani media.
Prime Minister Khan, as in-charge of the Commerce and Textile Ministry, had already approved the summary to be placed before the ECC, a report said.
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.
Cotton Association of India (CAI), one of the leading Indian trade bodies,is also advocating the starting of cotton export to Pakistan.
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.”
Pakistan Textile Exporters Association Chairman Khurram Mukhtar said that import of raw cotton, yarn and grey fabric from India would bridge the gap in demand and supply.
Source: Apparel Resources
Pakistan will buy sugar and cotton from India, newly appointed Finance Minister Hammad Azhar announced on Wednesday, lifting a ban on their import from the neighbouring country imposed in the wake of heightened tension over Kashmir in 2019.
The decision was taken at the meeting of the Economic Coordination Committee (ECC), which was chaired by Finance Minister Azhar.
Azhar said that the meeting discussed 21 items on the agenda, including import of cotton and sugar from India, which it allowed after detailed discussion.
The resumption of import of these goods will lead to partial revival of bilateral trade relations, which were suspended after the August 5, 2019 decision of India to revoke the special status of Jammu and Kashmir.
The private sector was allowed to import 5 lakh tonnes of white sugar from India, he said.
He also said that the government had allowed sugar to be imported from other countries, however, the price of the commodity in other countries was also high.
“However, in our neighbouring country India, the price of sugar is quite cheap,” he said. “Hence, we have decided to resume sugar trade with India”.
Azhar also said that Pakistan will import cotton from India starting June this year.
Adviser to the Prime Minister of Pakistan for Commerce and Investment, Dawood welcomed the decisions taken by the ECC.
“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,” Dawood tweeted.
Finance Minister Azhar told the media that demand for cotton in Pakistan was increasing but it had not produced quality cotton last year hence it had given the green signal for the product to be imported from other countries.
“The import of cotton from India was banned and this had a direct effect on our SMEs,” he said. “However, at the recommendation of the Ministry of Commerce, we have also decided to resume the trade of cotton with India,” he added.
Azhar was appointed as Finance Minister on Monday by Prime Minister Imran Khan who removed Dr Abdul Hafeez Shaikh from the finance portfolio after his embarrassing defeat in the Senate elections. Azhar is the third finance minister to be appointed since Khan came to power in 2018.
Earlier, in May 2020, Pakistan lifted the ban on import of medicines and raw material of essential drugs from India amid the Covid-19 pandemic.
The Ministry of Textile had sought permission from the ECC to lift the ban on import of cotton and cotton yarn from India in a bid to bridge the raw material shortfall for the value-added textile sector.
The Ministry of Commerce separately asked for permission to allow import of white sugar from India through the Trading Corporation of Pakistan and commercial importers.
Official sources here said that Prime Minister Khan as Minister-in-Charge of Commerce and Textile had already approved the reports placed before the ECC for allowing import of cotton and sugar from India.
“It shows that there is no technical or legal hindrance for importing these items from India,” a source said.
Tension has come down between the two nations after the restoration of ceasefire on the Line of Control last month. It was followed with an exchange of letters by the prime ministers of the two countries.
It is said that the two sides are working behind the scenes to restore their full diplomatic ties which were downgraded after August, 2019 action in Kashmir.
India’s move to revoke the special status of Jammu and Kashmir in August, 2019 angered Pakistan, which downgraded diplomatic ties with India and expelled the Indian High Commissioner in Islamabad. Pakistan also snapped all air and land links with India and suspended trade and railway services.
Source: The Financial Express
