SEZs and EoU units have been excluded from the benefits under the Remission of Duties and Taxes on Exported Products scheme, notified last month. India could offer further concessions to enterprises within special economic zones and export-oriented units to boost the exports sector. The finance ministry will soon set up a panel to work out details of extending the recently announced tax neutralisation scheme — Remission of Duties and Taxes on Exported Products (RoDTEP) — to these entities, director-general of foreign trade Amit Yadav told ET. “This committee will determine the remission rates which can be the rates for advance authorisation licence, SEZs and EoUs,” Yadav said, adding that the budgeted amount would be provided thereon. For advance authorisation, SEZs and EoUs, the principle cannot be the same as that for units within the domestic tariff area, he said. The scheme for these would likely be available by next financial year. Units within SEZs and EOUs source as much as 30% of their inputs from the domestic tariff area and industry has been demanding neutralisation for taxes paid on them for some time. Yadav said the government would also re-look at the remission rates offered under the RoDTEP scheme for some sectors following industry representations. “The Ministry of Finance along with the Department of Commerce will be setting up an anomalies committee which will be looking at these aspects,” he said. The government, in August, announced rates of tax refunds under the RoDTEP export promotion scheme for 8,555 products, such as marine goods, yarn and dairy items, with tax refund rates ranging from 0.5% to 4.3%.
Source: Economic Times
Indian minister for micro, small and medium enterprises (MSMEs) Narayan Rane recently virtually inaugurated the India Export Initiative and IndiaXports 2021 portal of India SME Forum. IndiaXports aims to orient MSMEs, without any fees, with the objective of focussing on the untapped export potential in existing tariff lines and help grow the number of exporting MSMEs. The target is to increase MSME exports by 50 per cent in 2022, according to an official release. The information portal serves as a knowledge base for export of all 456 tariff lines and the potential markets.
Source: Fibre2Fashion
The Union Minister of Commerce & Industry, Consumer Affairs & Food & Public Distribution and Textiles, Shri Piyush Goyal has said India is poised to become one of the largest digital markets in the world. Addressing the 2nd Global Fintech Fest-2021 through video conferencing today, he said, “At 87%, India has the highest FinTech adoption rate in the world against the global average of 64%.” “As of May 2021, India’s United Payments Interface (UPI) has seen participation of 224 banks & recorded 2.6 billion transactions worth over $68 Bn and the highest ever, more than 3.6 Bn transactions, in Aug’21,” said Shri Goyal. “Over 2 trillion transactions were processed using the AePS (Aadhar-enabled payment system) last year,” he added. The Minister said India’s FinTech industry came to the rescue of people at the time of pandemic, by enabling them to carry out critical activities from the safety of their homes, particularly during the lockdown & the 2nd wave of Covid. “As Prime Minister Modi says, ‘every crisis can be converted into an opportunity’, now citizens do not have to go to the banks, the banks have come to their homes and on their mobile phones,” he said. Shri Piyush Goyal said, under the visionary leadership of the Prime Minister Shri Narendra Modi India underwent a digital transformation in Mission Mode since he announced the Jan Dhan Yojana in his first Independence Day speech on assuming office, on 15th August 2014. More than 2 crore accounts were opened under the scheme, which has been considered a world record, he said. “JAM trinity, besides DBT, has brought in transparency, integrity and timely delivery of financial benefits and services to India’s vast population. “JAM trinity has enabled India to leverage its technical capabilities for developing Fintech sector. The Minister said, under the National Broadband Mission soon every village in India will have high speed internet and this power can be leveraged to make India a Fintech Innovation Hub. “I believe India is poised to become one of the largest digital markets with rapid expansion of mobile & internet networks. As India aims to become Aatmanirbhar, we want our industry & entrepreneurs to use local talent to produce globally marketable solutions, he said. Shri Goyal said, FinTech today has the potential to bring investments for mobile apps, ecommerce stores & several other digital infrastructures. “Investment inflow in the Fintech sector which has gone up to $10Bn since it started in 2016 has the huge potential to “Up the Game”, it will simultaneously enhance customer experience. Your strength will be augmented by the world’s 3rd largest Startup ecosystem which is hungry for growth.” An interesting development is the emergence of embedded finance The non-financial services sectors are also proactive in adopting FinTech solutions today. Shri Goyal said that with the expansion of their value chains, we need to consume more and more fintech services will grow proportionally. “Our MSMEs have also rapidly adopted FinTech solutions whether for credit, payments, accounting & tax filing. Government has recently launched the Open Credit Enablement Network (OCEN) & Account Aggregator (AA) framework. These enable formal credit flow to the most vulnerable segments, especially particularly small businesses, brings Ease for financial institutions to reach large segments, by lowering distribution costs and now institutions can give smaller loans, with short repayment cycles. The Commerce Minister said, India is today one of the fastest growing Fintech markets with more than 2,100 FinTechs. “A lot of Indian Fintech markets are unicorns and India’s market is currently valued at $31 Bn, and expected to grow to $84 Bn by 2025,” he said.
Source: PIB
Both the countries will exchange the first list of offers for products in which they seek tariff concession under the FTA, formally called Comprehensive Economic Cooperation Agreement (CECA), by October. India and Australia are planning to hammer out an early-harvest trade deal by the Christmas this year and a broader free trade agreement (FTA) by the end of 2022. At a joint briefing with commerce and industry minister Piyush Goyal in New Delhi, Australian minister for trade, tourism and investment Dan Tehan said, “It (the FTA) will cover goods, services, investments, government procurement, logistics, standards, rules of origin.” The negotiating teams of both the sides will start working immediately, identifying the key sectors that will be covered by the FTA, Goyal said. While bilateral goods trade stood at $12.3 billion in FY21, India had a deficit of $4.2 billion with Australia, as it shipped out merchandise worth just over $4 billion. Major traded items include mineral fuels, pharmaceutical products, organic chemicals and gem and jewellery. Both the countries will exchange the first list of offers for products in which they seek tariff concession under the FTA, formally called Comprehensive Economic Cooperation Agreement (CECA), by October. Although talks for an FTA with Australia have been going on since 2011, the reluctance of Indian industry to offer greater access to farm and dairy products and Australia’s unwillingness to further open up its services sector for the free movement of skilled Indian professionals have delayed the outcome of the negotiations. However, in the past two years, the talks have gained momentum. The negotiations with Australia are a part of India’s broader strategy to forge “fair and balanced” trade agreements with key economies and revamp existing pacts to boost trade. The move gained traction after India pulled out of the China-dominated RCEP talks in November 2019. Last week, India and its third-largest export market, the UAE, started formal negotiations for a “mutually-beneficial” comprehensive economic partnership agreement (CEPA). New Delhi and Abu Dhabi aim to wrap up negotiations by as early as December 2021 and sign the deal by March 2022 after the completion of necessary ratification processes. If all goes as planned, it would be the first FTA to be signed by India in just over a decade. Balanced FTAs are expected to also enable the country to achieve sustained growth rates in exports in the coming years. Already, India has set an ambitious merchandise export target of $400 billion for FY22, against $291 billion in FY21.
Source: Financial Express
We cannot regulate international shipping rates. It is market driven and we are in dialogue with them to see that more ships dock in India. But since it is an international phenomenon and affects all exporters across the world and all international trade, I do believe that while it may take some time, it may not affect as badly as was thought earlier. In an interview with ET Now, Piyush Goyal, Union Minister of Commerce and Industry, talks about slew of reforms to boost exports, PM's ambitious target for this year, container shortages, and more On slew of relief measures that have been announced for exporters,the idea is to give them much needed relief as we are coming out ofthe COVID period. Talk to us about what will be the kind of reliefthat we will see for exporters in the nextfew days. Export has been a thrust area of this government and this year we have set a very aggressive goalpost for the country and I am delighted to share with you that the entire business community, exporter community is aligned with our expectation, and with the honourable Prime Minister’s clarion call to take exports to the next level. All our missions over the world have also joined in this effort by engaging with stakeholders, with importers in others countries, to get more demand from India. It is an entire collective collaborative effort and we have shown it through a series of measures announced over the last 12-13 months. After Atmanirbhar Bharat package was first announced, the country wishes to encourage exports. The announcements will help get an insurance cover which means getting additional credit facilities will become easier for exports worth Rs three lakh crores. Project finance and Rs 33,000 crores are steps that are basically intended to strengthen our exporters ability to do international trade and I am very clear that the mood I see in the market, the enthusiasm when I engage with exporters, they will not let this nation down. We are speaking with you at a time when the Prime Minister has set a very aggressive target. The second half ofthe year is usually a year where we see a lot of exports picking up. Given the factthat we are seeing recovery happening across the Indian economy, how likely is itthat we are not even only going to meet but perhaps exceed the 400 billion targetthat has been set outfor this year. A target is always set very ambitiously and this year’s target was a huge jump from 290 to 400 billion and most naysayers had believed that it is just not possible. But as Prime Minister Shri Narendra Modi always guides us, one must take an aggressive goalpost and work towards it with full vigour. I am delighted that the exporting community has taken the Prime Minister’s clarion call to heart. We are well on our way to achieving the target. We have issues with shipping and containers and we are continuously engaging with the shipping ministry, with ship carriers but we feel confident that we will do well this year. First half figures are at 185 billion until 21st of September. Do encourage all of us but we will play it as we go along and hope to do better than expected. You did speak aboutthe speed bump that we are seeing with respectto container shortage, and the shipping shortage as well. When you say that you are engaging with stakeholders, how soon can we expect a resolution to this? This is going to be pretty importantin terms for us to be able to meet our 400 billion dollar target as well. I think this is an international phenomenon. It is not limited to India alone. So I do believe that it will take some time to settle down. We cannot regulate international shipping rates. It is market driven and we are in dialogue with them to see that more ships dock in India. But since it is an international phenomenon and affects all exporters across the world and all international trade, I do believe that while it may take some time, it may not affect as badly as was thought earlier. You are the commerce and industry minister. You look after the trade gap very closely. We are seeing crude prices inching towards the 80 dollars per barrel mark which is going to be a big concern for a country like India. How is the government looking at global crude prices inching forward and the kind ofimpactitis going to have for the Indian economy? Well, I cannot comment on global crude prices, that is something better dealt with by the petroleum ministry or by the experts in this field. I can assure you that a) our services exports are doing exceedingly well which will help us to bridge the trade gap significantly, and b) while on merchandise exports we may be facing a little shortfall but the fact is that it also gives a great boost to the Indian economy because a lot of what is coming in is raw materials and inputs for our finished products. So my sense is that with services taking a big jump, even if we have a little higher exports this year overall, we will be able to manage the trade deficit well and with 625 billion dollars plus forex reserves, India is in a sweet spot and internationally being recognised as a very strong economy.
Source: Economic Times
The Federation of Indian Export Organisations (FIEO) recently launched a trade facilitation portal—www.easeoflogistics.com—at the closing ceremony of ‘Vanijya Saptah’ in New Delhi. Inaugurated by commerce and industry and textile Piyush Goyal, the portal brings exporters and logistics service providers on a single platform, said FIEO president A Sakhtivel. Over 1,800 exporters and more than 300 service providers were brought on board during the launch of the portal, an FIEO press release said. FIEO is also supported in this effort by leading logistics associations, including those involving container shipping lines, freight forwarders and multimodal transport operators. Exporters can post details of their container requirements directly to service providers for receiving the best quotes, enabling exporters to chat, negotiate and finalise business.
Source: Fibre 2 Fashion
The govt must ensure that the base for direct taxes is widened, and also that the rates are rationalised by phasing out exemptions Tax revenues in FY22 so far have surpassed expectations and could well exceed the budgeted Rs 22.17 lakh crore. Even though the base effect could slow the pace of direct tax collections, these could overshoot the projected Rs 11.15 lakh crore having jumped 101% y-o-y in April-August. The 50% y-o-y increase in advance tax collections indicates companies and individuals expect the rest of the year to go well; PIT collections have grown by 69%, way above the average of 10-12%. Again, the mop-up from GST, which have averaged more than Rs 1 lakh crore, are reasonably robust, and indirect taxes have now risen 52% in April–August. Going by the trend so far, the share of direct tax revenues could be bigger than that of indirect taxes. Last year, the share of direct tax revenues in the total gross tax revenues was 4.7% of the GDP, whereas the share of indirect tax revenues was 5.4% of the GDP. This was also true in FY17—the year of demonetisation—when direct tax revenues, at 5.52% of GDP, were a shade lower than the 5.63% of GDP for indirect taxes. One reason for this was the sharp increase in levies on petroleum products, following the fall in the prices of crude oil; else, the share of direct tax revenueswould have overshot that of indirect taxes. To be sure the Centre and the states will both mop up very large sums by way of taxes on auto fuels, this year, given that prices have risen sharply while volumes have remained stable. But, it is important the economy gets a bigger share of direct taxes; an excess of indirect taxes in the kitty is rightly considered to be inequitable, the argument being that individuals, regardless of their incomes, are subject to the same levies on products and services. In the case of direct taxes, the rate of tax is linked to the level of the income. This is one reason experts have called for lower GST rates or other indirect levies like those on auto fuels. However, it is the direct-tax base that needs to be widened and the rates rationalised by phasing out exemptions. Revenue secretary Tarun Bajaj expects the Centre’s gross tax-to-GDP ratio to move up to 12% of GDP in the medium term, from just 10.3% in FY21 and between 11-11.2% over FY17-19. That is possible going by current trends. Moreover, he believes tax buoyancy will cross 1% from this year onwards. Since tax buoyancy includes all additional revenue measures—many of which are not made known publicly—the secretary is in a better position to assess the numbers. However, as economist Renu Kohli observed, the true level of tax buoyancy is challenged by inability to distinguish total revenue receipts from the impact of discretionary measures and the improvements in compliance, enforcement and administration. The government needs to put out more information in the public domain so that the receipts from an ‘unchanged taxation system’ are known and the real level of buoyancy can be ascertained.
Source: Financial Express
Shortfalls in revenue, decline in demand, production shortfalls, surge in raw material prices and stretched payment cycles were among the worst after-effects that plagued industries post the lockdown of 2020. To meet overhead costs and other operating expenditures, several industries, particularly, MSMEs availed emergency credit to battle the disruptions caused due to the pandemic. Clearly, the number of loans sanctioned under emergency credit line guarantee scheme (ECLGS) surged by a whopping 140% in a year, according to the latest report by State Level Bankers’ Committee (SLBC). The 170th SLBC meeting was held earlier this week, during which the report was released. It states that the number of industries seeking loans under ECLGS surged from 1.5 lakh in the first quarter of 2021-22 to 3.6 lakh in the corresponding quarter this year. During the same period, the amount of loans sanctioned too surged from Rs 7,480.29 crore to Rs 23,424 crore. The cumulative disbursals at the end of the first quarter of 2021-22 stood at Rs 20,434 crore in Gujarat under ECLGS. “To meet piling overhead costs amid revenue shortfalls and stretched payment cycles, a number of industrial units took loans. Since the interest rate of loans extended under ECLGS was 7.5% which is lower than what is extended to industries otherwise, certain units also availed these loans to repay other loans so that they can save on interest money,” said MM Bansal, convener, SLBC – Gujarat. “The definition of MSME was changed by the Union Ministry of Finance last year by including service sector units under MSMEs and increasing the turnover limit upto Rs 100 crore for a unit to be classified under MSME. As a result, more companies availed the benefit of emergency credit, made available as part of the relief package under Atmanirbhar Bharat,” Bansal added. Sectors such as apparel, garments and textiles, hospitality and tourism, among others witnessed a relatively slow revival, suggest industry estimates, and therefore, brought in more takers for emergency credit. Industry players said that while demand revived slowly, piling raw material costs since October 2020, also one of the reasons for surge in industrial units availing emergency credit. “Raw material prices have doubled across all sectors including real estate, chemicals, textiles, among others. After the lockdown, demand began reviving and export orders began to pour in. To meet the production requirements amid surging costs, many industries have opted for emergency credit,” said Hemant Shah, president, Gujarat Chamber of Commerce and Industry (GCCI).
Source: Times Of India
This was the lowest in any comparable period in relation to the respective BE since FY11, when the deficit came in at 39.7% of the BE in the first five months. The fiscal deficit was 109.3% of the corresponding annual target in April-August of FY21. Curbs on revenue expenditure and robust revenues helped the Union government contain its fiscal deficit in April-August to 31.1% of the budget estimate (BE) for 2021-22. This was the lowest in any comparable period in relation to the respective BE since FY11, when the deficit came in at 39.7% of the BE in the first five months. The fiscal deficit was 109.3% of the corresponding annual target in April-August of FY21. Even with the relief packages and export subsidy arrears clearances announced recently, the fiscal cost of which is estimated at around Rs 2 lakh crore, the fiscal deficit target of 6.8% of GDP for 2021-22 could be adhered to, given that tax revenue receipts would likely exceed the budget estimate by about Rs 2 lakh crore and expenditure rationalisation undertaken might allow savings of about Rs 1.15 lakh crore. Most departments were asked to contain spending in July-September to 20% of BE against norm of 25%. The expenditure curbs on departments were lifted on September 24. Robust revenue receipts gave the Centre confidence to limit its annual market borrowing programme at the budgeted level of Rs 12.05 lakh crore for FY22 even after factoring in Rs 1.59 lakh crore back-to-back borrowing arranged by the Centre for GST compensation to states, effectively bringing down its borrowings by Rs 1.59 lakh crore on-year. In the first five months, the Centre’s net tax receipts rose 127% on-year to Rs 6.45 lakh crore or 41.7% of FY22BE compared with just 17.4% of the corresponding target reported in the year-ago period. Corporation tax collections (post refunds) rose 160% on-year to Rs 1.68 lakh crore in the first five months of FY22 and up 51% over the corresponding period of pre-pandemic FY20, indicating robust profit growth of India Inc. Personal income tax (PIT) grew 69% on-year to Rs 1.99 lakh crore in April-August of the current financial year and up 20% over the corresponding period of FY20. There is a lack of clarity on whether the disinvestment target of Rs 1.74 lakh crore will be achieved in the current fiscal, and big-ticket plans like the BPCL sale will be crucial in this context. Revenue secretary Tarun Bajaj told FE recently that PIT had grown 62% on-year to Rs 2.88 lakh crore till September 23 of the current fiscal. The Centre’s gross tax revenue grew 70% on-year to Rs 8.6 lakh crore in April-August of FY22 and was up 30% over the corresponding period in FY20. The Centre’s capital expenditure in April-August of FY22 stood at Rs 1.72 lakh crore or 31% of the annual target as against 32.6% of the relevant target achieved in the year-ago period. After slowing down during the first four months, capex grew by 92% on-year in August. Total expenditure in the first five months of the financial year stood at Rs 12.77 lakh crore or 36.7% of the full year target, compared with 41% of the target achieved in the year-ago period. Data released by the Controller General of Accounts on Thursday put the Centre’s fiscal deficit for April-August of FY22 at Rs 4.68 lakh crore as against the BE for FY22 of Rs 15.07 lakh crore. Commenting on the H2 borrowing plan announced on September 27, Icra chief economist Aditi Nayar said, “The implication is that the government’s fiscal deficit will be around Rs 1.6 trillion lower than budgeted, despite the modest rise in expenditure, a clear confirmation of the revenue upturn that is under way. This also suggests that GoI’s disinvestment programme is assessed to be on track.”
Source: Financial Express
The core sector in August this year recorded a 3.9 per cent rise from the pre-covid August 2019 too The output of India’s eight core industries grew by 11.6 per cent in August compared with 9.9 per cent in the previous month even as the base effect was less beneficial.The core sector, comprising coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity, had contracted 6.9 per cent in August last year, as against 7.6 per cent in July. The core sector also recorded a 3.9 per cent rise from the pre-Covid level of August 2019. Only the production of refinery products and crude oil was lower over this period. However, the overall output was still lower by 0.3 per cent when compared to the February 2020 level. The picture at disaggregated level is more encouraging, said Sunil Kumar Sinha, principal economist at India Ratings. Except coal, refinery products, and cement, all other core industries surpassed the pre-Covid level on this parameter. Industries that showed higher output levels than in February 2020 were crude oil (105 per cent), natural gas (126.3 per cent), fertilisers (108.5 per cent), steel (103.5 per cent) and electricity (122.2 per cent), said Sinha. He believed that core sector industries would cross the pre-Covid level of production at an aggregate level next month. Two industries -- crude oil and fertilisers -- saw a decline in their production in August, as against only one (crude oil) in July. There are reports of fertilser shortage faced by farmers ahead of rabi sowing in various parts of the country. Cumulatively, core sector output grew at 19.3 per cent in the first five months of the current financial year, as against 17.3 per cent contraction in the corresponding period of the last financial year. India Ratings believed that the Index of Industrial Production (IIP) would also show an encouraging trend in August. The core sector has 40.3 per cent weighting in the IIP. Industrial production growth declined to 11.5 per cent in July from 13.5 per cent in June because of the normalisation of the base. ICRA in a note said although core sector growth had improved, the weaker trends in auto production were likely to weigh upon the manufacturing output in August 2021, resulting in IIP growth of around 11-12 per cent, similar to the July 2021 print. It also warned that the August gains in sectors such as mining, construction, and electricity were likely to be washed out by the September rains, exacerbating the impact of the normalising base.
Source: Business Standard
Such investments depend on a more stable policy and regulatory framework than the streamlining of procedures and digitisation of paperwork India’s growth lost its stride even before it was devastated by Covid. But the ruling NDA, led by PM Narendra Modi, harbours ambitions of making India a $5-trillion economy in five years. The transition from the current size of $2.7 trillion to $5 trillion needs a massive step up in investments, both domestic and foreign, especially in greenfield projects. The government has prioritised an infrastructure-led push for growth, amounting to $1.4 trillion. As budgetary resources are constrained due to slower growth and the animal spirits of domestic entrepreneurs to invest are low, foreign capital is being invited to play a huge role. The big question is whether foreign capital would oblige. The problem is that FDI into India, of late, is less interested in setting up greenfield factories, industrial parks, etc, and more in M&As in brownfield assets. Last year, for instance, foreign equity inflows rose by 27%, to $64 billion, mainly due a surge of 83% in M&As, amounting to $27 billion in ICT, healthcare, infrastructure and energy, as per UNCTAD. As these investments entail acquisition or taking equity stakes in existing facilities, the implication is that only a fraction of the FDI inflows are creating fresh assets in the economy. However, not so long ago, India was the world’s leading recipient of greenfield FDI—$63 billion and $62.3 billion in 2015 and 2016, respectively, according to fDi Markets of the Financial Times Group— after reforms-friendly Modi took office in 2014. The country was also one of the world’s fastest-growing large economies, at a clip of 8% and 8.2% in FY16 and FY17. The then CEO of Unilever, Paul Polman, told a leading business daily in 2017 that he “would love to have an economy of your size, growing at 5 to 6 per cent. Anybody would love to have that trajectory. At Hindustan Lever Ltd we have doubled our business in about seven to eight years. We have created in Hindustan Lever in the last eight years…. what took us a hundred years to create”. Since 2015, the flurry of greenfield proposals were exemplified by China Small and Medium Enterprises’ investment of $740 million in an industrial park, Beijing Auto’s project for $300 mn, Tsinghshan Holding’s $1.2 bn investment in steel, BBK Electronics’ $900 mn plans in telecom, among others, according to US-based AEI’s China global investment tracker. Property magnate Wang Jianlin’s Dalian Wanda also made a $10 bn commitment to build an industrial park. Global auto players, too, ramped up capacities. Maruti Suzuki India Ltd, which accounts for 50% of India’s car market, built its third factory in the state of Gujarat. Ford built its second plant in Gujarat. Mercedes Benz intended to double its assembly capacity. This surge hit a downtrend thereafter ($23.5 billion in 2020), when India’s growth also decelerated from FY17 onwards. Many big-ticket investment plans did not materialise or were shelved due to difficulties in doing business in the various states, regulatory uncertainty and land acquisition problems. An additional difficulty was the case-by-case scrutiny of investments from China on national security grounds in April 2020. None of the earlier Chinese proposals in autos or industrial parks took off. After investing $2.5 billion, Ford has exited the Indian market, following General Motors, Harley Davidson and MAN trucks. Steel giant Arcelor Mittal has had no success with greenfield projects. FDI numbers thus began to show a growing preference for brownfield investments through M&As. Between 2015 and 2017, the biggest Chinese investment deals included the $1.1 billion takeover of Gland Pharma by Fosun. MG Motors India, a subsidiary of SAIC Motor Corp that acquired a 50% stake in GM India in 2009, has acquired the latter’s facility to roll out SUVs. It has also shown interest in Ford’s facilities. Proposals worth $17.6 billion during April-June this fiscal, mostly from China and Hong Kong, being scrutinised by the government, are mostly for brownfield projects. Arcelor Mittal established its footprint in India by acquiring Essar Steel for $6 billion. If foreign capital is to contribute to making India a $5-trillion economy, it is necessary to incentivise a much larger proportion of FDI inflows towards greenfield projects. Such investments depend on a more stable policy and regulatory framework than the streamlining of procedures and digitisation of paperwork that have improved India’s ranking in World Bank’s Doing Business indicators (that has now been discontinued). Reform to free up the land and labour markets and improving the environment to do business in the states is imperative.
Source: Financial Express
Sustainability in the heart of fashion business helps the world to be a better place in more ways than one. Investing in sustainable practices can deliver never-before opportunities in business expansion and differentiation for products, brands, companies and all partners in the value chain. Sustainability is clearly a growing area of focus regardless of the industry, civil society, and Governments. It is not difficult to see why 197 Nations signed up for the Paris Climate Agreement in 2015, to limit global temperature to within two degrees increase — if not 1.5 degrees — from pre-industrialized levels. Statistical data for similar periods show the critical state of climate distress – in a 17-year comparison, number of floods globally rose from 1200 until CY 2000 to 2800 until 2018. In a 33-year comparison, droughts rose from 200 until CY1984 to 500 until CY2018. There is much more of such extremely worrying data from the UN Intergovernmental Panel on Climate Change (IPCC). Accounting for 2.4 percent of the global GDP, fashion and textiles are two of the largest industries globally. They touches lives, are media perceptive and prone to NGO scrutiny. They are also some of the most polluting, consumer underutilizing and landfill ending sectors — resulting in huge impacts on the environment. To improve the sustainability quotient of the industry, it is therefore important to understand key parameters across the textile value chain, analyse consumer insights, and view innovative models that build sustainable businesses Cotton, polyester and viscose are the top three fibres used in the fashion Industry, and each comes with its unique set of attributes, sustainability challenges and progressive work for betterment. Cotton: Cotton fibres are loved for its natural base, comfort and biodegradability and have challenges of conservation of land, water, fertilizers, and pesticides. Cotton uses around three percent of global agricultural land for cultivation with a yield of around 0.9 mt / hectare. India, the largest grower of cotton globally, has a low yield of 0.46 mt/hectare, which needs improvement. A WRI study shows that a cotton T-shirt of say 0.4 kg consumers a huge 2700 litres of water in manufacturing. Buyers that are more discernible have been focusing on organic cotton and a fewer ones with BCI. Initially, BT cotton was seen as the panacea for the yield challenge but later results were enriched by plant nutrients, crop rotation and innovative irrigation methods. ROC, practiced by few mills, is one of the best for sustainability in cotton. Polyester: Polyester, preferred for its ‘wash-n-wear’ qualities, strength and economy, has challenges due to it being made from crude oil, high energy and non-biodegradability — thereby a huge challenge in end of cycle. rPET recycled polyester fibres using PET bottles, form nearly 13 percent and has partly addressed the crude oil challenge. Recycling of clothing-to-clothing polyester articles will be a good step in its sustainability stride to address the end of cycle challenge. Viscose: Viscose, modal and lyocell brands, popular with consumers for their natural base, fluidity and biodegradability, present challenges in the form of conservation of forests, use of chemicals, emissions and effluents during manufacture. Responsible manufacturers have excelled by using only FSC, SFI, PEFC certified wood; thus, more trees are planted than destroyed. Birla Cellulose has been a global leader in responsible forestry management. In India, silviculture of the Grasim Harihar unit generates profitable employment for farmers too. Further closed loop and Best Available Technology (BAT) enriched sustainable manufacturing. Lyocell that uses solvent spun technology and spundyed viscose increase sustainability in downstream processes. Newer natural fibres such as banana, orange, lotus, pineapple are exotic and gaining attention due to their sustainability credentials. We shall have to wait and see the life cycle assessment of these when they are made commercially.
Dyeing and Finishing Excellence Critical
For Environment ‘Wet Processing’ of textiles give fashion a colorful ‘look and feel’, but in doing so, it uses much water, chemicals, steam and energy. Over 2000 chemicals and 60 percent of all coloring matter are used and dispensation of effluents and emissions is a challenge. Globally, 20 percent of all effluents are from the fashion and textile industries. Innovations have led to improvement through technology such as waterless dyeing, central effluent treatment plants, ROs and close looping. Roto spray, reuse of liquids, low temperature processes, enzymatic processes, ZLD are quite in vogue. Technology providers, finishing companies, NGOs like ZDHC have played an important role by collaborating to win.
Clothing Brands’ Leadership
Top clothing brands across the world have taken on leadership roles to make a quantum difference in the sustainability actions of their operations, in retail and to the supply chain. They have embarked on a multi-pronged business improvement strategy led with sustainability at the core. In the design phase itself, more than a year earlier to the merchandise hitting the store, designs are made considering fibres and blends having a better Material Sustainability Score MSI, LCA and biodegradability. This has improved their merchandise assortment and has created differentiation, both delivering positive business results. The merchandise, whilst adhering to the seasonal trend requirements, is also focused in detail on the within-season mini cycles to help reduce markdowns (the biggest bane of any clothing brand). Here clear agreements introduced with the supply chain to hold intermediate inventories facilitating quick turnaround time for second and third drops into stores. Trend forecasting tools and real-time digital-led analytics, more so post the Covid-19 pandemic, have also helped. Also, avoiding air shipments have helped to boost both sustainability and profitability. Very few fashion or textile companies practice optimization of garmenting waste and inputting that to circular models. Packaging and accessory usage is an area where biodegradable, renewable, reusable, lighter materials are used less per unit. Channels have helped in retaining of safety and aesthetic performance without a tradeoff through active participation. Digital Traceability of the entire supply chain is on the rise for endorsing claims on sustainability throughout the process. Life cycle assessment LCA is another tool that is encouraged and analyzed to be sure of the products sustainability hot spots and roadmap for improvement. The marketing campaign of merchandise have been fine tuned to be sustainability educative, consumer terminology inclusive and which relate to apprehensible metaphors. For instance, share process water saved in terms of drinking water made available per person per year instead of stating the litres of water saved. For example, one global brand promises to plant 10 trees for buying merchandise and thereby reduce carbon footprint. Retailing — be it physical or e-commerce — has its nuances. Stores have done work mostly on organizing visual merchandise with savings in energy by using LED lighting and for green building concepts; e-commerce is yet to succeed in its reverse logistics optimisation, which plagues its otherwise rapid growth.
The Greenhouse Gas challenge
According to a McKinsey research, the textile and clothing industry released 2.1 bn tons CO2 equivalent of GHG in 2018, a big enough figure to take action for reduction. Upstream actions in bulk relate mostly to cleaner and renewable energy usage. India has done reasonably well with solar forming 3.6 percent and wind 4.7 percent of the energy basket in India in 2020. In retail, multiple actions by global brands from designing to retailing can help in 25-30 percent reduction. Post-consumer usage such as washing, drying, ironing and disposal form a reasonable part too in boosting sustainability practices.
Emergence of Circular Business Models
A global study finds that in USA, consumers throw away 60 per cent on their clothes in the first year. This means that globally 18 million tons of clothing will be consigned to landfills. The Ellen MacArthur Foundation reports that only one percent of clothing is recycled and unless action is taken, nearly 150 mn tons would reach landfills by 2050. Circular business models that include many Rs — reuse, reduce, refurbish, rent, recycle — have renewed wings to take flight. Indians have culturally been more prone to reuse rather than dispose, clothing not being an exception. Hence, they do not see landfills, early in the cycle. Most end up in alternate use for cleaning material for industry and households with some change in configuration. Mechanical recycling of cotton clothing is deep in India, who is the global leader for that, though the quality is lower when compared to the original. Birla Cellulose has pioneered chemical recycling of cellulose fabric waste into viscose fibre of equivalent quality with the brand Liv Reviva. rPet is manufactured using waste PET bottles by manufacturers such as Reliance and Polygenta. Global brands have offered exclusive collections in the refurbish model in which they collect used clothing sold earlier, refurbish them and offer in the stores afresh. Brands have also been a source of collection for any old clothing, which thereafter are refurbished, packaged and re-exported from the Kandla port in Gujarat. Fashion rentals have also grown well as they offers a choice of non-ownership-led usage of multiple brands and styles — a way of staying fashion fresh at all times. The biggest challenge would however be fast fashion and reduction in usage since it affects both businesses volumes and the consumer appetite for fashion.
Consumer Behaviour:
Impetus for Sustainability Consumer behavior is changing due to rising evidence of climate change. Global research shows that 88 percent consumers would prefer sustainable clothing. Our research in India shows, quite hearteningly as well, that 49% of Gen Y and millennials have profound inclination towards sustainable practices and products during fashion purchases. ‘Tell us what is sustainable in your products and help us participate in it’ is what they say.
Beware of Greenwashing
The consumer needs to be wary of the sustainability claims of certain brands who promote campaigns that may not necessarily adhere to those practices. The consumer who has a heart to buy sustainable products should carefully study the product and process claims, update knowledge and avoid falling into any green washing trap.
Sustainability, the Heart of Fashion
Sustainability in the heart of fashion business helps the world to be a better place. It offers a a phenomenal opportunity to excel and differentiate a brand or a manufacturing company, its products and services in the market place. Business excellence cannot be achieved without sustainable practices for sure in the future and we shall be hearing about this more intensely, as the years go by.
Source: India Retailing
China is losing the most basic necessity of human civilisation- electricity. Till now, we only knew how the Chinese steel mills, aluminum manufacturing and power sector may be suffering in lack of thermal coal. However, China’s power woes could be much bigger and brutal than what we imagined. Javier Blas, Chief Energy Correspondent at Bloomberg News, tweeted, “CHINA ENERGY CRUNCH: The electricity shortages in China are worsening, and widening geographically. It’s getting so bad Beijing is now asking some food processors (like soybean crushing plants) to shut down.” A report says, “from aluminum smelters to textiles producers and soybean processing plants, factories are being ordered to curb activity or — in some instances — shut altogether. Why is China failing to produce electricity? China is the biggest coal consumer in the world. The Communist nation still consumes over 56 per cent coal as a part of its total energy consumption. The fossil fuel is the most vital part of China’s energy security. Such a high concentration of thermal power in China means that any decline in coal supply hurts its ability to generate sufficient electricity. Presently, China is facing a serious shortfall of Australian coal. Last year, Beijing imposed an unofficial ban on Australian coal that immediately led to Southern provinces in the Communist country going dark. Also, Chinese thermal power plants are accustomed to working on Australian coal and it is not possible for such power plants to replace all their equipment and start operating on non-Australian coal. How big is China’s energy deficit? Well, it is pretty bad. Almost half of China’s regions missed the central energy consumption targets and are facing crumbling pressure to reduce power use. To worsen Beijing’s woes, the three main industrial Chinese provinces- Jiangsu, Zhejiang and Guangdong that account for around a third of economy of China, are facing power (electricity) cuts. Make no mistake, the ongoing electricity woes are a bigger problem than the downfall of Evergrande Group, which is a leading Chinese real estate developer. China has to shut down everything from aluminium smelters to textiles, and even food processing units like soybean plants. In Jiangsu, steel mills have reportedly shut down and some cities are even turning off their street lights. Similarly, in Zhejiang, 160 industrial units including textile units had to be shut down. Meanwhile, even the Chinese households are looking at upcoming chaos. There is a severe shortage of thermal power and therefore the Guandong province has taken an extreme measure- advising residents to cut down on air conditioner usage and to rely on natural light instead of using home lighting appliances. Meanwhile, cutting down electricity supply to factories is becoming a routine measure in China’s industrial provinces. Ultimately, power woes of China are bound to drive away even the multinational companies operating in the Communist nation. As per Nikkei, suppliers to Apple Inc. and Tesla Inc. halted production at some of their sites in China on Sunday. Moreover, many small firms have started complaining that they have to curb or halt industrial activity. As a consequence, the MNCs operating in China may feel the pain of reduced industrial activity in the country. We are looking at a shortage of everything from textiles to electronics components, and any disruption in the supply chain could eat into the profits of these corporations. They might as well have to exit China and translocate to other venues. China preparing for a tough winter season It is not even October and China is looking at unaffordable prices. Meanwhile, Chinese President Xi Jinping remains adamant and wants to keep blocking coal shipments coming from down under. Power tariff surges during the winter months is not an unusual phenomenon in China. However, this time around, China is looking at skyrocketing coal prices which is bound to push power woes even further. Last year, the Chinese ban on Australian coal shipments had led to widespread power rationing and the Chinese authorities had to limit power supply to various provinces. The upcoming winters are however expected to be even more difficult for China to handle. Presently, China is imposing even steeper power cuts and rationing electricity usage drastically because it wants to conserve sufficient power supply for the upcoming winters. With China’s industries failing, we are looking at a huge socio-economic crisis in the country, where it will fail to fulfil all its basic needs from manufacturing basic industrial goods to producing consumer goods like textiles and supplying enough electricity to power and illuminate its households.
Source: tfiglobalnews
The Managing Director of the Ore Industrial Park, Dr Femi Akinkuebi, has identified the textile industry as a crucial sector for strengthening economic recovery, creating wealth for the nation and reducing unemployment substantially. Akinkuebi who stated this during a tour to the Industrial Park, on Thursday, said there is an urgent need for government to boost the textile industry to revamp the industry through provisions of some infrastructural facilities. According to him, giving attention to the sector will encourage people to take pride in investing in locally made products and this will help to boost the nation’s economy maintaining that the revival of Nigeria’s Textile Industry remains a factor in economic growth. He noted that Nigeria is richly endowed with the much needed raw materials as well as the skills to globally promote made in Nigeria goods for viable economic gains, saying this will discourage Nigerians strong desire for imported materials. He explained that if properly harnessed, the Textile industry can reduce over $4 billion in import bills annually, and save the nation’s hard earn foreign exchange while accelerating the industrial development of the country, and making Nigeria a global player in the textile and garment subsector According to him, if the yearly import bill of $4 billion textile fabrics is re-invested into the textile industry, the country would be a net exporter and expand its revenue from programmes like the African Growth and Opportunity Act (AGOA) of the United States. While explaining that Industry data showed that in 2019, 18.6 per cent of all imported cotton worldwide ended up in China, which made the country the largest exporter of textiles and clothing products in the world, disclosing that Chinese imports currently account for 60 per cent of the print fabric market in Africa, with India supplying an additional 21 per cent. He further explained that West Africa is a large market for prints and buys around 65 per cent of all foreign imports. Nigerian demand accounts for around 38 per cent of total imports in the region. In his words, “From materials knitting line/production of textiles auxiliary materials, like button, thread, stay down to clothing max production line, this industry has the capacity to employ over 500,000 workforces,” Akinkuebi said. He enjoined the Nigerian government to leverage the economic opportunities provided by this sector to economically advance the nation and encourage Nigerians to take pride in patronizing and investing in locally made goods. Dr Akinkuebi also appreciated the efforts of the Akeredolu led government in Ondo State for the creation of the Ore Industrial Park, which was designed to ensure rapid transformation in the state, noting that this has led many investors to come on board. He said the facility which had commenced operations has the much-needed incentives to aid the manufacturing of locally made goods in the country. He hinted that the OIP is an integral industrial city offering quality service and an enabling business environment stimulated with ultra-modern facilities and infrastructure. However, Akinkuebi, said the park has its own installed 30MW Gas Power Plant with the gas supply, planned recreational areas with other facilities, adding that six companies have already begun operations in the production of various locally made products. “OIP is designed in cluster arrangements in which textile and garment is one of them, so we encourage stakeholders in that sector to key into it, e.g setting up knitting line, bottom production, tread, linen, and other materials,” he added. The Ore Industrial Park was built as a Public-Private Partnership (PPP) project and established on a massive 1000 hectares of eco-friendly, economic and industrially zoned land. Textile Industry, crucial sector to revive Nigeria’s economy, to create employment We Have Not Had Water Supply In Months ― Abeokuta Residents In spite of the huge investment in the water sector by the government and international organisations, water scarcity has grown to become a perennial nightmare for residents of Abeokuta, the Ogun State capital. This report x-rays the lives and experiences of residents in getting clean, potable and affordable water amidst the surge of COVID-19 cases in the state. Textile Industry, crucial sector to revive Nigeria’s economy, to create employment Textile Industry, crucial sector to revive Nigeria’s economy, to create employment.
Source: Tribune online
But industry insiders said the price decreases due to imports were quite small and that prices remained much higher than those of 2020 Yarn imports have boosted supply and brought down local prices, ending a months-long tangle in the apparels market. For the last couple of months, textile millers and apparel exporters had been locked in a battle over rising yarn prices, with millers claiming that high prices were tethered to a surge in demand. RMG manufacturers have responded by importing yarn. Industry insiders said the price decreases due to imports were quite small. They said prices remained much higher than those of 2020. At the beginning of this year, 30-count yarn, used in the manufacture of apparel products, sold at $4.35-$4.40 per kg. Prices have now fallen to $4.10-$4.15 per kg. In December last year, 30-count yarn sold for $3 per kg. Prices are likely to continue to fall as September to December is cotton harvest season and cotton-producing countries have had good yields this time, apparel industry insiders said. They also said that the price of yarn in India is also on the decline and is selling for $3.60 per kg — down from $3.80 per kg a few months earlier.
Ironing out wrinkles Previously, apparel and terry towel exporters had alleged that spinning millers were to blame for increases in yarn prices. Textile millers denied the allegations and claimed that they were not hiking prices intentionally. They said the surge in sales of apparel products in Europe and the US had caused an increase in orders with Bangladeshi factories, driving up demand for yarn. After several meetings, the textile millers and apparel manufacturers agreed to fix the yarn prices. “Although we fixed the price of yarn at $4.20 per kg at the joint meeting, we had to buy it at $4.25-$4.30 per kg. It is currently selling at $4.10-$4.15, which means it has fallen by a bit,” said Mohammad Hatem, vice president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). Several apparel manufacturers are importing yarn from the international market mainly to overcome the stresses caused by the yarn price hike, he added. Hatem also said that the current price of yarn in India is $3.60 per kg, so it is profitable for the manufacturers to import yarn from India or other international sources. “Though the government provides a 4% incentive on export apparel items which use yarn produced from domestic sources, importing the yarn is still profitable,” he added. There is a big difference between the price of yarn in the local and international markets, owing to which importers are still benefited even if they do not get the 4% incentives, Hatem further said. “Moreover, taking this incentive is often time consuming and the exporters have to face harassment. So, the apparel manufacturers are trying to buy yarn from the international market and many are applying for LCs from Indonesia, China and even Vietnam,” he added. Md Fazlul Hoque, vice president of the Bangladesh Textile Mills Association (BTMA), told Dhaka Tribune that the local supply of yarn has also increased in the market and so the prices have come down. However, he said, it is doubtful how long the situation will sustain as the price of cotton in the international market is at its highest since 2011 as natural calamities in India have wreaked havoc on the global cotton supply. “This will also affect the market of our country. We should take action now to prepare for the impact the rise in cotton prices could have on the country's yarn market,” he also said. According to the BTMA, domestic spinning mills supply 80% of the yarn to exportoriented knitwear factories.
Source: Dhaka Tribune
Vietnam’s gross domestic product (GDP) expanded by 1.42 per cent in the first nine months this year over the figure in the same duration last year, maintaining production and business amid social distancing in many regions. Data from the General Statistics Office showed GDP declined by 6.17 per cent annually in the third quarter, the sharpest drop since Vietnam began announcing its quarterly GDP figures in 2000. In the third quarter of this year, industry and construction contracted by 5.02 per cent, services went down by 9.28 per cent and agro-forestry-fishery fell by 1.04 per cent. The nine-month GDP growth was thanks to the agro-forestry-fishery sector with an expansion rate of 2.74 per cent, contributing 23.52 per cent to the overall growth; and industry and construction with a growth rate of 3.57 per cent, contributing 98.53 per cent. Meanwhile, in the nine-month period, services were down by 0.69 per cent, pulling national growth down by 22.05 per cent. Agro-forestry-fisheries continued to play its role as a mainstay of the economy amid the pandemic. Specifically, agriculture grew by 3.32 percent, contributing 0.31 percentage point to the added value of the economy. Forestry and fisheries each added 0.02 percentage point thanks to their respective expansion rates of 3.3 per cent and 0.66 per cent, according to Vietnamese media reports. Meanwhile, industry and construction, manufacturing and processing are growth driving forces of the economy with an expansion of 6.05 per cent, contributing 1.53 percentage points to the added value of the entire economy. The wholesale and retail sector fell by 3.1 per cent, and the transportation and warehousing industry decreased by 7.79 per cent.
Source: Fibre2Fashion
The power crunch could affect its industrial production, economy Nothing could have been as eye-catching as a fall in the commodities market. This week, the commodities market has witnessed a decline with metals such as nickel, copper, zinc, lead, aluminium, lithium, iron ore, tin, rhodium, besides other commodities such as iron ore witnessng a fall in prices. The London Metal Exchange (LME) index has dropped 1.06 per cent so far this week. The major reason for the commodities slipping is the power crunch that China is going through now. One of China’s worst power shortages is not confined to only the commodities market, though. Termed unprecedented, the power crunch has left millions of Chinese, particularly in northern parts, without power. Two different reasons There are two different reasons for the power crunch — one for the north and another for the south. In the north, it is due to soaring coal prices. In the south, it is due to lower hydropower production. Many industrial units are facing electricity supply crunch, affecting production. China’s most industrialised provinces Jiangsu, Zhejiang and Guangdong are the worst hit by the situation. The Chinese power situation has resulted in many financial and rating agencies lowering the growth estimated for the country’s GDP to below eight per cent. The unfolding scenario, which is feared to get worse as winter nears, has many wondering what has gone wrong with the Communist nation. What are the effects of Chinese power woes? According to Iikka Korhonen, head of Bank of Finland Institute for Economies in Transition, China’s manufacturing PMIs this month point to a subdued growth and the trend had begun even before the power crunch. Bloomberg News Chief Energy Correspondent Javier Blas tweeted that the power situation was worsening and widening. Chinese authorities have asked food processors such as soyabean crushing plants to shut down. Smelters, mainly aluminium, steel plants, cement manufacturers, fertiliser companies and textile units have all been asked to curb their production or even stop for now. Even suppliers of electronic components have been affected that could impact firms such as Apple and Tesla. In some provinces, the suppliers have suspended production. In one case, a textile mill in Jiangsu province has been told that it is unlikely to receive power supply until October 7.
What are the other impacts? In provinces such as Jiangsu, even street lights have been turned-off. In some northern provinces, even traffic lights have been switched-off. In some apartments, even operations of lifts have been stopped, forcing people to use the staircases. In Guangdong, the citizens have been asked to reduce air-conditioner usage. In at least nine provinces, power is being rationed, while industrial users have been asked to stop production during peak consumption hours. Even chemicals, dyes and furniture firms have been affected. Production at a popular steel and wood firm, Dongguan Yuhong Wood Industry, in Guangdong’s province in Dongguan has been affected. . This could force multinational firms to look at alternatives, an effort that had begun when the Covid pandemic set in. The power shortage is now expected to affect the electric vehicles sector, one of the rapidly progressing sectors. This will ultimately drag industrial production and affect economic growth. This could also affect India and other countries that depend on China for imports of industrial equipment and machinery.
Why did such a situation occur? The major reason for China’s power crunch is short supplies of coal. China is the major consumer of coal in the world and the commodity makes up at least 60 per cent of the total energy consumption. A diplomatic dispute with Australia has led to a shortage in coal supplies. In view on the controversy, which started over a doctored image posted by the Chinese Foreign Ministry on Twitter, Beijing banned import of Australian coal. This, in particular, has affected its Chinese provinces. China produces 90 per cent of its coal requirement locally but the producers are unable to ramp-up output at a short notice. Beijing is now having to depend on other suppliers such as Indonesia, Russia and South Africa. Coal plants’ problem But the issue is that the Chinese plants are used to working with Australian coal and the change in the fuel has affected their efficiency. This is because they have to change equipment to work on non-Australian coal. Also, China, being the first nation to recover from the Covid pandemic, was flooded with demand for exports. This resulted in power consumption increasing by over 10 per cent, resulting in the plants being unable to meet the rising demand. All this has resulted in coal prices surging to a record $212 a tonne on Zhengzhou Commodity Exchange. They have gained 120 per cent year-on-year due to this.
Why can’t power charges be raised? Power producers are also faced with the problem of being unable to raise the prices of electricity as they are regulated by the Communist regime. Since these producers are prone to losing money in view of the coal price surge, they are reluctant to increase production to meet the demand. The Chinese National Reform and Development Commission froze the rate hike in 2019 and has not set a deadline for it. This has led to lobbying by the producers for a hike, which Beijing is reported to be considering. In addition to coal shortage, China is also faced with reducing carbon dioxide emission to meet its norms of reducing it by 65 per cent compared with emissions in 2005. In the south, Guangdong gets a fourth of its electricity from hydropower from nearby Yunnan province. However, a warm summer has drained water reservoirs affecting power production. Rising demand for energy has compounded the situation. How is decarbonisation affecting power supply? Last month, Chinese president Xi Jinping said carbon emission will peak by 2030 and Beijing will achieve carbon neutrality by 2060. This is one of the reasons why a number of coal-fired plants required in the Communist nation have not come up. Production curbs to meet the emission norms were expected to reduce energy needs. But industrial units, particularly in Mongolia and Guangdong, have not been able to meet the target, thus resulting in the power shortage. Eight other provinces have also not met the emission norms due to post-Covid lockdown recovery. This, in turn, resulted in energyintensive industries running overtime. Economic experts say decarbonisation targets are unlikely to be met until consumers begin to pay the exact cost for consumer power. Consumers should also pay for the pollution they cause, they say.
What are the ways out? On Thursday, Bloomberg News reported that China could review import of coal from Australia. This will help China to get coal at a lower price since India gets coal from Down Under at a much more competitive price. Another report said that power charges could be increased at least for industrial units. Two, the Chinese authorities are planning to allow the power producers to hike the rates. But how far will the Chinese citizens bear the higher cost is a million dollar question. Another issue is also on the cards — shortage of natural gas. Consumption of natural gas is on the rise with Covid restrictions being eased across the globe. There are even fears that the Chinese power crunch could even lead to socio-economic unrest and probably expose the Jinping administration’s shortcomings.
Source: The Hindu Businessline
