INTERNATIONAL
Textile Raw Material Price 2016-11-01
|
Item |
Price |
Unit |
Fluctuation |
Date |
|
PSF |
1053.13 |
USD/Ton |
0% |
11/1/2016 |
|
VSF |
2376.36 |
USD/Ton |
-0.86% |
11/1/2016 |
|
ASF |
1889.28 |
USD/Ton |
0% |
11/1/2016 |
|
Polyester POY |
1092.24 |
USD/Ton |
0% |
11/1/2016 |
|
Nylon FDY |
2346.84 |
USD/Ton |
0% |
11/1/2016 |
|
40D Spandex |
4354.20 |
USD/Ton |
0% |
11/1/2016 |
|
Nylon DTY |
2029.50 |
USD/Ton |
0% |
11/1/2016 |
|
Viscose Long Filament |
1298.88 |
USD/Ton |
0% |
11/1/2016 |
|
Polyester DTY |
2546.10 |
USD/Ton |
0% |
11/1/2016 |
|
Nylon POY |
5564.52 |
USD/Ton |
0% |
11/1/2016 |
|
Acrylic Top 3D |
1335.78 |
USD/Ton |
0% |
11/1/2016 |
|
Polyester FDY |
2154.96 |
USD/Ton |
-0.68% |
11/1/2016 |
|
10S OE Cotton Yarn |
2064.19 |
USD/Ton |
0% |
11/1/2016 |
|
32S Cotton Carded Yarn |
3363.80 |
USD/Ton |
-0.04% |
11/1/2016 |
|
40S Cotton Combed Yarn |
3832.43 |
USD/Ton |
-0.02% |
11/1/2016 |
|
30S Spun Rayon Yarn |
2981.52 |
USD/Ton |
0% |
11/1/2016 |
|
32S Polyester Yarn |
1736.51 |
USD/Ton |
0% |
11/1/2016 |
|
45S T/C Yarn |
2583.00 |
USD/Ton |
0% |
11/1/2016 |
|
45S Polyester Yarn |
2317.32 |
USD/Ton |
0% |
11/1/2016 |
|
T/C Yarn 65/35 32S |
1859.76 |
USD/Ton |
0% |
11/1/2016 |
|
40S Rayon Yarn |
2228.76 |
USD/Ton |
0% |
11/1/2016 |
|
T/R Yarn 65/35 32S |
3143.88 |
USD/Ton |
0% |
11/1/2016 |
|
10S Denim Fabric |
1.35 |
USD/Meter |
0% |
11/1/2016 |
|
32S Twill Fabric |
0.83 |
USD/Meter |
-0.18% |
11/1/2016 |
|
40S Combed Poplin |
1.17 |
USD/Meter |
0% |
11/1/2016 |
|
30S Rayon Fabric |
0.67 |
USD/Meter |
-0.22% |
11/1/2016 |
|
45S T/C Fabric |
0.66 |
USD/Meter |
0% |
11/1/2016 |
Source: Global Textiles
Note: The above prices are Chinese Price (1 CNY = 0.14760 USD dtd 11/1/2016)
The prices given above are as quoted from Global Textiles.com. SRTEPC is not responsible for the correctness of the same.
Last month, Sanjay Lalbhai-controlled Arvind Ltd announced the sale of a 10-per cent stake in its brand business subsidiary, Arvind Lifestyles, at a valuation of Rs 7,400 crore. The market capitalisation of Arvind, even after a 19-per cent rally, is around Rs 10,800 crore, and this deal has renewed interest in textile and garment companies. Arvind, though, could be one of the few exceptions when industrialists are shying away from making new investments. Lalbhai, Arvind’s chairman, said, “We have enormous potential for growth in India’s textiles sector which we are trying to tap through investment in technology, brands, IPR (intellectual property rights), etc.”. He added, “Our major focus will continue to be investing in change rather than just setting up manufacturing capacities.” Besides the areas mentioned, Arvind will invest in technical textiles and the digital space.
Growing consumption and the government’s announcement on supporting a revival in the sector are driving the optimism. “The Indian textile sector is looking up. It has seen a major overhaul mainly because of several measures taken by the government for its revival,” said Kavita Gupta, textile commissioner, Ministry of Textiles. Besides the Amended Technology Upgradation Fund Scheme (ATUFS) the government announced in January this year, a special package on garment units with production and employment-linked benefits announced in June 2016 will aid the textile sector immensely, Gupta said.
Green shoots in textile and garments sector ATUFS has allocation of Rs 5,151 crore for new schemes. The special package in June 2016 allocated Rs 6,000 crore to the textiles and garments sector; it provides tax and production incentives and is expected to lead to an increase of exports by $30 billion and attract investments of Rs 74,000 crore in three years. The government expects it would create a million jobs, and help India compete abroad. However, manufacturers haven’t begun increasing hiring and production as they need further clarity, before they make further investments and hire more employees, which the government is addressing.
The subsidy transmission will take a couple of quarters more. The scheme, experts say, will work because it has come when the sector is recovering and needs an impetus push. “All these measures have a lead time. So, we are expecting huge growth in exports and further growth from January 2017,” said Gupta. The financials of textiles and garment companies are improving over the past three quarters till June 2016 (see chart). In the September quarter, Arvind posted a 20 per cent increase in net profit, excluding exceptional items at Rs 78 crore. These incentives come at a time when China reduced focus on labour and energy-intensive sectors, including textiles, and saw its global market share reduce from 41 per cent two years ago to 38 per cent.
The global economic slowdown, coupled with China’s continued dominance through cheaper supply of clothes to world markets, hit the country’s textiles sector hard. India’s textiles exports fell to $40 billion in FY16 as compared to $41.4 billion in FY15. Even between April and September 2016, textiles exports fell 3.44 per cent year-on-year to $17.3 billion. Revival of the textile and garments industry is important as it contributes 14 per cent of India’s gross domestic product (GDP), four per cent of industrial production and 13 per cent of merchandise export. The textile industry is the second-largest employer after agriculture, and employs 45 million people, including unskilled women. “The growth, however, is unlikely to come at the desired speed without addressing other challenges. The government needs to expedite free trade agreements with major importing countries, including the European Union, Australia and Canada, to remove trade barriers there. Despite the price offered by Indian exporters for their cotton textiles being competitive, the preferential access given to countries such as Bangladesh, Cambodia, Pakistan and Vietnam in major importing nations like the EU is severely affecting shipment from India,” said R K Dalmia, chairman, Cotton Textiles Export Promotion Council (Texprocil). Meanwhile, an Emkay Global Financial Services study estimates the $45-billion Indian apparel retail market to grow by 11 per cent compounded annual growth rate in the next three years.
SOURCE: The Business Standard
Grasim Industries has bounced back well from the controversial proposal to merge the group company Aditya Birla Nuvo with itself and subsequent spin off of financial services. The company has gone out of the way to explain the proposal to investors even as there are concerns about the move. The restructuring within the group apart, the company has drawn an ambitious growth plan and expects demand for viscose staple fibre to grow. The company registered a strong financial performance in the September quarter and hopes things will fall in place soon. Dilip Gaur, Managing Director, and Sushil Agarwal, Whole-Time Director and CFO, Grasim Industries spoke to BusinessLine on the future prospects. Excerpt:
What is the progress of the merger proposal?
Agarwal: It is on track. The process requires many regulatory approvals including that of stock exchanges, SEBI and High Courts, besides shareholders. We expect to complete the entire process by end of this fiscal or in the first quarter of next financial year. The financial services business will be listed on exchanges by next fiscal.
Have you managed to convince investors on the restructuring?
Agarwal: We were confident that the proposal will go through from day one. Unnecessary controversy was created as the reason behind the move was not understood properly by few people. We had explained the plan to domestic and foreign institutional investors who are more than convinced with our clarifications. Eventually, the outcome of shareholders voting will decide the final fate of the plan.
What is the highlight of the dividend distribution policy approved by Grasim board today?
Agarwal: The dividend policy was as mandated by the market regulator SEBI. The Board has agreed to distribute 25-45 per cent of the company's profit as dividend per year. This will be at the prerogative of the board. A broad range on dividend payout has been approved as payout to investors depend on various factors including company's performance, cash flow, growth opportunities, capital expenditure and overall liquidity position. The board will take a call on the dividend on quarterly basis after considering business prospects.
How is the demand for viscose staple fibre?
Gaur: It has been growing at a steady pace. In the last 18 months, the company has been working with value chain participants to increase usage of VSF in garment. Being a fibre manufacturer, we had a disconnect with the garment industry. However, things are changing as we are helping the textile industry to launch new fashion lines using VSF. As a fall out of our efforts, domestic demand for VSF has gone up 19 per cent in this quarter and we expect this to grow significantly in the coming days due to versatility of the fibre.
Excess VSF capacity in China was depressing VSF prices for the last few years. Any change on this front?
Gaur: We do not think China's excess capacity will have a role to play any more. In fact, VSF prices are holding strong, despite Chinese producers operating their plants at over 96 per cent. This is largely because the global demand for VSF is looking up. With no big new capacity planned in China and its inventory levels coming down, VSF business is poised for good growth. Moreover, besides textile, the demand for VSF is also coming from non-woven fabrics. As per recent study, VSF demand is expected to grow five per cent globally, and in India, it expected to register double-digit growth because of its varied application.
What is the capex for this fiscal?
Gaur: We plan to invest about Rs. 4,500 crore this fiscal including cement projects. We will be investing Rs. 500 crore to increase caustic capacity by 2.08 lakh tonnes per annum to 10.48 lakh tonnes per annum through brownfield expansion at Vilayat (Gujarat) and debottlenecking at other plants.
SOURCE: The Hindu Business Line
Minister of Textile Smt. Smriti Zubin Irani will inaugurate a fortnight long Exhibition cum sale of Handicrafts developed by Artisans of Clusters at Dilli Haat today evening i.e. on 2nd November 2016 at 6 P.M. This fair is being promoted and marketed by Council of Handicrafts Development Corporations (COHANDS), with financial assistance from the office of Development Commissioner (Handicrafts). Shri Ramesh Bidhuri, Member of Parliament, Smt. Rashmi Verma, Secretary Textiles and Development Commissioner (Handicrafts) Shri Alok Kumar and other dignitaries will also be present on this occasion. It will remain open for public till 15th of November 2016. Cluster Artisans from all over India will participate in the fair during this programme.
The fair has been conceptualized with a view to provide direct marketing platform for innovative products developed by 120 Artisans of Handicrafts Clusters supported and promoted by Office of the Development Commissioner Handicrafts covering different crafts like leather, embroidery, zari and chikankari, Madhubani painting, artificial jewellery, metal ware, paper machei etc. About 22 types of craft are on display with live demonstration during this period. The event will showcase the best of Indian Handicrafts in quality, design and versatility from all over the country. This programme is being organized as an exclusive fair for Handicraft products in India at a grand scale to increase visibility of the products in domestic market.
The programme will also benefit the artisans from Clusters who are unable to participate in the International Fairs due to high cost. The space rental and infrastructure shall be provided free of cost to these participants. A Thematic Display at Dilli Haat for the benefit of Cluster Artisans, a Craft Awareness Programme with a view to support the local level awareness that targets general public and spread awareness about our crafts and a cultural programme representing the folk art/dance covering cultural heritage of the country covering east to west and north to south is also being organized on the occasion.
SOURCE: The Business Standard
Under a scheme by the textiles ministry, there may be a rise in the insurance cover of handloom weavers. The plan involves three-fold hike in insurance cover to Rs 2 lakh from Rs 60,000 in case of natural death. There is also a possibility of increase in the accidental death cover, which may be raised to Rs 4 lakh, from the present Rs 1.5 lakh. Textile industry is India's second-largest employer after agriculture. Insurance cover to handloom weavers in case of natural and accidental death and total and partial disability is provided under the Mahatma Gandhi Bunkar Bima Yojana. “We plan to increase the insurance cover for weavers in the handloom sector. This will encourage more weavers to get covered in the insurance net and attract more people to join the sector's workforce,” a senior official from the ministry told a news agency.
In the year 2015-16, under the insurance scheme, the government had released Rs 16.67 crore, which is slightly higher than Rs 16.39 crore—the sum was released when 5.74 lakh weavers were enrolled in the year 2014-15. “We welcome the move. It will work as a great morale booster for the weavers. Weavers are the lifeline of textile industry. Out of 110 million people employed in the textile sector, more than 60 per cent are in handlooms,” Confederation of Indian Textile Industry secretary general Binoy Job told the agency.
SOURCE: Fibre2fashion
Stepping out of its niche in domestic and international markets, handloom fabrics have begun making big strides in fashion. While brands like Fabindia have always worked with handloom fabrics, those like Aditya Birla Fashion and Retail and Titan Group are now readying to foray into the segment. In the last six months, the development commissioner of handlooms has received 21 requests from ecommerce firms seeking to sell handloom products online.
Though ecommerce sites have their own funding pattern, the National Handloom Development Corporation (NHDC) has been providing links of credible handloom clusters for sourcing the materials.Weavers are being trained to use internet to place product details and prices, while many ecommerce partners are offering to photograph and prepare writeups of the products. “Since young entrepreneurs, fashion designers and fashion weeks are interested in handloom fabrics, the idea of handloom is generating interest,“ said Sarvepalli Srinivas, managing director of NHDC.
Earlier this month, Aditya Birla Fashion and Retail-owned Allen Solly announced a partnership with Pochampally Handloom Weavers Co-operative Society from Telangana for their new range of ikat collection garments in the men's wear category. “During the National Handloom Day programme in Varanasi in August, contracts were signed with the Clothing Manufacturing Association of India, NIFT and many fashion designers,“ Srinivas said.
The ministry of skill development has also signed an agreement with the textile ministry for upgrading weavers. “The Handloom Export Promotion Council (HEPC) has been participating in business fairs and rotating exhibitors from various handloom clusters. Combining multiple fibres such as cotton with linen, jute with linen, or silk with wool are giving new options to the weavers to address evolving market trends,“ Srinivas said. NHDC has been undertaking product developments that include making towels from organic cotton, bedspread embedded with mosquito repellents through nano technology, organic cotton shirts with natural dyes and handloom denim. “We are working with the Retail Association of India. Apart from supplying hank yarn and quality dyes and chemicals, NHDC has the reach to all the major handloom producing areas. This helps us become an aggregator to provide a bridge between apparel brands and handloom weavers for supply of specified fabrics,“ he said.
SOURCE: The Economic Times
After several months of sluggish growth, export credit by banks has risen significantly. The outstanding gross export bank credit saw a 27.9 per cent increase as of August 2016 on a year-on-year basis, against 19.2 per cent in September 2015, data from Reserve Bank of India show. After a sustained period of negative growth, export credit has been witnessing a positive growth for the past six months. Exporters attribute this recovery to better exports in geographies such as the European Union, along with the reintroduction of interest equalisation scheme, which was earlier known as interest subvention.
In November 2015, the government had introduced a three per cent interest equalisation scheme on pre-and post-shipment rupee export credit, retrospectively with effect from April 1, 2015 for five years. In April 2014, the government had withdrawn three per cent interest subvention scheme for exports. Lower interest rates were also a contributing factor for increased export credit. “There are encouraging signs of exports and many sectors are picking up. There is a big demand in project finance, requiring medium and long-term credit. However, global growth remains a challenge. India’s growth in trade was around 10 per cent for a decade, mainly because of high global growth in trade. Also, export credit insurance facilities need to be strengthened,” said Yaduvendra Mathur, chairman and managing director at Exim Bank.
Export credit breaks trend to show sharp rise It may be noted that India’s merchandise exports during September 2016 has shown signs of revival registering 4.62 per cent growth in dollar terms (5.45 per cent higher in rupee terms) valued at $22,880.56 million (Rs 1,52,699.59 crore) in September 2016, against $21,869.36 million (Rs 1,44,814.06 crore) during September 2015. According to Suranjan Gupta, additional executive director at the Engineering Export Promotion Council of India, engineering exports to the European Union in the month of September saw a 20 per cent growth on a year-on-year basis, against 12.8 per cent in the same period last year. “In September, there has been a revival in some markets in Europe. Domestic situation is not great; so manufactures are pushing for exports. Both in the months of July and September, engineering exports on an average was above $5 billion,” said Gupta. Exporters also attribute longer credit period offered by Indian exporters to the increase in export credit. Earlier, Indian exporters were offering goods at 30-60 days credit period; they are now offering the same at 60-90 days period. Thus, by offering an extended time of repayment, exporters are looking to incetivise international buyers. In consequence, the loans in books of banks remain outstanding for a longer period. “In the past two months, we have seen exports have shown growth. We are getting a longer credit period, which means need for finance goes up. Earlier, we used to sell goods at a credit of 30-60 days, but now we are selling at 60-90 days due to demand constraints,” said P K Shah, director of Nipha Exports.
SOURCE: The Business Standard
Indicating a sharp uptick in industrial activity, the Nikkei India Manufacturing Purchasing Managers’ Index TM (PMI) rose to a 22-month peak in October of 54.4 against 52.1 in September. An index reading above 50 reflects expansion; a marking below it points to contraction. A Nikkei release on Tuesday attributed the good performance to “stronger contributions from three of its five sub-components: new orders, output and stocks of purchases.” Output in October increased for the 10th straight month and at the quickest rate in nearly four years, it added. The data for October provide “positive news” for the economy as manufacturing output and new orders expanded at the fastest rates in 46 and 22 months, respectively,” said Pollyana de Lima, economist at IHS Markit and author of the report. The manufacturing sector looks to be building on the foundation of the implied pick-up in growth in the previous quarter, she noted.
Reflecting the higher demand during the festival season, consumer goods registered the strongest rate of expansion in output and new orders, outperforming intermediate and investment goods. The data also indicated that much of the new orders were from domestic markets; growth in new business from abroad eased to a three-month low. However, the spurt in business did not translate into new jobs. Manufacturing employment remained unchanged in October, with the index recording exactly 50. The report also noted that the average price of inputs rose sharply in October, with the inflation rate quickening to its fastest since August 2014.
SOURCE: The Hindu Business Line
The economy is expected to fare better in the second half of the current financial year, backed by a likely rise in sales and improved capacity utilisation, though fresh investments and jobs creation might be a concern, according to a report from the Associated Chambers of Commerce and Industry (Assocham). More spending on infrastructure, largely by the government, is seen as the most important driver for a turnaround in the economic outlook for the second half, the period between October and March, it added. About 66 per cent of those polled in the Assocham Bizcon Survey expected improved sales and capacity utilisation during the second half but remained uncertain on fresh investment. A majority (55.6 per cent) believe employment conditions will not improve in the coming days. And, 38.9 per cent feel their profits might not change in the ongoing quarter. The second best driver for an optimistic outlook is effective policy reform, followed by a stable exchange rate for the rupee, despite global uncertainty on account of the US Federal Reserve’s next policy move and the bitterly fought polls there.
While a big chunk of Bizcon Survey participants felt the present economic situation was better than the previous six months on several parameters, the optimism is more pronounced for the second half of 2016-17. "There is a clear turnaround in business confidence, which holds the key to new investment and consumer confidence," said Assocham president Sunil Kanoria. He said unlike the previous surveys, the latest round indicated a slight uptick even with regard to capacity utilisation and the order book. However, generation of employment and improvement in wages is some distance away. The confidence was pronounced at the level of individual companies, as 89% of respondents expressed optimism about better days ahead. About 55.6% felt there was an increase in sales volume during the September quarter and expected more during the December one. "The power to increase price on the part of producers and service providers would remain constrained till there is some more improvement in consumer demand," said Kanoria.
About 44.4% felt that in the July to September period, there was no change in wage costs. Half felt this wouldn't change in the near future. The economy grew at the slowest pace in six quarters at 7.1% in April-June, mainly on subdued performance of the mining, construction and farm sectors. The finance ministry expects the economy to grow by 7-7.75% in the current financial year, against 7.6% the previous year.
SOURCE: The Business Standard
The commerce ministry has started review of the foreign trade policy to carry out mid-course corrections in the export schemes, if required. As part of the review, it would hold stakeholders’ consultations to understand the issues faced by exporters. “Sectors, which feel they want something amended, deleted, tweaked or brought in, will have to engage with the ministry. We certainly want more discussions,” sources said. The ministry is also looking at the rollout of the goods and services tax (GST). “Right now, we have two schemes — advance authorisation and Export Promotion Capital Goods, where we allow duty-free imports, right from the beginning. Under the GST regime, everybody has to pay the duty first and then seek reimbursement. Once that gets decided by the GST Council, we can modify our schemes,” sources added.
In April 2015, the government unveiled its first five-year Foreign Trade Policy (FTP), aiming to double exports of goods and services to $900 billion by 2020. In the FTP (2015-20), the government replaced multiple schemes with Merchandise Exports from India Scheme and Services Exports from India Scheme. Since December 2014, exports fell for 18 months on the trot till May, due to weak global demand. Shipments witnessed growth only in June this year, thereafter again it entered the negative zone in July and August.
SOURCE: The Business Standard
Prime Minister Narendra Modi has set up 10 groups of secretaries to do a mid-term review of major programmes of each ministry, and suggest tax and policy proposals for the next Budget. Two groups of joint secretaries have also been constituted in each sector to assist the respective group of secretaries. The sector-specific groups of secretaries have been asked to finalise the report by month-end and the recommendations will be presented before the Prime Minister, sources said. One group of secretaries tasked with suggesting strategies for doubling farmers’ income by 2022 held its first meeting on Tuesday and had preliminary discussions.
According to sources, the top bureaucrats in the groups have been asked to carry out mid-term review of major policies and programmes of each ministry and suggest realignment of physical targets, financial outlays and implementation strategies. The groups have been asked to carry out a “critical review” of various schemes with a view to prepare an action plan with corrective measures and monitoring mechanisms. They have been informed to look at the possibilities of converging schemes of various ministries as also recommend new tax and non-tax initiatives for Budget 2017-18. The groups have also been asked to suggest new policy initiatives in each sector and make specific recommendations for job creation and review all autonomous organisations and public sector undertakings. That apart, the groups have been asked to develop fool-proof mechanisms for eliminating unused funds under various schemes. Last year too, the PM had set up eight such groups and their recommendations were incorporated in the last Budget.
SOURCE: The Business Standard
Andhra Pradesh and Telangana have emerged as the top states in the annual “ease of doing business” rankings, toppling Gujarat to the third place. Both the states have been ranked first in implementing business reforms, the commerce and industry ministry announced on Monday. The second edition of the government’s ranking of states came a few days after India fared poorly, at 130 among 190 countries, in the World Bank’s ease of doing business rankings. However, the World Bank takes into account ease of doing business climate in Delhi and Mumbai only. Chhattisgarh and Madhya Pradesh were also among the top five in the state-wise rankings. Haryana, Jharkhand, Rajasthan, Uttarakhand and Maharashtra, in that order, were the remaining states in the top ten. Last year, Gujarat had featured at the top, with Andhra Pradesh grabbing the second position and Jharkhand came third.
The State Implementation of Business Reforms, 2016, based on the ranking by Department of Industrial Policy and Promotion (DIPP), tracks implementation of reforms by state governments. Telangana, Andhra top ease of doing biz rankings Originally conceived under the Make in India campaign, it was a 98-point plan prepared in December 2014. A wider plan was released in September 2015, covering 340 points. The plan includes reforms around 58 regulatory processes, policies, practices or procedures spread across 10 areas such as access to information, transparency enablers and land availability. The states had submitted evidence of implementation of 7,124 reforms. These submissions were reviewed by the World Bank team and validated by DIPP to study whether they met the objectives of the plan. A total of 6,069 reforms were approved as having been implemented, a release by DIPP said. The exercise is aimed at promoting competition among the states to improve business climate and attract investment. "While last year only 7 states implemented more than 50% of the reforms, this time 18 states have implemented more than that level," said Nirmala Sitharaman, commerce and industry minister.
States traditionally weak in this regard such as Arunachal Pradesh, Jammu and Kashmir and those in the North East have scores between 0 and 1 on a scale of 100. A detailed report is expected in November. In the World Bank's Doing Business report released last week, India's place remained unchanged from last year's 130 among the 190 economies that were assessed on various parameters. But the last year's ranking was revised to 131, from which the country has improved its place by one spot.
SOURCE: The Business Standard
The combined index of eight core industries stands at 176.1 in September, 2016, which is 5.0 percent higher compared to September, 2015. Its cumulative growth during April to September, 2016-17 is 4.6 percent. The eight core industries comprise nearly 38 percent of the weight of items included in the Index of Industrial Production (IIP). -Coal production (weight: 4.38 percent) declined by 5.8 percent in September, 2016 year-on-year (YoY). Its cumulative index during April to September, 2016-17 increased by 1.2 percent over corresponding period of previous year. Crude oil production (weight: 5.22 percent) declined by 4.1 percent in September, 2016 (YoY). Its cumulative index during April to September, 2016-17 declined by 3.3 percent over the corresponding period of previous year. -The natural gas production (weight: 1.71 percent) declined by 5.5 percent in September, 2016 (YoY). Its cumulative index during April to September, 2016-17 declined by 4.4 percent over the corresponding period of previous year. -Petroleum refinery production (weight: 5.94 percent) increased by 9.3 percent in September, 2016 (YoY). Its cumulative index during April to September, 2016-17 increased by 7.9 percent over the corresponding period of previous year. -Fertilizer production (weight: 1.25 percent) increased by 2.0 percent in September, 2016 (YoY). Its cumulative index during April to September, 2016-17 increased by 5.6 percent over the corresponding period of previous year. -Steel production (weight: 6.68 percent) increased by 16.3 percent in September, 2016 (YoY). Its cumulative index during April to September, 2016-17 increased by 7.2 percent over the corresponding period of previous year. -Cement production (weight: 2.41 percent) increased by 5.5 percent in September, 2016 (YoY). Its cumulative index during April to September, 2016-17 increased by 4.5 percent over the corresponding period of previous year. -Electricity generation (weight: 10.32 percent) increased by 2.2 percent in September, 2016 (YoY). Its cumulative index during April to September, 2016-17 increased by 5.1 percent over the corresponding period of previous year.
SOURCE: The MoneyControl
FM Logistic of France has drawn up aggressive warehousing plans for India as part of its Ambition 2022 global vision statement. The company acquired a majority stake in Pune-based Spear Logistics earlier this year and will leverage the partnership to take the growth story forward. “It is an important time to enter India. We had decided to come here nearly three years ago after a careful study,” said Stephane Descarpentries, Director, Strategic Projects and Director, Operations Asia, FM Logistic, in a recent telephone interview. Sectors such as fast moving consumer goods and retail will become key ingredients of the script where the company has earmarked € 50 million to be spent over the next four years in India. “Within the next three to five years, we want to be among the top three logistics players for warehousing. Along with Spear, we want to continue developing the core business of automotive, engineering and telecom while building FMCG and retail,” said Descarpentries. Some of the French company’s prized global clientele like Nestle and L’Oreal could become part of the India story. The idea is to offer top-class services in warehousing and distribution, while keeping in mind the growing importance of e-commerce.
Global dynamics
Beyond FMCG, there could be other interesting global dynamics at play in India. FM Logistic is talking to Renault-Nissan for operations in Brazil and, like L’Oreal, could be a “natural customer for India”. As Descarpentries reiterated, it will be FM Logistic’s endeavour to bring its corporate customers to India from operations in Europe, China and Brazil. Bigger warehousing facilities in Mumbai and Delhi will be ready in early 2017 as the first part of a longer journey with Spear Logistics.
Setting platforms
These will be leased multi-client facilities that are scalable from 200,000 square feet to 400,000 square feet. Depending on how quickly optimisation is achieved in these two mega units, FM Logistic will then open similar facilities in Bengaluru and Chennai, again on a leased basis. The next plan, three years down the line, will be to build owned facilities (termed ‘platforms’) keeping in line with its business model across the world. Each of these will be close to a million square feet though not as large as the company’s biggest global platform in Russia which is nearly 1.3 million square feet. “We will set the platform up in national markets and close to main consumption centres like Delhi, Mumbai, Bengaluru and Chennai,” said Descarpentries.
GST impact
According to Gautam Dembla, Managing Director, Spear Logistics, there will be fewer warehouses once the Goods and Services Tax is in place as it will lead to physical boundaries breaking down between States. However, they will still end up being larger and more complex. Warehouses will also need to be technologically advanced with software systems support and hi-tech handling equipment to manage very large volumes. The leased warehouse model, that has stood Spear Logistics in good stead, will continue for user industries such as automotive and engineering. “They do not need a proliferation of warehouses unlike FMCG and retail which will do better with platforms,” said Dembla.
In his view, the opportunities are endless going forward. “When we started Spear Logistics 14 years ago, we were doing 10,000 square feet of warehousing which has since grown to three million square feet in India alone. Globally, FM manages three million square metres which gives you an idea of scale,” said Dembla. FM Logistic is equally upbeat on growth prospects in China, Russia and Brazil. At present, the priority is to build the India business over the next three years. Russia and Brazil are going through economic volatility, but the company is hopeful that better times are ahead.
SOURCE: The Hindu Business Line
The government has revised the duty drawback rates with effect from November 15, 2016. The revised duty drawbacks provide composite rates for products such as rubber parts (for automobile and machinery) and children’s pictures. It has also changed descriptions in certain tariff items such as packaged rice, rubber parts to prevent disputes and simplify procedures. “These take into account relevant broad average parameters such as prevailing prices of inputs, input output norms, share of imports in input consumption, the rates of central excise and customs duties, incidence of service tax … value of export goods,” said the Central Board of Excise and Customs.
Duty drawback is a relief or refund of certain types of customs and central excise duties as well as service tax on imports of inputs or raw materials that are used to manufacture goods for exports. The CBEC further said that as trade facilitation measure, the tenure of the Drawback Committee has been extended to expeditiously review issues arising from the changes made. The government has also amended the Customs, Central Excise and Service Tax Drawback Rules, 1995 which did not allow AIR drawback to exports if the amount of drawback was less than one per cent of the freight on board value of export, except where the drawback per shipment was over Rs. 500.
The CBEC has also directed field offices to continue scrutiny and preventing any excess drawback in a shipping bill. It has also said that exporters should not avail themselves of refund of service tax paid on taxable services which are used as input services in the manufacturing or processing of export goods through any other mechanism while claiming AIR.
SOURCE: The Hindu Business Line
As Diwali shopping enters its last leg in India, Christmas buying is beginning to take off across the world. But hundreds of Indian textile and leather exporters, which supply to international retail chains such as Zara, H&M, Tom Taylor, Mother Care and Abasic for their peak Christmas sales, have been saddled with weak order books. Brexit, or Britain’s exit from the EU, is being blamed for the significant fall in exports during a season that makes up for a large chunk of the industry’s annual business. Brexit had impacted purchasing power in the EU and Britain, pointed out executives dealing with the setback. Orders for the winter season, comprising Christmas and Back to School, has dropped by around 10-25 per cent.
According to the Tirupur Exporters’ Association (TEA), last year’s textile export turnover was around Rs 23,000 crore, making it an average of Rs 5,800 crore per quarter. However, during the last quarter, when shipments to Europe started for the winter season, exports declined by 10-15 per cent, said T R Vijayakumar, general secretary, TEA. Customers had reduced spending because Brexit had hit the EU economy, officials said.
While ongoing orders had been badly affected, subsequent bookings were also stalled, they added. There is enough demand, but Tirupur exporters are not able to convert it into orders because the prices buyers are quoting are not viable. Vijayakumar added that the beneficiaries of this were Bangladesh, Vietnam and other textile exporting countries. A high yarn price, availability of yarn, import duty on man-made fibre, and high labour and interest costs make Tirupur products almost 20 per cent costlier than Bangladeshi textiles.
Bangladesh not only enjoys a duty-free status, exporters there receive support from the government when it comes to power and raw material. The 20 per cent fall in the pound had added fuel to the fire, said Vijayakumar, whose company exports knitwear worth Rs 125 crore to Europe. The situation is also similar for the country's $6.4 billion leather exports. Rafeeque Ahmed, chairman of the Council for Leather Exports (CLE), said the uncertainty over Brexit and the steep fall of the pound over the past week were affecting India’s exports to the UK and Europe.
Brexit, weak global demand hurt pre-Christmas exports India’s leather exports have declined around 8 per cent to $451 million in August due to lower demand from the EU. In 2015-16, exports of leather and leather products stood at $5.85 billion against $6.49 billion in the previous fiscal year, a 9.86 per cent drop, said Ahmed. The UK and the EU account for 14 per cent and 65 per cent, respectively, of India’s leather exports.
India is also expected to face competition from Bangladesh and Vietnam, which benefit from free trade agreements as against the 7-8 per cent duty Indian exporters' need to pay. Availability of raw material locally, cheaper labour, and low interest rates and power tariffs, also work against Indian exporters. Ahmed said the industry needed to emerge from negative growth but that was not possible in the current circumstances, despite the fact that exporters were working at zero margins. While exporters are looking at new countries like Japan, Australia, New Zealand and South Korea, there are difficulties in diversifying into other markets in a short period of time as it involves more marketing, which is not possible because exporters are not making money.
SOURCE: The Business Standard
Ahead of the first global sustainable transport conference to be held in Ashgabat, Turkmenistan, next month, transport ministers from 32 landlocked developing countries (LLDCs) met in La Paz, Bolivia to assess the progress in achieving sustainable transport. The recommendations from the meeting that was chaired by Bolivian President Evo Morales are expected to be accepted at a two-day meet in Turkmenistan — November 26-27 — where an Indian delegation will be participating.
India has implemented a number of measures to facilitate trade, including unilateral concessions for LLDCs, and is working on a number of infrastructure projects to build roads, rail connections, and to build power plants to generate and share electricity etc. LLDCs, being further away from the sea, face problems like high transportation, travelling and trading costs, customs bottlenecks and often enormous delays. These are due to a lack of effective transportation mechanism, inadequate physical infrastructure, etc, which doubles the trade and transit cost faced by these countries adding to their comparative disadvantage globally, making them relatively less competitive. The transport ministers of the LLDCs, including from Africa, Latin America and Asia at the meeting in Bolivia, talked about efficient, reliable and sustainable transport systems that can be reinforced for landlocked developing countries which are often long distances from the sea and face disproportionately high transport and transaction costs.
A senior MEA official told FE: “India believes that for an equitable, balanced and sustainable global growth, it is a must that the fruits of development and progress be shared with others. It is with this belief that India has been extending its steadfast support to strengthen the development process of LLDCs.” “While India has a coastline of over 7,500 km, we are a large country with areas that are quite remote and not very well connected. We are conscious of the many disadvantages of remoteness and the additional costs and hardships that it can entail for the people inhabiting such areas. And are therefore, deeply sensitive to the unique challenges faced by the landlocked developing countries on account of their geography,” the official added.
Over the years, India’s Line of Credit (LoC) programme has provided finance across Africa, Latin America and South-East Asia and LoCs have constantly evolved as a tool. Says Ram Upendra Das, Research and Information System for Developing Countries (RIS), “Owing to their geographical location the LLDCs face high transport and trading cost which makes the trade (both export and import) difficult. This is highlighted from the fact that the LLDC’s share in total global exports is less than 1% (2015), and trade as we know, addresses the problem of demand-supply gap which could be addressed through better connectivity.”
SOURCE: The Financial Express
The Indian economy is well-prepared, even if not completely immune, for any external risk in case the US Federal Reserve normalises rates in December, says a DBS report. According to the global financial services major, expectations that the US Fed might normalise rates in December have been rising and the resultant risks of a stronger dollar accompanied by a rise in rates are under watch. “While this is a source of concern for most emerging markets, we reckon that the Indian economy is well-prepared even if not completely immune to any resultant volatility,” the report said.
According to DBS, India’s most external vulnerability indicators have shown improvement. The current account balance is likely to ease below 1 per cent of GDP this year, while the balance of payments is in surplus due to portfolio inflows, along with a stronger pick-up in foreign direct investments, improving the overall funding mix. Moreover, easing domestic borrowing costs have lowered the appetite for external commercial borrowings, with the April-July 2016’s lending down 50 per cent year-on-year. On non-resident deposits, the report said that the upcoming FCNR maturities are likely to further lower the debt burden. “These metrics combined with a smaller current account deficit and on-track fiscal consolidation, lower the economy’s vulnerability to external risk,” DBS said.
SOURCE: The Financial Express
The sticky issue of administration or control over assessees under the goods and services tax (GST) regime is close to a breakthrough. The Centre is likely to propose that the power of audit and scrutiny should be with the Union as well as state governments without any threshold. The two-day meeting between the Centre and state finance ministers to discuss GST norms begins on Thursday. The Centre, however, is likely to audit and scrutinise fewer assessees than states. The issue of administrative control is one of the key matters to be taken up by the GST Council on Thursday and Friday, after an earlier agreement between the Centre and states fell through in the last month meeting.
According to an earlier proposal, states were to assess businesses with an annual turnover Rs 1.5 crore, while both the Centre and states were to do so for businesses having higher turnover. The Centre and states had earlier agreed that the Centre will have exclusive power over assessees in the service sector, till the state officials were trained to do so. But some states raised objection to this. “Threshold is a bad idea as turnover of a company keeps changing. Besides, it is difficult to have a clear distinction between what classifies as a good or service. So instead, we can have clear distinction to carry out audit and scrutiny. We are willing to carry out a lot less intervention than states. If states want the comfort of numbers, they will get that,” said a government official who did not wish to be identified. There will be “cross-empowerment” right from the beginning to ensure that a taxpayer will have to deal with one authority for all taxes to protect them from harassment. Under the framework, both the Centre and states will have administrative control over assessment, scrutiny and audit for the central GST and state GST. Whoever strikes first will carry out the assessment for CGST, SGST and IGST. “There will be a demarcation on who will carry out what audits. We want to supervise so that taxes grow and more people comply,” said the official. In case of scrutiny, if the states want to do it for 5-10 per cent cases, the Centre will do for just 1-2 per cent, as per the proposal. This will ensure that both Centre and states will share equal powers on all tax matters.
Which assessee would be assessed by which administration would be decided on the basis of risk assessment. The list will be shared with one another, based on which each authority will get its share of assessees for auditing and checking for a possible evasion. Only about 5 per cent entities will be audited under the GST regime.
PROPOSALS
SOURCE: The Business Standard
Implementation of the Goods and Services Tax is moving ahead apace, and doubts about meeting the April 1 deadline are diminishing. The Government has demonstrated a political will and has created a ‘national focus’ on GST. The GST Council is presently engaged in deciding the rate structure. This is an important but complex task as the Government seeks to achieve multiple objectives, of being: pro-poor, anti-inflationary, pro-aspirational middle-class, pro-States, and pro-revenue. The Centre has promised to compensate the States for any shortfall in revenue below the stipulated normative rate of growth of 14 per cent calculated on the revenue base of 2015-16. The revenue growth of 14 per cent represents a compromise that averages the growth rate of both the leaders and the laggards witnessed over the past five years. The Centre’s commitment, therefore, creates a revenue challenge which the rate structure must meet.
Fixing the rate
The GST Council is seriously considering a rate structure of 6 per cent, 12 per cent, 18 per cent and 26 per cent, and 26 per cent plus cess levied on some luxury goods or what is termed ‘demerit goods’. At the last meeting, which was inconclusive, it was decided that the exact compensation requirement would be computed to decide on the rate of cess to be levied on demerit goods, after which the rate structure could be finalised. There appears to be some consensus that the cess should only be levied on demerit goods, which are currently subject to a rate of 26 per cent or more. The question that arises is whether what is on the table proposed by the Centre and deliberated by the Council is the best option in the circumstances. It would appear that there are some other options available.
First of all, cess is a bad idea. It would distort the duty structure and prevent the Government from creating a rational rate structure free from compensation compulsions. It would be far better to go for a demerit rate of 40 per cent in which the States would get an equal share of revenue, minimising in turn their compensation requirements. In the present proposal, it appears that there would, in effect, be three standard rates as about 25 per cent of the total revenue would accrue equally from each of the three rates, namely 12, 18 and 26 per cent, respectively.
Even the 18 per cent standard rate suggested in the CEA’s report would translate to an effective rate of 19 per cent as subsuming the cesses was not factored in the CEA report. Therefore, a better structure of rates could be 5 per cent, 10 per cent, 20 per cent and 40 per cent. Precious metals could carry a special rate of 6 per cent instead of the proposed rate of 4 per cent or, alternatively, the precious metal rate could be raised to 5 per cent and merged with the proposed 5 per cent merit rate. This would leave four rates, namely, 5, 10, 20, 40 per cent, with 20 per cent being the standard rate accounting for more than 50 per cent of the total revenue. The suggested rate structure would still probably leave a revenue gap to meet compensation requirements.
New revenue option
To meet this, the Government could consider a new revenue option of imposing GST on unmanufactured tobacco at rates to be decided by the council. Presently there is no Central levy on unmanufactured tobacco but some States collect VAT on sale of tobacco. GST could be collected from the purchaser of unmanufactured tobacco much like Central Excise duty currently levied and collected from the purchaser of molasses. This levy would leave farmers completely out of the administrative domain of taxation. Tobacco taxation at source was recently mooted in an article by Vijay Chhibber, formerly secretary in the road development department. He makes the point that out of total tobacco production of 520 million kg, hardly 100 million kg bear local VAT levies.
About 420 million kg of tobacco are largely outside the tax net. This is illustrated by the fact that a tobacco-growing State such as Chhattisgarh hardly collects Rs. 13 crore as VAT on sale of tobacco. The numbers would suggest that the Centre could conservatively collect Rs. 25,000 crore annually which would be shared by the Centre and the States (there would be no SSI exemption). GST duties on unmanufactured tobacco could be adjusted against GST duty payments on various tobacco products, creating an audit trail. Revenue would accrue to the extent the unmanufactured tobacco is used in the exempted stream of manufactured tobacco products. This would also bring down evasion in the tobacco product segment, by incentivising tobacco product manufacturers to report more transactions in order to avail themselves of the duties paid on unmanufactured tobacco in the earlier part of the supply chain.
Because the GST transactions of tobacco, like other GST transactions, would be uploaded on the GSTN portal, these could be tracked. Tax payment not only generates revenues, it creates an information trail for public policy. In this case a vigorous health policy could be built around disincentivising tobacco product consumption, especially chewing tobacco. So we have now the broad contours of the rate structure: 5 per cent, 10 per cent, 20 per cent, 40 per cent (demerit rate); special rate of 6 per cent which could be merged with the 5 per cent rate; and a new GST levy on unmanufactured tobacco.
Some advantages
What are the advantages of this proposed alternative rate structure? The goods in the CPI basket which predominantly drive inflation would face lower duties — the 6 per cent merit rate would come down to 5 per cent and the 12 per cent merit rate would come down to 10 per cent. It would meet the aspirational demands of the middle-class by bringing down the incidence of duty on a wide range of consumable products from 26 per cent to 20 per cent. It would shore up the revenue of States by giving them an equal share in the revenue of demerit goods, instead of the cess, which would deprive them of the same. It explores a new revenue option in the form of GST on purchase of unmanufactured tobacco, which will help disincentivise the consumption of all tobacco products by raising prices, subserving the health objectives of the Government.
The only negative factor could be the rise in the incidence of duty on services from the current rate of 15 per cent to 20 per cent. This increase could be mitigated by having merit rates of duty on services, similar to goods. For example, transportation services could be subject to a uniform merit rate of 10 per cent as increased transportation costs could fuel inflation. In conclusion, the alternative rate structure without the cess will find greater acceptance with the States besides shoring up government revenues through a marginal increase in the overall standard rate and a new GST levy on unmanufactured tobacco.
SOURCE: The Hindu Business Line
“By taking the lead in spreading awareness on GST, the state has reiterated its commitment to implement the same,” Menon said at an interactive session on GST held recently in Kochi.
‘Highest gainer’
Being one of the highest consuming states, Kerala will also be one of the largest beneficiaries from introduction of GST, he said. It will improve the finances of the state significantly. The session was jointly hosted by the Ficci and KPMG in India with the Government of Kerala and witnessed active participation of ministers from the state and senior government officials. Experts speaking at the session noted that India has the potential to emerge as a unified common market upon implementation of the GST. This will simplify tax compliance, enhance productivity in supply chain, eliminate multiple taxes and their cascading effect.
Efficient administration
Automated systems and processes are expected to lead to efficient and effective tax administration and reduce the level of interaction with the assesse. Business decisions would get de-linked from tax considerations. Opportunities will be available for optimising supply chain and achieving business efficiency in warehousing and distributor network. GirishVanvari, Partner and Head, Tax, KPMG in India, said that the organisation is working on an array of new services - a few have already been launched and others are in the pipeline. The session addressed various facets of the Model GST Law such as an overview of its features, transition provisions, valuation and input tax credits. It also sought to demystify the concepts of supply, time and place of supply, deriving value from supply chain, and preparing a company’s enterprise resource planning (ERP) for GST.
SOURCE: The Hindu Business Line
GSTN, the company that is building the world’s biggest and most complex tax system, will borrow Rs 800 crore from banks to fund infrastructure costs to support Goods and Services Tax rollout from April 1 next year. The Goods and Services Tax Network (GSTN), a not-for-profit, non-government, private limited company promoted by the central and state governments, is borrowing Rs 250 crore for working capital needs and another Rs 550 crore as long-term loan from domestic lenders, its chairman Navin Kumar told PTI here. The government of India has 24.5 per cent stake in GSTN and the state government an equal share. The remaining 51 per cent is with private financial institutions. “The total authorised and paid-up capital is Rs 10 crore. So, Rs 4.90 crore has come from central and state governments and Rs 5.10 crore from private institutions,” he said. Kumar said the cost of infrastructure to support the GST will be Rs 1,380 crore. “We will be borrowing Rs 550 crore for infrastructure. We have also sought some working capital limit, that we will see if there is any default in payment,” he said.
Since its incorporation on March 28, 2013, the GSTN had used Rs 64 crore towards payments to its vendors and employees out of the central government’s sanctioned grant of Rs 315 crore for the first three years. “Government has released Rs 120 crore from the grant, and we have used Rs 64 crore, rest of the money we have to refund to the government,” he said, adding this year entire expenses would be met through borrowing. Kumar said after receiving Letter of Guarantee from the government, the GSTN will raise a five-year term loan of Rs 550 crore from various Indian banks. “We have also requested for a Rs 250-crore working capital loan. So, if there is any delay by any government in making payment, then we will borrow money. We have selected the banks,” he said.
Explaining how the working capital and term loan would work, he said working capital loan works like a credit and at the end of the year the borrower has to square up the loans. But the payment of term loan has to be made every month. GSTN is a non-government, private limited company promoted by the central and state governments with the specific mandate to build the IT infrastructure and the services required for implementing Goods and Services Tax (GST).
SOURCE: The Financial Express
With the impasse over the decision on the rate structure in the GST Council, the euphoria with which GST was touted as a “game changer” and the” reform of the century” is gradually waning. Surely, there are questions on the claims about achieving simplicity, unification in markets, acceleration in the growth rate and increase in exports. The compromises involved in implementation bring in the reality check that the structure that will emerge will fall well short of what is hoped. While it was clear that flawless GST is a mirage, it was fervently hoped that the implementation will not violate the fundamental principles and will at least serve as the next stage of consumption tax reform.
The critical elements of the tax reform are that it should reduce the administration, compliance and distortion costs to the economy. According to the best practice approach, the tax should have a broad base, low rates, less differentiated rates and should be simple and transparent. It was with this objective that the sales tax system with 14-16 tax rates in the mid-1990s was gradually converged into two broad rates in addition to exemption and a low rate on precious metals when the value added tax reform was implemented in 2005.
Reaching consensus of all the states to achieve this is a major landmark. In contrast, the multiplicity of rates in the proposed GST structure, is clearly retrograde as it will increase the administrative complexities and compliance cost. Rather than moving towards neutrality, the reform will increase distortions.
The proposed GST structure entails six rate categories excluding exemptions. Even if the low rate for gold is excluded, there are five rate categories namely, 6%, 12%, 18%, 26% and additional cess on sumptuary items to fund the compensation for revenue loss. The low rate on gold is unavoidable not for reasons of equity but compliance. Indeed, on equity grounds, the general rate should be applied but given the low volume-high value of the commodity and the possibility of informalisation in the production of jewellery, levying the tax at more than 4% could result in large scale tax evasion.
The problem, however, is with the multiplicity of rates proposed. Ideally, like in Canada, there should be a single rate at the central level and one at the state level. Most countries levy the tax at a single rate. However, as I had argued in my previous columns, it would be impossible to think of a flawless GST levied at single rate in India. Although international experience shows that the tax policy has been ineffective in reducing inequalities of income, the political considerations continue to rule. The modern tax literature shows that the focus should be to increase the incomes of the poor rather than reducing the incomes of the rich, and this is better done through appropriate expenditure policy. After conducting a series of incidence studies, Pechman and Okhner conclude that the US tax system is not significantly progressive and the study in Chile found the tax system mildly regressive. However, in Indian context, with only 3% of the population paying income tax, any changes in inequality through the direct tax system leaves out 97% of the population and therefore, having two rates is unavoidable at this juncture to make the system look progressive.
The proposed tax rates of 6% and 26% are clearly avoidable. The 6% rate seems to be due to the fact that almost 300 items are exempt in the Union excise duty and the government does not want to tax them at 12% suddenly. This will however, create a problem as the states are levying the VAT on some of these items at 5%. The Union government could have pruned its exemption list in the last budget itself so that they could have been taxed at the merit rate of 12% when the GST is levied. Even now rather than soft pedalling, the Council should decide to tax these items at 12% and avoid an additional rate category.
There is no rationale for having a super rate of 26% either. This comes from the recommendation of the CEA Committee which seems unsure of its calculations on the revenue neutrality with 18% standard rate and provides an additional rate category. With consumer durables included in this category, it will create a lot of administrative and compliance problems. Perhaps, the better option is to levy the standard rate at 20% and avoid this additional rate. This should adequately take care of revenue considerations. As creating an additional rate category from the prevailing VAT system is clearly retrograde.
There will be more discussions when the list of exempted goods and services and those belonging to the different rate categories is put out. Hopefully, care will be taken to avoid levying lower rate on inputs. Since the basic principle of GST is to provide input tax credit, there is no reason for levying lower rate. Taxing inputs at lower rate provides incentive to evade the tax on the final products by suppressing the value of output. In fact, this is a major shortcoming of the prevailing VAT and GST implementation provides an opportunity to overcome this.
The problem with multiple rate categories is that it complicates the structure, adds to both administrative and compliance costs, leads to classification disputes and opens up avenues for special interest groups to lobby for lower rates. Indeed, with unprocessed food exempted and basic consumer goods subject to lower tax, the low-income households will be adequately insulated from the price escalation on account of GST and there is no reason for having so many rates. As regards, the cess for compensating the states is concerned, it is hoped that seeding the PAN number in the GST registration will improve income tax compliance significantly as it had happened in many developing countries.
As argued by Richard Bird and Pierre Pascal Gendron, some imperfections may even be an essential element of getting GST accepted in the first place in developing countries. However, it is important to ensure that the fundamentals of the reform are not violated. In India, having achieved a measure of unification in tax rates at the state level already, increasing the number of rates is certainly retrograde and hopefully GST Council will avoid this. The developments also have cast serious doubts on the ability to accomplish the reform by April 2017, and rather than forcing the issue, it is desirable to implement the reform after adequate preparations during 2017.
SOURCE: The Financial Express
Finance minister Arun Jaitley makes a strong point when he says those opposing the cess he is proposing to compensate states in the GST structure haven’t understood this is actually better than a tax. For every R100 levied as a GST tax, the Centre will get only R50, and 42% of this has to go to the states, leaving the Centre with only R29—so, to compensate the states by R50,000 crore, it will need to levy a tax of R172,000 crore! Put that way, there can be no doubt the cess is better than the tax. Of course if, as is expected, half the cess is going to come from the one on energy, this adds a considerable cost to the system since energy is an input and the cess cannot be adjusted as a credit.
Jaitley also defends the multiple GST rates by arguing that if there were a lesser number of rates, many items that are currently taxed at around 5-6%—most of them are exempt in the central list but face a state VAT right now—will see a big jump in prices if the tax is fixed at, say, 12%. Former finance secretary Vijay Kelkar has, along with Satya Poddar and V Bhaskar in a column (GST: Make haste slowly, October 19, Mint) argued the GST rate can be higher on certain items—that is, the exemptions can be reduced—and certain sections of the population can be compensated for the higher GST payout on their consumption basket through a direct benefit transfer (DBT), but targeting is not that easy.
Also, while it may be desirable to have a single-rate GST from the point of it being simpler, it is important to keep in mind that the political economy is such that the best solution doesn’t usually win. In such a case, then, the reformers’ job is to try and push for the least-bad solution. And this is where, it appears, the finance minister is not being ambitious enough and not taking into account the benefits of the GST.
What we need to focus on is the fact that, based on the proposal given to the states by the finance ministry, the revenue-neutral-rate of GST is working out to be around 17-18%, which is considerably higher than the 15-15.5% that the chief economic advisor (CEA) recommended as being non-inflationary.
While the revenue department of the finance ministry argues that this is also because the CEA’s calculations were based on taxes collected in an earlier year—the new tax proposals are based on the actual taxes of R8.8 lakh crore collected by the Centre and the states in FY16—this is neither here nor there; by this logic, tax rates will keep going up each year in order to catch up with the amount of tax needed/collected.
What makes tax collections go up even when the rate is fixed is the increase in nominal GDP itself and compliance—the amount of the potential tax base that actually pays taxes. While India’s compliance rates across the GST chain are estimated to be around 35-40%, with the biggest evasion taking place in service taxation, it is obvious that a higher compliance will come with the complete goods/service value chain being captured and lakhs of tax invoices being matched in real time by powerful and smart computer systems—based on the taxpayer number, for instance, the computer will track any good, and the tax paid on it, from the first producer to the last, so if the chain breaks at any point, the taxman will know whom the good has been sold to and will be in a position to identify where the tax evasion is taking place.
But any system, no matter how good, can be compromised, particularly if the entire chain operates in cash and that is why a lower rate is a good idea—as in other areas of taxation, this too will encourage compliance—since getting the system to stabilise will take time as every trader/producer will have to input item codes for thousands of items.
Moreover, in the current list circulated, more than a fourth of items are to be taxed at 26% and these include many items of everyday use. While the best would be to abolish the 26% slab and move all these goods to an 18 or 20% slab, if the rate has to be retained for revenue reasons, the best bet would be to drastically prune the list in the 26% slab to just a few items.
The critical issue here, again, is one of compliance. The CEA’s analysis had concluded that increased compliance could fetch additional revenues of R4.3 lakh crore or around half the amount collected in FY16. It is not clear what level of compliance needs to be achieved to get to this figure, and how long it will take to get to the required levels of compliance, but it is obvious the results of compliance can be a game-changer.
There is a related problem here which finance minister Jaitley needs to keep in mind. If not in the first year, certainly everyone expects compliance to go up after 3-4 years. If so, what that means is the Centre and the states will see a huge jump in their tax collections—since the chances of the political class saying it will cut tax rates as it needs far less taxes are remote, keeping a high rate now means India will get locked into a perpetually high tax regime; if the VAT experience is anything to go by, once the political class found the system was working well, it hiked VAT rates instead of reducing them. And while it is possible for the finance minister to say the GST Council can lower rates once there is increased compliance, doing so will be difficult since the structure needs a real champion to push for lower rates and, unlike today where states are looking at a step-up in revenues, there will be no carrot to dangle at them later.
But, an argument will be made, the efficiency gains will be in the long run while the tax compensation will have to be made every quarter—how is the mismatch to be handled? This is where the new FRBM committee under NK Singh comes in. If a path-breaking taxation is to be introduced and can be compromised by putting in place a high rate-structure just to meet temporary shortfalls, surely the committee can be persuaded to relax the FRBM by a certain amount for 3-4 years, to allow for this—if this is done, Jaitley’s point about needing to compare the R50,000 crore cess with a potential R172,000 crore tax becomes moot since the FRBM will allow the compensation to be paid for through a higher deficit. Just as the promise of a 100% compensation was meant to assuage the fear of states and get them to agree on GST, relaxing the FRBM should allow the Centre to take a bolder approach to GST. If the sole purpose behind the proposed GST is to levy tax rates roughly similar to those in place today—and that is what it looks like right now—you have to ask yourself whether it is even worth it.
SOURCE: The Financial Express
In a move to contain its rising trade deficit with China, India is mulling ways to reduce further onslaught of Chinese goods entering its market by reducing and delaying duty concessions to China. Even though nothing is firmed up, India may maintain a separate negative lists of items on which it will give limited or no tariff concessions to Chinese imports under the Regional Comprehensive Economic Partnership (RCEP)trade agreement. Commerce minister Nirmala Sitharaman could discuss the new approach at the ministerial level talks on November 3-4 in the Philippines. “The big elephant in the room is China which worries Japan also…For India everyone knows china is the concern,” said a commerce department official.
The new approach of differential treatment comes in the wake of India’s burgeoning trade deficit with China. In 2015-16, India's exports to China were $9 billion while the imports were a staggering $61.7 billion leaving a trade deficit of $52.7 billion. “With China, we may have a different negative list. We have not taken a call on this but we are discussing it,” the official said. Since India had to do away with a three tier structure of differential duty cuts as part of the negotiations, these deviations are considered to be the last ray of hope to contain the trade deficit with China under a formal trade agreement.
RCEP is a comprehensive free trade agreement subsuming goods, services, investment, competition, economic and technical cooperation, dispute settlement and intellectual property rights between 16 countries - 10 members of the Association of Southeast Asian Nations and their six free trade agreement partners – Australia, China, India, Japan, Korea and New Zealand.
SOURCE: The Economic Times
The next ministerial of the 16-nation Regional Comprehensive Economic Partnership (RCEP) in the Philippines on November 4 could adopt the “no early harvest” policy, following India’s insistence, sources said on Tuesday. This means agreements on all the three pillars of negotiations — goods, services and investment — have to be implemented only as a package, and not one at a time. So even if a consensus is reached early on goods trade (which is what most nations want), it cannot be enforced in isolation and accords on all the three pillars of negotiations can be put to effect only simultaneously. FE had reported on July 15 that India was insisting on the ‘no early harvest’ clause in RCEP talks.
Differential offer for China in goods trade
The sources said although India has been considering sweetening its offers for RCEP countries for liberalisation in goods trade, its offer for China will likely be different from that for others — both in terms of removing tariff lines on imports from the giant neighbor as well as the time frame for doing so. While India is learnt to have shown its readiness to consider scrapping as much as 80% of tariff lines in merchandise trade for all other RCEP partners, it seems comfortable with removing around 65% of tariff lines for China initially. This is still a marked improvement from the initial offer of 42.5% for China, although these tariffs could be abolished only over a period of time to protect interests of domestic industry. The period for phasing out tariff lines for imports from China could be 20-30 years, as it is essential to ensure Indian industry has enough time to improve its competitiveness, sources had earlier told FE.
India already had a massive goods trade deficit of almost $53 billion with China in 2015-16. India will, however, be bold to sweeten its offer in goods trade provided it is assured of commensurate pledges from others in services trade and investment. The scrapping of tariff lines means import duties on specified items would be cut to zero over a mutually agreed-upon time frame.
Initially, India had offered to abolish 80% of tariff lines for 10 Asean members, 65% of tariff lines for Japan and South Korea and 42.5% for China, Australia and New Zealand. In return, while South Korea and Japan were willing to offer 80% tariff elimination for Indian goods, China was ready to remove only 42.5% tariff lines. Australia and New Zealand offered to abolish 80% and 65%, respectively, of tariff lines for merchandise imports from India.
India to insist on more details of offers in services
India will impress upon other countries to spell out details of their offers in services trade before they insist on India making its offer in goods more explicit. Several countries are already unwilling to commit much in liberalising their services trade or investment space, and are interested in seeking more concessions from India in goods trade. For instance, Asean — especially Singapore — is learnt to be resisting move for any worthwhile liberalisation in services trade. India is already seeking liberalisation in at least 120 areas in Mode 1 (cross-border trade) and Mode 2 (consumption abroad) services, while some nations are willing to go up to only 100. Similarly, negotiations for further liberalising trade in Mode 3 (commercial presence, mainly FDI) are yet to pick up pace. Importantly, serious offers on liberalising Mode 4 — which is of immense importance to India, as it covers the movement of skilled professionals — have barely started.
SOURCE: The Financial Express
A leading Pakistani trade body on Friday warned it may suspend trade with India, citing the "current hostile conditions". The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) president Abdul Rauf Alam said there was no compulsion to continue trade ties with India, the Dawn reported. "Pakistan had no compulsions of any sort to continue business and trade relations with India under the current hostile conditions," the newspaper quoted him as saying. He further said that the entire Pakistani business community was united to take any decision, and given the tense situation in the region, it was not possible to continue trade relations with India. He pointed out the role of the SAARC Chamber of Commerce and Industry and said that it left them with no choice but to promote trade relations with ECO (Economic Cooperation Organisation) and D-8 (Developing-8) countries. It is the first time that a major Pakistani business body issued a statement about snapping trade links with India due to border tensions. Already the cultural and political ties have suffered due to acrimony following the death of a Kashmiri militant leader as well as the Uri terror attack.
SOURCE: The Business Standard
The amended bilateral tax treaty between India and Japan, which provides for strengthened exchange of information to help reduce tax evasion, has come into force from October 29. The agreement to amend the 27-year old Double Taxation Avoidance Agreement (DTAA) was signed when Japanese Prime Minister Shinzo Abe visited India in December 2015. In a notification, the Department of Revenue said, "All the provisions of said Protocol amending the Convention between the Government of India and the Government of Japan for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income shall be given effect to in the Union of India with effect from October 29, 2016." Article 26 of the Convention provides that the information received under the DTAA would be kept secret and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of taxes.
Besides, the two countries cannot decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person. Nangia & Co Managing Partner Rakesh Nangia said that by replacing the erstwhile Article 26 on exchange of information, the protocol provides a strengthened exchange of information clause. "This will act as a deterrent and help in reducing tax avoidance and evasion and will also enable assistance in collection of taxes between India and Japan. The ambit of taxes has been widened to include indirect taxes such as wealth tax, excise duty, service tax, sales tax and VAT," Nangia said. He said amendments have also been made to Article 11 containing provisions on taxability of interest.
In order to push investment in India, in December 2015, Japan had set-up a make in India fund of Rs 83,000 crore by Nippon Export and Investment Insurance and Japan Bank for International Cooperation. Nippon Export and Investment Insurance has been classified as 'Central Bank' eligible to claim the beneficial provisions of the treaty, in respect of interest income. Similarly, General Insurance Corporation of India and New India Assurance Company Ltd have also been included in the definition of 'Central Bank' eligible to claim beneficial provisions of the treaty in respect of interest income. "These changes shall be effective in Japan starting January 1, 2017 and in India starting April 1, 2017," Nangia said.
SOURCE: The Economic Times
The international crude oil price of Indian Basket as computed/published today by Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas was US$ 47.26 per barrel (bbl) on 31.10.2016. This was lower than the price of US$ 48.50 per bbl on previous publishing day of 28.10.2016.
In rupee terms, the price of Indian Basket decreased to Rs. 3159.50 per bbl on 31.10.2016 as compared to Rs. 3242.61 per bbl on 28.10.2016. Rupee closed at Rs. 66.86 per US$ on 31.10.2016. The table below gives details in this regard:
|
Particulars |
Unit |
Price on October 31, 2016 (Previous trading day i.e. 28.10.2016) |
Pricing Fortnight for 01.11.2016 (Oct 13, 2016 to Oct 26, 2016) |
|
Crude Oil (Indian Basket) |
($/bbl) |
47.26 (48.50) |
49.53 |
|
(Rs/bbl |
3159.50 (3242.61) |
3309.10 |
|
|
Exchange Rate |
(Rs/$) |
66.86 (66.86) |
66.81 |
SOURCE: PIB
Giang spoke yesterday in Ha Noi at a conference themed "Strengthening the supply chain in the ASEAN textile sector towards sustainable development." Vietnam has targeted an export turnover of US$29 billion this year, $2 billion higher than 2015, Giang said, adding that there were more than 6,000 textile and garment businesses operating in the country, creating stable jobs for more than 2.5 million workers. "The country is the largest exporter of textiles and garments in the region. This production sector developed thanks to its wide and deep integration into the region and the world. From a sector that mainly served domestic consumption, it has become a leading force in the country's export turnover," said Giang. It has also helped Vietnam become one of the largest five exporters of textiles and garment in the world, he added.
Vietnam has been a member of the ASEAN Federation of Textile Industries (AFTEX) since 2001. AFTEX has initiated two big programmes - the alliance of the ASEAN supply chain and the ASEAN professional skills standards - which have resulted in many advantages for the region. However, co-operation among Viet Nam, Indonesia, Thailand, Malaysia, Cambodia and Myanmar in the supply chain has not developed as expected. The export turnover of goods between Vietnam and ASEAN countries increased from $15 billion in 2005 to $42 billion in 2015. However, the turnover of textiles and garments with ASEAN members has only increased moderately, from $451 million in 2005 to more than $1.73 billion in 2015, of which the export value was $965 million and the import value $767 million. Giang said there was a big change in the business environment and a strong movement of global textiles and garment supply chains thanks to free trade agreements. "The AEC and the ASEAN one-door mechanism, which will be applied from 2017, will create new opportunities and challenges. Therefore, AFTEX activities in the future will create conditions for each ASEAN member to better take part in the sustainable textiles and garment supply chains for the region and the globe," said Giang.
To reach the above target, Giang said, Vietnam needed to focus on developing textiles and garment as it had targeted in the textiles and garment development strategy by 2020 and in a vision to 2040. "Meanwhile each business needs to find its own characteristics to build up its own brand names," said Giang. The conference was part of the meeting of the ASEAN Federation of Textile Industries 2016 (AFTEX) hosted by Viet Nam. The three-day AFTEX conference, which will end tomorrow, also focuses on sustainable solutions for the textile supply chain, sharing of experience in environmental management and strategies for seeking supply sources of international brands in Vietnam. On this occasion, an exhibition of textile raw materials is opened today. The event is held annually with the participation of over 190 companies from 15 countries and territories, such as Viet Nam, Germany, Japan, South Korea, as well as Pakistan, Thailand and China, at a 5,00sq.m area.
SOURCE: The Vietnam Net
Pakistan’s entrepreneurs need to invest in balancing, modernisation and replacement of weaving and spinning industries to regain the lost share of basic textiles in the international market, industry experts agreed. Over the years, stagnant investment in industries has made most manufacturing units unviable. Technology is transforming so rapidly that machines bought a decade back have turned obsolete. Only a decade back, Pakistan’s basic textile industry enjoyed a comparative advantage over all of its competitors in the world, according to research papers of 2005. Today, the industry lost its international competitiveness. Unfortunately, local entrepreneurs remained complacent, while their competitors invested in upgrades of their spinning and weaving machines.
Bangladesh and China, which were used to import yarn and fabric from Pakistan, relinquished the buying after developing self-sufficiency. Our major buyer was China. We were complacent that China would opt out of basic textile production due to increasing wages. China, however, has been adding new spinning and weaving machines every year. What we failed to realise was that China was trying to remain competitive by upgrading its technology. The new spinning and weaving machines are much faster and operational on one-third workers and consume 40 percent less energy.
Bangladesh, the second largest buyer of Pakistani yarn and fibre, has added new spinning capacities, which are almost equivalent to our total spinning capacity. The country added five times more weaving efficient capacities than Pakistan. This, perhaps, is the main reason that basic textile orders from Pakistan continue to decline. Another newly emerging economy Vietnam has also installed new modern yarn and weaving capacities. So much so that Vietnamese yarn exports to China increased 34 percent in September. During the same month, Pakistan’s export to China declined 29 percent. Indian yarn exports to China fell 73 percent. Consumption of local yarn in China rose five percent in September. Amir Fayyaz, chairman of the All Pakistan Textile Mills Association said textile entrepreneurs should upgrade their technology if they want to compete globally.
Introduction of new technologies and globalisation resulted in regular shift in comparative advantage to different regions, creating new jobs as well as shedding some jobs as redundant industries are closing. New jobs require different skills and therefore workers losing their jobs in dying industries, for example, cannot be accommodated in any of the new industries. The new technologies save labour, and gadgets like computers and robots replace human workers. A labour, lacking new skills, finds it difficult to get employed in a modern setup. World over, basic textile industries systematically upgrade technology, replacing 10 to 15 percent of older machines with new technology in a certain period. They impart new tech training to their workforce. Currently, Pakistan’s industries are sitting on inefficient technology. They are losing export orders as a result of which many workers have lost jobs. They are also weakening future job opportunities for them. The government should facilitate employers and workers by evolving strategies for skills enhancement. Right now, the industries resent wage increase because they are operating on obsolete technology. If they have efficient technology to produce more products with fewer inputs like power and human resource then they will be content on increase in wages. The technology upgrade will reduce informal economy as high tech production will not be possible without documentation. The output will be of better quality and the cost of production will be relatively lower.
SOURCE: The News
Executive Director, International Cotton Advisory Committee (ICAS) Jose Sette Thursday said Pakistan has huge potential in textile manufacturing to reach out in the international market. One of the greatest challenge for cotton sector in Pakistan is energy shortage, which need to be addressed for industrial growth in textile sector, he said while talking to APP, on the sideline of 75th Plenary Meeting of International Cotton Advisory Committee (ICAS) here. He said efforts by the government to overcome the power shortage would play big role for revival of textile industry and enhance in manufacturing. He said the ICAC has the honor of holding its plenary meeting in Islamabad. Jose Sette said Pakistan's annual production averaged two million tons making the forth largest producer in the world.
Replying to a question, he said his meetings were a forum for the discussion of international issues of the importance to the world cotton industry and provide opportunities for industry. He said his delegation is enjoying hospitality and warm welcome in Pakistan.
SOURCE: The Business Recorder
In recent years, many Chinese textile companies flood into Vietnam and establish spinning plant there, including Texhong, Bros Eastern and Luthai and so on, while many yarns produced there flow back to China. Currently, cotton textile spinning capacity in Vietnam amounts to around 6.5-7 million spindles, and annual cotton import reached around 0.9 million tons. In Jan-Sep, 2016, cotton imports totaled around 786kt in Vietnam, up around 7% on the year, and may be around 1 million tons throughout 2016. It is well known that cotton used by Vietnamese mills mainly depends on import, and imported cotton is mainly for cotton yarn or blended yarn production, but downstream market in Vietnam is slanting feeble; therefore, more than 80% of yarns in Vietnam are for export. Yarn exports amounted to around 962kt in Vietnam in 2015, up around 12% compared with 2014, and export totaled around 856kt in Jan-Sep, 2016, up 19.6% on annual basis, to exceed 1.10 million tons throughout 2016 under rapid growth pace.
Cotton yarn is major yarn exported in Vietnam, and China is major cotton yarn export market for Vietnam. Imports of Vietnamese cotton yarn surged this year, and Vietnam has become the biggest cotton yarn supplier for China, accounting for around 40% in Sep 2016 among total cotton yarn imports in China. But proportion of Indian cotton yarn in China declined to around 12% in Sep 2016. According to latest customs statistics, imports of Vietnamese cotton yarn reached 456kt in Jan-Sep, 2016 in China.
Price spread between international and Chinese cotton has close relationship with cotton yarn imports in China. In 2016, price gap of international and Chinese cotton narrows affected by cotton policy and advantage of Indian cotton yarn weakens in China, so Chinese buyers turn to purchase competitive Vietnamese cotton yarn or Chinese domestic cotton yarn. Under such circumstance, imports of Vietnamese cotton yarn soared in China.
Price spread between international and Chinese cotton narrows in 2016, staying as low as 1,000yuan/mt once, but enlarges gradually recently, up to around 3,600yuan/mt by now, which arouses discussions on whether cotton yarn imports will surge again. Based on current analysis, cotton yarn imports from India may be hard to hike again as supply and demand of cotton yarn changes in India. India was once the largest imported cotton yarn supplier for China, but Indian cotton yarn has lost advantage on global market with high cotton price this year. Under this situation, Indian spinners are active in expanding local demand, changing product structure and developing other overseas markets like Bangladesh. Market share of Indian cotton yarn may rebound in China again, but hard to hit new high.
All in all, yarn market develops rapidly in Vietnam, and yarn exports may exceed 1.10 million tons this year. China is the largest yarn export market for Vietnam, especially cotton yarn. Besides, Vietnam is the biggest imported cotton yarn supplier for China this year, but upward potential in later period may be limited. With bigger price gap between international and Chinese cotton, if cotton yarn imports surge again, India is expected to be the major driving force, but proportion of Indian cotton yarn may be hard to hit new high.
SOURCE: The CCF Group
According to Trinh Thi Thu Hien from the Ministry of Industry and Trade’s (MOIT) Import-Export Department, under the Vietnam-EAEU FTA, 56 percent of tax categories of Vietnam’s exports to the region had zero percent tariff as soon as the agreement took effect. Nearly all textile & garment products which had a tariff of 15 percent have seen the tax cut to zero percent since October 5. EAEU has strict protection over textile & garment products made of wool, cotton and high-end products, but has opened the market to products. Many footwear and handbag products taxed 5-10 percent previously have also seen the tax cut to zero percent. These include sports shoes, an advantageous product of Vietnam.
With the free trade agreement (FTA) between Vietnam and EAEU (Eurasian Economic Union) having taken effect, many Vietnamese export items now enjoy a zero percent tariff. However, it will be not an easy task to boost exports. The zero percent tariff instead of 10 percent has also been applied to Vietnam’s seafood exports. And EAEU has committed to cut 100 percent of tax categories on plastic products. In order to enjoy a preferential tariff, exports must have added value of no less than 40 percent. However, EAEU will consider stopping the preferential tariff if they discover that imports from Vietnam increase sharply and suddenly. - for example, if footwear exports to the market exceed the current production capacity. MOIT thinks that though Vietnam’s wooden furniture industry still has opportunities to penetrate the EAEU market, but the growth rate would not be high.
As for textile & garment products, in order to enjoy the preferential tax tariff of zero percent, the export volume must not be higher than 1.5 times of the average export volume in the last three years. If the export volume exceeds the threshold, EAEU will conduct an investigation to consider whether to impose MFN tax. If so, the taxation will be valid for six months, and may extended for three more months. MOIT said though exports enjoy preferential tariffs, it would not be easy for Vietnamese businesses to bring goods to the EAEU, partly because of non-tariff barriers, such as regulations on food safety and quarantine on Vietnam’s farm produce.
According to Le Ngoc Lam, deputy general director of BIDV, the procedures Vietnamese businesses have to follow to get licenses to export products to Russia, especially related to sanitary issues and quarantine, are complicated. “A lot of our clients complain they find it difficult to obtain licenses to export seafood to the market,” he said.
SOURCE: The Vietnam Net
The global fashion brands and retailers on Monday announced to cut business relations with five more readymade garment factories in Bangladesh taking the total number to 150 as the factories failed to make required progress in remediation for ensuring workplace safety. Accord on Fire and Building Safety in Bangladesh, the platform of EU brands and retailers, in its statement on Monday said that the five factories were inspected for fire, electrical and structural safety by the Accord in 2014 and the factory owner continued to fail to implement the remediation process. The factories are: Mithun Knitting and Dyeing, Intercare Ltd and Goldmart Apparels (Pvt) Ltd in Chittagong and Fair Cotton (pvt) Ltd and Authentic Knit Wear Ltd at Naranyanganj.
With the five, the total number of RMG factories with which EU buyers cut business relations in different times on workplace safety grounds reached to 46. Another platform Alliance for Bangladesh Worker Safety, formed by North American retailers, has so far cut business relations with 104 supplier factories due to failure to make required progress in remediation. In its statement Accord on Monday said despite repeated initiatives by the Accord, the five factories failed to make adequate progress in implementing corrective action plans. The failure of the factories to cooperate prompted the implementation of a notice and warning process in accordance with the Accord article.
Despite notice and warning process and numerous efforts by the Accord staff and Accord signatories, the factory owner continued to fail to cooperate and implement the corrective action plans approved by the Accord, the buyers’ platform said. The Accord urged its signatory companies, who were using the factories, to terminate business relations with the five suppliers and all factories they operate.The tone of Accord and Alliance for cutting the business relations with 150 factories is similar. After the Rana Plaza building collapse, which killed more than 1,100 people, mostly garment workers, in April 2013, European retailers formed the Accord while North American retailers formed Alliance for Bangladesh Worker Safety undertaking a five-year plan which set timelines and accountability for safety inspections and training and workers’ empowerment programmes. The Accord has so far conducted initial inspections at 1600 factories while Alliance inspected 759 factories.
SOURCE: The Global Textiles
Cotton futures fell on Tuesday to touch their lowest in a week on liquidation by speculators as good harvesting conditions prevailed in the United States. On Monday, the first month December contract on ICE Futures registered the biggest intraday percentage loss in seven weeks as index funds shifted long positions forward and as the US dollar firmed. "Speculators have to get on the move at some point, they've got a very large long position ... and not a lot of buyers in there," said Jordan Lea, chairman and co-owner of Eastern Trading in Greenville, South Carolina. The December cotton contract on ICE Futures US settled down 0.66 cent, or 0.96 percent, at 68.2 cents per lb. It traded in a range of 68.1, the lowest since October 25, and 68.92 cents a lb.
Total futures market volume fell by 798 to 30,836 lots. Data showed total open interest fell 1,318 to 260,741 contracts in the previous session. CBOT January soybeans were down 18-1/2 cents at $9.93-1/4 per bushel. December corn was down 6 cents at $3.48-3/4 a bushel.
SOURCE: The Global Textiles
Circularity in the textiles industry is not a distant dream - it is here now in the form of mechanical textile recycling. That was one of the standout messages of a circular economy event staged in Holland today by Dutch social enterprise Circle Economy. Brett Mathews reports from Amsterdam. Keynote speaker at the event, Isaac Nicholsen, chief sustainability officer at Spanish textile up-cycling business Recover, told delegates that resource scarcity, regulatory measures and possible economic advantages mean the shift towards circularity is becoming inevitable. Most interestingly, he highlighted the huge strides made by Recover - a highly sustainable textile business which has managed to remain firmly under the radar until recently - in the area of mechanical textile recycling. While mechanical recycling may lead to shorter cotton staples, he suggested that "with the right strategies of blend it can be as good quality as virgin fibre." "We can also recycle what we recycle," added Nicholsen, who also said the mechanical recycling techniques offered by Recover can work in tandem with chemical recycling whereby textile fibres are completely broken down using a chemical process before being converted into new fibres. "We are already blending mechanical [textile] inputs with chemical [textile] inputs," added. Recover is a business which is definitely worth keeping a very close eye on in the next few years.
Also talking at the event was Cyndi Rhoades, founder and CEO of Worn Again, the London-based sustainable textile consultancy which has developed technology that chemically breaks down fibre blends - cotton/polyester - and creates new fibres. Rhoades told delegates her business had faced challenges convincing apparel brands and retailers that the new fibre her process will be creating is a legitimate alternative to what is already on the market. Hence, she suggested, it has to be of equivalent quality to virgin fibre, it has to be environmentally friendly, and it has to be competitive on price. To ensure the shift to circularity in textiles happens, Rhoades suggested that brands would have to "publicly commit to circularity to send a message to manufacturers that this was the future." She added: "No manufacturer will make a long-term multi-million dollar investment unless they know there is a long term future in [a closed loop system]." We would agree with this, albeit with the caveat that public commitments (which make for great PR) are one thing, firm actions a different thing entirely. On this score, actions not words might be more likely to encourage fibre makes to start digging into their pockets.
SOURCE: The Ecotextile
Two leading textile recycling associations have refuted recent mainstream media suggestions that western exports of second hand clothing are hurting textile manufacturing sectors in East African countries. The export of second hand clothing to East Africa has been a thriving trade for many decades, however, the East African Community (EAC), made up of Kenya, Uganda, Tanzania, Burundi and Rwanda earlier this year proposed banning all imported used clothing and shoes by 2019 - a move which could have serious ramifications for the second hand market in places such as the UK, where much more clothing would likely head to landfill without the huge East African outlet.
The Textile Recycling Association (TRA) and the Secondary Materials and Recycled Textiles Association (SMART) have now issued a joint statement in response to what they claim is "inaccurate and unbalanced media coverage." The two trade bodies said: "There are numerous countries around the world, including Pakistan, Guatemala and Honduras, which enjoy both robust manufacturing and secondhand industries. "While there were indeed periods during the 1980s and 1990s during which African textile manufacturing retracted, this can be attributed to a number of reasons." A key reason, the bodies suggest, was the abolition of the World Trade Organisation's Multi-Fiber Agreement in 2005 which had hitherto limited the amount of new clothing China could export to developed countries.
The statement added: "Further, even if the region was to ramp up production, it is unlikely that clothing would be affordable for those area residents. This is further demonstrated by the fact that most, if not all, textiles manufactured in Africa are exported for sale in developed countries, including the US and UK, as opposed to being sold where they were created. With many in the East African Community living on the equivalent of US$1.00 to US$2.00 or less per day, secondhand clothing provides many with their only affordable access to quality apparel." The TRA and SMART also made a broader, robust defence of the second hand clothing market, counteracting some recent media claims which have denigrated the value of used clothing, particularly that produced by fast fashion brands. They suggested a lack of consumer awareness around recycling and textiles was hampering efforts to increase recycling rates. The statement added: "Most people do not view textiles as a household recyclable like paper, plastic, aluminium and glass, despite the fact that more than 95 percent of all textiles can be recycled or reused in some way. Further, many do not understand that the term 'textiles' encompasses more than just clothing—linens, towels, pillows, footwear, accessories, bags and stuffed animals are all textile products that can be recycled or reused. "The production of new textiles is widely recognized as being one of the most environmentally and socially damaging industries in the world, but the reuse and recycling industry redresses much of that damaging impact. "Ultimately, consumers should not walk away from these misleading articles thinking they might as well throw away their old clothing. The secondhand clothing industry dramatically helps close the loop on post-consumer textile waste, and provides many people around the world the only affordable access to quality apparel."
SOURCE: The Ecotextile
Benetton has launched a new sustainability initiative aimed at empowering women in the textile sectors in Bangladesh and Pakistan. The Italian apparel retailer will support more than 5,000 women employed in Bangladesh's ready-made-garment (RMG) sector and a further 1,500 women in Pakistan as part of its Sustainable Livelihood Project which will operate under Benetton's Women Empowerment Program (WEP). The project includes a two-year calendar of initiatives aimed at empowering home-based female workers in the two countries. In Bangladesh and Pakistan, over the next two years Benetton will support the activities of UN Women, the United Nations organisation for gender equality and the empowerment of women. Funding is aimed at improving the conditions of female garment workers and reducing their vulnerability, both at home and in the workplace.
In Bangladesh, Benetton will support 5,000-6,000 women currently employed in the RMG sector. This will include organising training courses that will help them strengthen their professional skills. "We will help them sign up for basic financial products at local banks, such as loans, insurances and savings accounts. We will start a dialogue with their employers aimed at increasing their safety at the workplace and in its surroundings," said a statement from the Italian business. In Pakistan, Benetton will support around 1,500 women living in the manufacturing district of Sialkot. Priority will be given to the unemployed, those working at home or in the fields and those belonging to ethnic and religious minorities. Added Benetton: "We will help each of them obtain an ID, which is necessary to vote, open a bank account and get access to training courses. We will illustrate to them and their families what their rights are as women and workers and we will stress the fact that they must be involved in decision-making processes, at all levels. We will also help them obtain formal employment and we will work together with the local textile factories to make workplaces more welcoming to women."
The WE Program is the core focus of Benetton Group's current sustainability strategy. Based on the Sustainable Development Goals set by the UN for 2020, its objectives – attaining gender equality and women empowerment – will be achieved through five key efforts: sustainable livelihood, non-discrimination and equal opportunities, access to health, quality education and the end of every form of violence against women around the world.
SOURCE: The Ecotextile
Visitor numbers at the recently concluded Intertextile Shanghai Apparel Fabrics – Autumn Edition 2016 were up 10 per cent over the previous 2015 edition at 73,000 buyers. These buyers who came from over 90 countries and regions, also include those buyers who visited three other concurrent fairs including Yarn Expo Autumn, PH Value and CHIC. According to Wendy Wen, senior general manager of Messe Frankfurt (HK) Ltd, for the last few years, even though Intertextile Shanghai has continued to grow in size, their priority has been to focus on the quality of exhibitors and buyers. “While we are aware that the current economic conditions are creating challenges in some sectors of the industry, we are confident that with the unrivalled range, internationality and quality of exhibitors here, this fair attracts quality trade buyers,” she added.
SOURCE: The Global Textiles
Canadian Prime Minister Justin Trudeau and European Union leaders on Sunday finally signed a landmark trade deal seven years in the making, after it was nearly torpedoed by a small region of Belgium. The ceremony in Brussels had been pushed back from Thursday after French-speaking Wallonia, with just 3.6 million people, initially vetoed an agreement affecting more than 500 million Europeans and 35 million Canadians. Cheers and applause erupted as Trudeau signed the pact alongside EU President Donald Tusk, European Commission head Jean-Claude Juncker and Slovak Prime Minister Robert Fico, whose country holds the rotating EU presidency.
Protesters earlier burst through riot police lines and hurled red paint at the European Union’s headquarters, while activists chanted slogans against the Comprehensive Economic and Trade Agreement (CETA). “What patience,” said Juncker, adding: “This is an important day for the EU and for Canada too because we are setting an international standard that will have to be followed by others.”
CETA removes 99 per cent of customs duties between the two sides, linking the single EU market with the world’s 10th largest economy. The Belgian drama had sparked dire warnings for the EU’s credibility as a trading partner as it wrestles with Britain’s shock vote to leave, a huge migration crisis and the threat of a resurgent Russia.
SOURCE: The Business Standard
Oil prices settled at one-month lows on Monday after dropping over 3 percent on doubts about OPEC's ability to implement its planned production cuts, with the market further weighed by expectations that the cartel had record output in October. The Organization of the Petroleum Exporting Countries (OPEC) approved a document on Monday outlining its long-term strategy, a sign its members are achieving consensus on managing production. But OPEC has achieved little otherwise. Representatives met on Friday in Vienna, and then again on Saturday with their counterparts from non-member producers. They did not reach any specific terms, and sources said Iran has been reluctant to even freeze output.
A Reuters survey found on Monday OPEC's oil output likely hit a record high in October, rising to 33.82 million barrels per day. Brent's front-month contract LCOc1, which expires after Monday's session, was down $1.41, or 2.8 percent, at $48.30 a barrel. It hit a low of $47.98 during the day. The more active next-month Brent contracts were down $2.03, or 4 percent, at $48.65 a barrel. U.S. West Texas Intermediate (WTI) futures CLc1 were trading down $1.84, or 3.8 percent, at $46.86 a barrel after falling to $46.71. The settlement for WTI was the lowest price since Sept. 29 and for Brent was the lowest since Sept. 30 "Investors in crude oil and energy stocks must be having a nightmare this Halloween," said Fawad Razaqzada, technical analyst at Forex.com. "The latest fruitless discussions from the OPEC and non-OPEC members have caused ... a technical development that could lead to further momentum-based selling pressure." Reservations over OPEC's output cut prompted analysts to leave their price outlooks broadly unchanged, a Reuters poll on Monday showed.
Compounding the bearish sentiment was data from energy monitoring service Genscape, cited by traders, which showed a build of 585,217 barrels of crude at the storage hub and delivery point for WTI in Cushing, Oklahoma, in the week to Oct. 28. Oil prices have risen as much as 13 percent since OPEC announced on Sept. 27 a production cut to support prices after a slump that began in mid-2014. The cartel said how much each member should cut will be finalized at a Nov. 30 meeting. Non-member Russia had agreed to cooperate, but a draft federal budget showed it expects to increase its output by 0.7 percent next year and 0.9 percent in 2018.
SOURCE: The Reuters
