The government has removed the benefit of 4 per cent Merchandise Exports from India Scheme on exports of made ups and garments with retrospective effect, that is, from March 7, 2019. The government’s decision to withdraw the Merchandise Exports from India Scheme (MEIS) with retrospective effect is likely to erode profit margins of textile players. It will also impact exports and fresh investment in the sector. The government has removed the benefit of 4 per cent MEIS on exports of made ups and garments with retrospective effect, that is, from March 7. Moreover, the MEIS that had been granted to exporters of made-ups and garments till July 31 will be recovered, said a government notification. “Withdrawal of 4 per cent MEIS with retrospective effect has caused an extremely serious situation for the exporters of made ups and has indeed come as a shock to the industry,” said K V Srinivasan, chairman, The Cotton Textiles Export Promotion Council (Texprocil). “Exporters of made ups are facing serious working capital problems, affecting their day-to-day business,” added Srinivasan. Exporters of cotton made ups were already passing through a tough situation financially due to the non-implementation of the Rebate of State and Central Taxes and Levies (RoSCTL) scheme even after its announcement 10 months ago. This scheme, announced for export of made ups and garments, is yet to be operationalised. Also, MEIS of 4 per cent was also frozen for made ups and garments from August 1, 2019. The textiles industry also faces some pending claims under the erstwhile Rebate of State Levies (ROSL). “How can the government withdraw any incentive scheme of which the benefits have been passed on to consumers,” asked an industry leader. India’s exports of made ups and garments have declined severely in the last one year due to the global economic slowdown. With countries like Pakistan, Bangladesh, Vietnam and Turkey enjoying benefits of the generalised system of preferences with developed countries, India has been left behind. Thus, India’s exports of made ups and garments became beneficial only through incentives like the MEIS. Exporters are working against tough competition from countries like Bangladesh, Sri Lanka, Vietnam and Pakistan. This is combined by high import duties in leading export markets like the US, European Union and China. Meanwhile, exporters have already factored in the availability of 4 per cent MEIS along with the RoSCTL scheme which is expected to be to the tune of 8.2 per cent while quoting export prices to foreign buyers. M Senthilkumar, managing director of BKS Textiles, believes that the withdrawal of MEIS with retrospective effect would erode profit margins of textile companies. “The MEIS benefit has already been passed on to consumers. Hence, exporters would have to pay it back to the government from their profits which would have an impact on their balance sheet,” Kumar added. Many exporters have also paid advance tax on these export receivables as required under the I-T Act which has further aggravated the problem. All exporters have been badly affected by this decision, especially the MSME sector where bulk of the made ups meant for exports are being manufactured. Srinivasan urged the government to restore the benefit of 4 per cent MEIS on exports of made ups and garments.
Source: Business Standard
With WTO Appellate Body in limbo, Govt gets time to replace schemes challenged by the US. The government is looking at the possibility of extending the popular Merchandise Export from India Scheme (MEIS) and other export incentives, challenged by the US at the World Trade Organization, beyond March 31 as it is worried that replacing the existing schemes could hurt the already floundering exports. The Foreign Trade Policy 2020-25 to be announced in the new fiscal may continue many of the old schemes with some adjustment in rates, a government official told BusinessLine. “Exporters across sectors are seeking a continuation of incentives such as the MEIS, the Export Promotion Capital Goods (EPCG), the Export Oriented Units (EOUs) and the Electronic Hardware Technology Park (EHTP) schemes, which the government was planning to end this fiscal. With exports showing a decline so far this year, there is a growing feeling amongst policy makers that the boat should not be rocked further,” a government official told BusinessLine. India’s exports declined almost 2 per cent to $239.29 billion in April-December 2019 with most labour-intensive sectors contracting. Last year, the US had complained to the WTO that India’s export subsidy schemes flouted rules as the country’s Gross National Income (GNI) had exceeded the per capita $1,000 annual threshold above which members were banned from subsidising exports. Following this, a dispute panel ruled in the US’ favour. The report circulated on October 31 stated that New Delhi should do away with schemes including the MEIS, the EoU/EHTP and the EPCG within 120 days of adoption of the ruling, while the benefits of the Special Economic Zone scheme have to be withdrawn in 180 days.
Appeal against panel decision
India, however, need not be in a hurry to discontinue the schemes as it subsequently appealed against the panel decision at the WTO Appellate Body. Since the apex decision making body has not been functional since December — after the US blocked the appointment of new judges, demanding changes to WTO rules — India is not under pressure to implement the judgment of the panel. “The fact that India has appealed against the WTO panel ruling allows the country to continue the schemes for many more months as the Appellate Body crisis is unlikely to be resolved soon because of Washington’s inflexible attitude,” the official said. An indication that the government is slightly relaxed about replacing the export promotion schemes is evident from the fact that Finance Minister Nirmala Sitharaman’s decision to switch the MEIS with a new Remission of Duties or Taxes on Export Product (RoDTEP) scheme from January 1, 2020 has not yet been implemented. The RoDTEP scheme is supposed to be compliant with WTO norms as it seeks to neutralise all taxes and levies imposed on export products without linking them directly to exports. But exporters are not too keen, as many in sectors such as electronics fear that the payments under it would be lower.
Source: The Hindu Business Line
Goyal meets WTO chief, EU trade commissioner, others
Union Minister Piyush Goyal on Friday discussed with World Trade Organization chief Roberto Azevedo challenges in the multilateral trading system as well as India's preparedness to engage in reforms aimed at bringing inclusivity and transparency. Goyal, who is here to attend the World Economic Forum (WEF) annual summit, met European Union trade commissioner Phil Hogan, former US Vice President Al Gore, renowned economist and Nobel laureate Michael Spence, and Singapore's Minister-in-Charge of Trade Relations S. Iswaran, among others. He also held discussions with Blackstone Group Chairman, CEO and Co-Founder Stephen A. Schwarzman, South Africa's Minister of Trade and Industry Ebrahim Patel and ABB Chairman and CEO Peter Voser, according to a series of tweets by Goyal. With Azevedo, the minister discussed various challenges in the multilateral trading system. They also spoke about India's preparedness to engage in reforms aimed at bringing inclusivity, transparency and non-discrimination, as per a tweet. "We had constructive discussions on some of the big debates in the trading system, including dispute settlement, development & #fisheriessubsidies. Glad to hear India's support for a strong WTO," Azevedo said in a tweet. The minister said his engagements at Davos show him that businessmen can clearly see that India is the place to invest for a better future. He met Hogan and spoke about "the significant India-EU economic and investment ties, and the vast potential for them to grow manifold to our mutual advantage".Goyal—who holds the portfolios of Commerce and Industry, and Railways—also tweeted that he had a productive meeting with OECD Secretary General Angel Gurria. "Spoke about increasing India's engagement with OECD for better insights on global trends, thus promoting more equitable and fair trade," the minister tweeted. With Gore, Goyal discussed the global economic scenario and its impact on trade and investment. After meeting with Iswaran, the minister said they discussed ways to further enhance longstanding and deep relations and establishing sustainable trade ties between the two countries. About his meeting with Schwarzman, Goyal tweeted, "discussed a range of investment opportunities that India presents across various sectors including real estate, infrastructure and logistics".With Patel, the minister spoke about expanding trade and investment ties through closer cooperation to achieve mutual economic growth and prosperity. "Discussed our plan of Railway electrification & the huge investment opportunity it presents. Also, spoke about a range of emerging sectors in India like e-mobility, automation & renewable energy," Goyal tweeted after meeting Voser. Goyal also met Macquarie Group CEO Shemara Wikramanayake. "We spoke about the company's existing investments in India's infrastructure & renewable energy sector and also discussed other avenues for future investments," the minister said. On Thursday, the minister said the Indian economy is well-poised to take off and that there is a lot of enthusiasm for making investments in the country.
Source: Financial Express
Vietnam, meanwhile, has also signed an FTA with the EU in 2019 and is already strategising to take advantage of the benefit. To work its way out of the current economic slump, the government needs to provide exports a boost, especially merchandise exports, amid a slackening domestic demand. While sceptics say an export thrust is difficult when global trade is not doing well, optimists say it’s pertinent to promote garment exports as it could be single-biggest boost to jobs, beyond aiding to narrow the trade deficit. “The government recognises the potential of the garment sector to create jobs, but lack of reforms is holding back its growth,” said Deepak Mohindra, chairman of Apparel Sourcing Week, adding the country needs reforms such as easing labour norms, reducing tariffs, and a fresh look at free trade agreement (FTA) with the European Union (EU) to be an apparel manufacturing and exporting hub. Bangladesh offers an interesting example. In 2000, its apparel exports (at 2.6 per cent of global share) lagged behind India’s (at 3 per cent). However, a collaborative government effort and its ability to leverage duty-free access to markets such as the EU, has made it the world’s second-largest apparel exporter after China. At $37 billion in 2018, apparel exports has helped its GDP grow at six per cent annually over the last decade, besides creating millions of jobs. “Today Bangladesh is exporting four times more than India to the EU, whereas in the US the difference is of only 25 per cent,” he said. Vietnam, meanwhile, has also signed an FTA with the EU in 2019 and is already strategising to take advantage of the benefit. However, an absence of FTA remains a killer for the 6,000-odd domestic garment exporters employing 40 million workers and exporting goods worth $17 billion. The EU accounts for a major chunk of India’s total apparel exports generating revenue of $5.4 billion in 2019 as against $4.2 billion exported to the US.
Apparel Sourcing Week 2020
It provides a platform to manufacturers to showcase their products and manufacturing capabilities. The 3-day program will be held from Feb 20-22 in Bengaluru with an expected footfall of 10,000 attendees
Source: The New Indian Express
The implications of the first phase of the US-China trade settlement will travel far beyond China, impacting countries that deal with Beijing. In most cases, the impact on China’s trade partners, including India, will be negative. But smart Indian companies can take advantage of some aspects of the deal, especially what they failed to cover, such as the technology sector. The deal will curtail China’s ability to buy goods from non-US countries as Beijing has committed to purchasing goods and services worth $200 billion above the 2017 level from the US. Countries such as India that have been trying to persuade China to buy more have reasons to worry. India and several Asian countries are not in the same league as the US when it comes to supplying quality goods from the industrial and agriculture sectors. For instance, Indian grains, fruit and vegetables have not been able to overcome testing and quarantine requirements essential to access the Chinese market. But there are situations where trade logic does not work in its entirety. China is being forced under the agreement to import far beyond its requirement for high-quality US goods; this will mean less buying from other countries. The deal is a severe blow to the Chinese economy, which recently recorded its worst growth in three decades. The deal will mean greater transparency in China’s financial sector and opportunities for the Wall Street to operate in Shanghai and Shenzhen. China has committed to opening the doors wider for US non-bank financial institutions (NBFIs). This means removal of foreign ownership caps on insurance, securities, futures and fund management companies by April 1. The commitment will hasten the process of implementing a promise that China made in 2017. Whether US NBFIs will be about to gain a foothold in China is a different matter. Chinese rivals are tough players with deep contacts. Foreign banks have been unable to make a mark despite being permitted to operate via wholly owned subsidiaries since 2003. Indian financial and IT companies, which have close contact with American players, might get a chance to ride piggyback into China. The deal can open new possibilities of Indian companies and research and development (R&D) institutions to find Chinese financiers and collaborators. China has been trying to get off the hook from Donald Trump administration’s scrutiny and controls over technology acquisition by Chinese companies. Beijing is desperately pushing for a technology upgrade programme called Made in China 2025. It needs western technology and collaboration with companies and institutions in the US to make a success of it. The first phase of the deal does not touch this aspect at all. The second phase of the trade settlement is unlikely to happen before 2022; till then, Washington will monitor the implementation of the first phase. Meanwhile, the trade war will continue. As I argue in ‘Running with the dragon: How India should do business with China’, many Indian companies have the opportunity to grow dramatically if they find creative ways to adopt new technologies while operating in China and engaging with Chinese companies in India and in other countries. It is wise to engage with potential competitors before they overtake our business as we have seen in market segments such as mobile phones and some white goods. In not addressing the technology question, the deal gives Indian companies and institutions an opportunity. They can join hands with Chinese counterparts, who are desperately looking for alternatives to US institutions. Indian entities should creatively use the opportunity to find out what exactly Chinese companies are seeking before making their offer. Indian firms must reach out rather than wait for invitation as China has alternatives. China is scouting for scientific and engineering talent globally. The number of Indian post-doctoral students and scientists in China runs in hundreds. What is required is talent and technology aggregators on the Indian side who would pitch for business in China. There are many such western aggregators operating in China but hardly any Indian firm. The Indian government and corporate sector were not quick to respond to the needs of Chinese companies to relocate or invest overseas as rising costs, reduced export demand and anti-pollution laws pushed up product prices in China over the past three years. Vietnam stepped in. Granted that Vietnam, with similar culture and surface road connections with China, had an advantage. But what India can offer more than any Southeast Asian country is its huge market and trained manpower. It is to be seen whether Indian companies and government agencies would respond to the new situation as smartly and creatively as it is necessary to monetise opportunities.
Source: Economic Times
If the net profit numbers don’t look so bad — up 6.38% y-o-y — it’s thanks to the lower tax rate, like at Larsen &Toubro, for example. The first lot of numbers from corporate India for the three months to December 2019 is disheartening because even a festive quarter didn’t help alleviate the stress. Companies are struggling to grow their toplines — revenues for a sample of 170 companies (excluding banks and financials) grew just 1.1% year-on-year. However, many have been able to protect their operating margins by resorting to cost-cutting measures and added help from benign commodity prices. The expenditure for the same set of companies went up by just 0.79% y-o-y allowing for a 28 bps rise in operating profit margins. If the net profit numbers don’t look so bad — up 6.38% y-o-y — it’s thanks to the lower tax rate, like at Larsen &Toubro, for example. The tax outgo for the 170 companies was down 15% y-o-y. If one excludes the profits of TCS and RIL, the profit growth is just 5.2% y-o-y since large commodity players such as JSW Steel posted a sharp drop in profits of 88% y-o-y. The struggle to grow the topline can be seen across businesses. At Asian Paints, for instance, the growth in domestic decorative was a dull 3% y-o-y since volumes grew in low double digits that implied realisations must have weakened. At the other end of the spectrum, L&T reported a 3% y-o-y fall in core E&C revenues and this coupled with other factors resulted in a poor consolidated profit. At UltraTech revenue growth was virtually flat, although realisations shot up because volume growth was weak. JSW Steel also posted poor revenue numbers with sales falling 12% y-o-y. At PVR, the growth in footfalls was only 1% y-o-y while same-store footfalls actually contracted 6% y-o-y. At Avenue Supermarts, same-store sales rose by 6-7% y-o-y. Managements remain circumspect and some like the one at Asian Paints pointed out the demand environment was challenging. The TCS top team was also conservative while speaking out the outlook, noting that it would not be easy to replicate the growth rates of the past. Large companies such as Reliance Industries reported very ordinary numbers across businesses — except for retail. The accelerated fall in capex, however, enabled the company to turn free-cash-flow positive.
Source: Financial Express
The PMO directive was mentioned in a meeting held on December 18, 2019, to review the progress in the power and renewable energy sectors under the chairmanship of Prime Minister. The Prime Minister’s Office (PMO) has instructed the power ministry to come up with a mechanism wherein lending by government-owned Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to state-owned power distribution companies (discoms) would be contingent on states undertaking adequate distribution reforms. The development comes at a time when discoms’ dues to power producers stood at Rs 80,930 crore at the end of November 2019, up 45% from a year earlier with 89% of these being “over-dues” with payment default of 60 days or more. Discoms’ financial losses stood at nearly Rs 28,000 crore at the end of FY19, up 88% year-on-year. The PMO directive was mentioned in a meeting held on December 18, 2019, to review the progress in the power and renewable energy sectors under the chairmanship of Prime Minister Narendra Modi. The Union power ministry was also asked to initiate specific measures to ensure that states achieve the targets under the Ujwal Discom Assurance Yojana (UDAY) scheme, the minutes of the meeting, reviewed by FE, revealed. States had missed the UDAY target of bringing down discoms’ aggregate technical and commercial (AT&C) losses to 15% by the end of FY19. The losses stood at 21.3% at the end of September 2019. Other actions directed by the PMO to reform discoms include the inclusion of private players in the discoms business “with appropriate options ie complete privatisation, concession based public private partnership, franchisee models, etc”. It has also suggested amending the Electricity Act, 2003 to introduce ‘carriage and content’ — a project which has been in the back burner for quite some time — in order to segregate the business of operating local power transmission systems from distribution of electricity. It would effectively allow end-consumers to choose who they want to buy electricity from, similar to the way telecom and direct to home (DTH) television operators work. India’s power distribution sector, largely a state preserve, has not been very amenable to reforms. The government has already drawn up plans to address the issue of lack of competition in the electricity distribution segment by allowing multiple private franchisees in each area, while state-run utilities will continue to own the network. Though the franchisee model has been tried in states such as Maharashtra, Odisha and Rajasthan, it hasn’t made much headway; the new model, the government thinks, is more workable, given the pricing freedom and various incentives being offered for the operators to meet operational parameters like elimination of pilferage and theft. The power ministry was also asked to examine the possibility of introducing new regional electricity regulators and strengthen existing state regulators.
Source: Financial Express
Union Minister Piyush Goyal on Friday discussed with World Trade Organization chief Roberto Azevedo challenges in the multilateral trading system as well as India's preparedness to engage in reforms aimed at bringing inclusivity and transparency. Goyal, who is here to attend the World Economic Forum (WEF) annual summit, met European Union trade commissioner Phil Hogan, former US Vice President Al Gore, renowned economist and Nobel laureate Michael Spence, and Singapore's Minister-in-Charge of Trade Relations S. Iswaran, among others. He also held discussions with Blackstone Group Chairman, CEO and Co-Founder Stephen A. Schwarzman, South Africa's Minister of Trade and Industry Ebrahim Patel and ABB Chairman and CEO Peter Voser, according to a series of tweets by Goyal. With Azevedo, the minister discussed various challenges in the multilateral trading system. They also spoke about India's preparedness to engage in reforms aimed at bringing inclusivity, transparency and non-discrimination, as per a tweet. "We had constructive discussions on some of the big debates in the trading system, including dispute settlement, development & #fisheriessubsidies. Glad to hear India's support for a strong WTO," Azevedo said in a tweet. The minister said his engagements at Davos show him that businessmen can clearly see that India is the place to invest for a better future. He met Hogan and spoke about "the significant India-EU economic and investment ties, and the vast potential for them to grow manifold to our mutual advantage".Goyal—who holds the portfolios of Commerce and Industry, and Railways—also tweeted that he had a productive meeting with OECD Secretary General Angel Gurria. "Spoke about increasing India's engagement with OECD for better insights on global trends, thus promoting more equitable and fair trade," the minister tweeted. With Gore, Goyal discussed the global economic scenario and its impact on trade and investment. After meeting with Iswaran, the minister said they discussed ways to further enhance longstanding and deep relations and establishing sustainable trade ties between the two countries. About his meeting with Schwarzman, Goyal tweeted, "discussed a range of investment opportunities that India presents across various sectors including real estate, infrastructure and logistics".With Patel, the minister spoke about expanding trade and investment ties through closer cooperation to achieve mutual economic growth and prosperity. "Discussed our plan of Railway electrification & the huge investment opportunity it presents. Also, spoke about a range of emerging sectors in India like e-mobility, automation & renewable energy," Goyal tweeted after meeting Voser. Goyal also met Macquarie Group CEO Shemara Wikramanayake. "We spoke about the company's existing investments in India's infrastructure & renewable energy sector and also discussed other avenues for future investments," the minister said. On Thursday, the minister said the Indian economy is well-poised to take off and that there is a lot of enthusiasm for making investments in the country.
Source: Financial Express
New JIT technology ensures a textile order is completed within 48 hours to reduce wastage. Saving environment is an important concern we face, yet little is being done. This is especially when it comes to the textiles industry in India and even globally, despite the fact that this industry is one of the most polluting industries in the world. Various surveys show that around five per cent of all landfill space is consumed by textile waste. Moreover, 20 per cent of all freshwater pollution is created by textile treatment and dyeing. To look appealing by wearing glamorous clothes, we have ended up causing excessive harm to the environment. However, there are individuals doing their bit to upend this wrong. Take the case of Indian entrepreneur Nitin Kapoor, 32. Understanding the shortcomings of the textile industry, Kapoor has launched an all-new clothes manufacturing technology which emphasises on minimising water pollution and using very little water in clothes manufacturing. Kapoor, who is the founder of Indian Beautiful Art (IBA), has developed Just In Time (JIT) technology for garment manufacturing. It only produces what is demanded by the market and controls the utilisation of natural resources along with no dumping of waste fabric or garment. Right from printing to dispatching the product, according to latest fashion trends, the order is managed within 48 hours to reduce wastage. Already a recognised start-up by the Department for Promotion of Industry and Internal Trade (DPIIT), Kapoor has now applied for the Start Innovation award as well to showcase JIT technology. The son of an Air Force officer, Kapoor is hoping for a positive response since the resources saved are phenomenal, and there is no compromise on a customer’s options. To know more, we spoke to Kapoor:
When did you decide to develop JIT technology?
In 2015, when we calculated the number of garments exported versus the number of apparel in our inventory which was lying unsold was alarming. The gap was huge. Since fashion changes at the drop of a hat and clothes go out of trend, it becomes hard to sell those products. Further, there are sizes which do not get sold and become outdated. It took us 24 months and US$1 million (self-funded) to crack the JIT model in garment manufacturing. After a lot of trial and error, we were able to conclude the final product made within 48 hours after receiving the order. JITGM (Just In Time Garments Manufacturing) is a copyrighted process with the Government of India, which will reduce the wastage of resources, especially water.
How are the costs controlled?
A customer places the order via Augmented Reality images which offers them multiple ranges of fabrics/colours/prints/embroideries and places order, which is produced within 48 hours. The problem gets solved in two parts. Instead of getting prints of photoshoot, images on the clothes are tested using the technology. This cuts the cost of photoshoot production and creates a single prototype for various patterns of the same garment. The colours and designs are changed directly which save time, resources and labour. Secondly, the garment is manufactured once the customer has placed an order. It also helps us in our business capital, cuts down cost on warehousing and inventory management and keeps the stock always trendy, sturdy, rocking and knocking.
What are the kind of garments you make? How much waste is reduced per piece? With JIT technology, we have the luxury to create garments for every segment, and we are already in women’s, men’s and kids clothing in both the categories – fashion and ethnic. With process automation through in-build technology, we are able to match the cost of manufacturing as compared to bulk manufacturing; with the same, we are sure to touch a large number of customers in every age group. How do you generate awareness among consumers about your products? To our customers, we are promoting these as #WaterSaved, wherein they know that they have contributed towards saving of 60 per cent of the water by purchasing from us.
Source: The New Indian Express
At a time when India is looking to fight the global financial slowdown and surge ahead by adding trillions to its gross domestic product (GDP), the power sector in the country seems to be facing its own problems. According to members of The Economic Times India Leadership Council, the country has overlooked solving the current issues of power generation and distribution, and has rather concentrated on deploying a plan to create capabilities in generating power from renewable sources. Data from US-based independent and statistical analytics firm Energy Information Administration (EIA) show that India suffers from one of the highest levels of electricity transmission and distribution (T&D) losses globally. T&D losses account for the electricity that is generated but doesn’t reach the customers. According to EIA, India’s T&D losses equal 20% of the total generated amount, which is more than twice the global average and nearly three times as much as the US. Highlighting other issues, the members also said that companies operating in the power utilities segment (generally dealing in distribution) are currently cashstrapped and hence they haven’t been able to buy power from manufacturing companies resulting in low power offtake. These members include Gyanesh Chaudhary, MD and CEO, Vikram Solar; Ajay Kapur, CEO, Vedanta Aluminium & Power; Anil Chaudhry, country president and MD, Schneider Electric ; Santosh Khatelsal, MD, Enerparc Energy; Syed Sajjadh Ali, MD, Eaton Power; and Sriram Ramakrishnan, MD, Fuji Electric India. To add to the issues, the members said the country has not been investing in the current infrastructure to plug energy leakage and ensure lastmile delivery to consumers. The strain on the economy has also affected the energy demand in the country which has fallen for the fourth straight month, the members said, adding that the new and expanded capacities of power generation are lying idle.
UNDERSTANDING INDIA’S ENERGY BASKET
To understand the impact of the crisis and how members are looking to work towards solving it, it is very important to understand India’s energy basket. According to the members, India’s fuel basket will be a mix of conventional and clean energy. While solar is the cheapest during the day at ?2.4-4 per unit, at night, coal is cheapest at ?3.50 a unit. This is because solar reaches a rate of ?12 at night since it needs to be stored. However, with the help of new technology, resulting emissions from coal can be reduced at night, the members said.
CORRECTIVE MEASURES
Interestingly though the members feel that there are corrective measures that can be taken in order to rectify the flailing situation. The solutions, they believe, can work together in unison to tackle the energy crisis in the country.
SMART ENERGY
One of the problems highlighted was the last-mile delivery of electricity. One way to solve this issue would require employment of automation and deployment of smart micro-grid. However, there seems to be a challenge with the deployment of such a system as it would take a lot of time to transition the entire grid to such a smart system. Hence, for an interim solution, the members pointed out that further privatisation of the distribution sector will ensure efficient and secure ways of delivering energy to consumers.
SHEDDING WEIGHT
While India has been contemplating to slowly introduce electric vehicles, there is another alternative that will help cut down CO2 emissions. The members said that vehicle manufacturers have the option of adding clean and light metals such as aluminium to vehicles to make them more energy-efficient. According to aluminium mining company Vedanta, using 1 kg of aluminium to a car or light truck will result in a total saving of 20 kg of CO2 over the vehicle’s lifetime. Over 20 million tonnes of aluminium used in an entire transport sector can result in saving of 400 million tonnes of CO2 and over 100 billion litres of crude oil. Improving energy efficiency of conventional fuels is often more cost-effective and the most immediate way to use lesser quantities of fossil fuels, the members said.
RECYCLING AND REUSING RESOURCES
As India and its different stakeholders in the energy sector try to look at different ways of tackling the energy crisis, reusability or recycling resources will be one of the key areas, members said. The members feel that the industry, eventually, will use ecofriendly products that can be reused many times over, marking a shift to renewable fuels, resulting in costsavings on raw materials, reducing emissions, and promoting sustainability. But for this to happen, companies will require financial support, technological infrastructure, along with requisite policies and proper economic analysis, the members said. Examples of the circular economy approach were the initiatives undertaken by Schneider in 2018. These initiatives reduced customers’ CO2 emissions by 30 million tonnes, primarily through the renovation of existing equipment such as buildings, industry, and infrastructure.
ALTERNATIVE OR RENEWABLE SOURCE OF ENERGY
Another important aspect of tackling the energy crisis in India are renewable forms of energy such as wind and solar. Solar energy seems to have got some traction in the space and leads the pack of clean fuels with a CAGR of 55%. The members also said that solar energy has great fundamentals and will perform best when it is not worried over government policies. However, they added that the sector is concerned about the pressure exerted by the old guard to prevent its penetration in the market and its inclusion in the national grid. Furthermore, the solar energy market is dependent on Chinese imports for its equipment, modules that also attract an anti-dumping duty resulting in raised prices for the domestic industry. The members also cautioned that the solar energy sector is funded by FIIs, who may turn wary of policy inconsistencies. Another concern for the members was that a tariff drop in bidding for solar projects in order to encourage more activity has compromised on the quality of the electricity generated in such projects though the price of the fuel was lower.
THE SILVER LINING
Even if understanding the country’s energy basket raises some red flags, the members think that India has a long runway on its development path. Its current energy use is just 0.6 tonne of energy equivalent per capita. TERI estimates a level of at least 2.5 tonne oil equivalent energy use per capita, for Indians to enjoy a high quality of life. The country’s energy consumption is set to increase, but since it is still in a developing stage and will mature and scale later than most economies, it will have the option of being future-ready in terms of using energy efficiency technologies keeping its carbon emissions in check.
CONCLUSION
The industry’s focus must remain on resource efficiency, apart from setting the right tariffs, which can be achieved by removing inefficiencies through automation and digitisation, the members said. They also added that investment in solar must be incentivised with a focus on rooftop solar, while battery usage should be encouraged, so energy price of solar plus battery becomes the cheapest form of electricity.
Source: Economic Times
Encouraging trends in emerging markets belie their volatility since the taper tantrum of 2013, when the Federal Reserve signaled it was pulling back on quantitative easing. Further turbulence is likely, despite the improving outlook for advanced economies, easing trade tensions and accommodative monetary policy. The International Monetary Fund estimates that growth in developing countries fell to 3.7% last year, the slowest pace since 2009 and well below the IMF’s July 2019 forecast of 4.1%. An expected rebound to 4.4% this year assumes highly uncertain recoveries in stressed economies such as Argentina, Iran and Turkey, as well as in countries where growth has slowed significantly — China, Brazil, India, Russia and South Africa among them. Rising friction in the Middle East, if sustained, could result in higher energy prices and supply disruptions for developing countries. India, which recently downgraded growth for the 2020-21 fiscal year to 5%, the slowest pace in a decade, imports more than 70% of its oil needs. A price rise of $10 per barrel widens the current account deficit by 0.4 % of gross domestic product. Every increase of 10% adds 0.2% to the rate of inflation, which is already above the Reserve Bank of India’s 4% target. Higher borrowing costs and a stronger U.S. currency due to haven demand would hurt developing countries. Between 2010 and 2018, low exchange-rate volatility and high interest-rate differentials caused non-bank financial institutions in emerging markets to double their U.S. dollar-denominated debt to $3.7 trillion. Much of this is unhedged. Further geopolitical risks include North Korea’s missile-rattling, challenges in Hong Kong and Taiwan to Beijing’s assertions of authority, and China’s territorial maritime disputes with its neighbors. Japan and South Korea are contesting matters arising from World War II. India’s proposed changes to citizenship laws and the status of Kashmir is fomenting domestic unrest and tensions with predominantly Muslim Pakistan and Bangladesh. Meanwhile, the spread of a new virus that originated in China threatens to depress retail sales and tourism in Asia, helping to bring a global stock rally to a halt last week. These stresses exacerbate long-term structural problems. The early 2000s and the period immediately following the global financial crisis saw a synchronized acceleration of growth across the world. But advanced economies have slowed and their long-term potential rate of expansion has fallen. 2018 and 0.1 percentage point lower than in its October forecast. Underlying this stagnation is the flagging potency of debt-fueled growth, flat productivity, limited policy options, and unfavorable demographics. Emerging economies cannot rely on historic demand for exports to drive future expansion. Despite the U.S.-China phase one trade agreement, conflicts won’t abate. Sino-American trade tensions alone will cumulatively reduce the level of global GDP by 0.8% by 2020. The Trump administration also has trade disputes with the European Union, Australia, India and Vietnam, among others. France and the U.S. are trying to de-escalate threatened tariffs on champagne and cheese in retaliation for a digital tax affecting Alphabet Inc.’s Google and Amazon.com Inc. Trade volume growth fell to about 1% in 2019, the weakest level since 2012. The retreat from a rules-based trade system and the weaponizing of trade interdependence will damage everyone. In the past 20 years, China, a crucial driver of emerging markets, went from a 10th to two-thirds the size of the U.S. economy, assisted by trade within the WTO framework. Today, China’s blacklisted Huawei Technologies Co. relies on chips designed in America while advanced economies benefit from its cheaper and often cutting-edge 5G technology. Three-quarters of the world’s smartphones, mostly made in emerging markets, use Google’s Android mobile operating system. American restrictions hurt developing nations as well as consumers in advanced economies. In a world of limited demand, irrespective of leadership or ideology, governments everywhere face a mounting anti-globalization backlash. Nationalist agendas and a shift to autarky – closed economies – will persist. A return to strong growth in trade and crossborder capital flows seems unlikely. This affects developing-world economic models. Lower-income nations focused on export-oriented industries, such as textiles and manufacturing, exploiting cheap costs. Now, weak demand and trade disputes limit this option. Higher-income developing countries face technology transfer restrictions that affect improvements in productivity. Meanwhile, automation decreases the advantages of low-skilled, cheap labor and offshoring. Bringing manufacturing home to advanced economies decreases companies’ exposure to disruption, currency fluctuation and political interference. The failure of Prime Minister Narendra Modi’s “Make in India” strategy reflects these shifts. India has failed to produce the 1 million new jobs per month needed to absorb new entrants into the workforce. Indian Railways recently received 23 million applications for 90,000 vacancies. Slower growth creates a dangerous feedback loop. Dissatisfaction with improving ordinary lives can prompt civil unrest. Countries rich in scarce resources, or having large internal markets such as China, India, and Indonesia, may muddle through. Others will struggle. Rising nationalism and protectionism are likely outcomes, and will only deepen the wedge between advanced and emerging economies. It will make an interesting if rough ride ahead for investors.
Source: Economic Times
Thailand and Laos will hold a meeting on Feb 25-26 to promote cooperation in trade and investnment. Auramon Supthaweethum, director-general of Thailand’s Trade Negotiations Department, revealed that the meeting will be on a ministerial level between the Ministry of Commerce of Thailand and the Ministry of Industry and Trade of Laos in Bangkok. They aim to nearly double bilateral trade from the 2016 figure of US$5.9 billion to around $11 billion by 2021, she said. In 2018, bilateral trade amounted to US$6.73 billion, increasing by 9.21 per cent over 2017 with Thailand enjoying a trade surplus. Thai exports to Laos amounted to $4.12 billion and Thai imports from Laos were valued at $2.61 billion. Laos is Thailand's 21st biggest partner in the world market and eighth largest trading partner in Asean. Exports included refined oil, cars, equipment and components, livestock products, iron, steel, chemicals and cosmetics, soaps, etc while major imports were fuel (electricity), metal ore, electrical machinery and components, electrical appliances, vegetables, fruits, cement, etc. “This is an opportunity for Thailand to expand further in accordance with the policy of Jurin Laksanawisit, Deputy Prime Minister and Minister of Commerce, ” she added. Trade between Thailand and Maldives during the first 11 months of 2019 (January to November) was valued at $170.28 million. Thai exports accounted for $108.60 million. Exports included motorcycles and components, plastic products, clothes, furniture, machinery and mechanical components.Thailand’s imports totalled $61.69 million, including products such as fresh, chilled, frozen, processed and semi-processed aquatic animals, metal products, textile products and publications etc. “Maldives is a tourist destination, and therefore, the restaurant, spa, and hotel service businesses are likely to grow. It is an opportunity for Thailand which has potential in this field to invest and open the market for premium products, ” said Auramon. Auramon said the 12th Thailand-India JTC Meeting is expected to take place in March in New Delhi while the Thailand-South Africa JTC meeting at senior officer level will be held on Feb 18 in Pretoria.
Source: The Star
A 50-square-meter patch of field and 100 cotton trees. That’s all that Jin Shirai needs to make his living. Shirai is a weaver, though the term only represents part of what he actually does. As a craftsperson who creates from scratch, his work starts in spring when he plants wamen (Japanese cotton) seeds. Throughout summer he personally takes care of the field and in autumn he harvests the cotton, removes the seeds and hand spins it into yarn. After countless other small procedures and, when necessary, dyeing the yarn, he finally starts weaving. In Japan’s textile industry, there are weavers who specialize in and only weave for a living, while most dyers only dye and spinners spin. For large-scale production, it’s more efficient, especially since each process demands high levels of skill, training and expertise. Shirai’s approach to fabric making, however, is unusually holistic. During his final year studying textiles at the Kuwasawa Design School, one of the top vocational schools in Japan for designers and creators, Shirai made an unusual decision. While his peers were looking into finding positions in creative companies, he decided he wanted to deepen his knowledge and techniques further in Okinawa. The island, which served as an international trading hub more than 500 years ago and continues to nurture unique styles of handicrafts, appealed as an ideal training ground. Shirai found a government-funded program to learn about Okinawan textiles and culture. Feeling confident, he moved to the island straight after graduation, and sent in an application form. “But I got rejected,” he says, laughing, during a recent interview at his studio in Chiba Prefecture. He sheepishly attributes the rejection to his own arrogance and assumption that he would be accepted. “I re-read the application form after and the reason was obvious,” he says. “There was no passion, nor aspiration for study.” Not one to give up, Shirai tried applying for another training course but, again, he was rejected. Left on the island with no plan, he found a part-time job in a cafe and studied local textiles on his own in a library. Luckily, the owner of the cafe turned out to be friends with one of the key figures in Okinawa’s textile community. Living on the island, Shirai says, allowed him to make connections and build trust within the local handicrafts community. “If there is anything that I’m blessed with, it’s being fortunate with people I meet,” he says, going to explain that he also met one of the staff from the program he originally wanted to enroll in. That person encouraged Shirai to apply again and, in his second year in Okinawa, he was accepted. Once part of the program, he began studying Ryukyu kasuri, one of the native Okinawan styles of textile that involves creating patterns by adjusting pre-dyed wefts and warps, sometimes by as little as a few millimeters. It was during his third year in Okinawa, when Shirai was working on perfecting his kasuri technique by making more and more meticulous patterns, that he was suddenly struck by the beauty of sozai (“raw material”). “Just a piece of plain woven cloth had an overwhelming presence next to my work,” he says. “I was just blown away.” His fascination with sozai led Shirai to the work he chooses to do today — self-producing textiles. Though he stayed in Okinawa for another seven years, offers to exhibit Shirai’s work on the mainland encouraged him to move back. By then he had experimented with different fibers — silk, cotton and ramie — and eventually started growing his own wamen from seeds he received from his friends. “I haven’t really thought about it. I suppose I like to grow plants,” he says when asked why he settled on cotton. “Also with cotton, I can take on the entire process — from growing it to delivering work to my customers.” Now living in Chiba Prefecture, Shirai spends most of his day sitting in front of his spinning wheel, taking a break every 30 minutes to ensure he doesn’t get too tired and that the consistency of the yarn doesn’t change. He has kept a record of his cotton spinning since 2012, noting the amount of cotton used and number of times the wheel was spun in each session. Using that information, he says he can estimate the fineness of each yarn, and how to arrange them when weaving in such a way to achieve a consistent texture and look to his fabrics. “There are still many aspects of my work that I don’t really know or have control over,: he says. “For example, the indigo dye from India and the aluminum acetate and wood acetate used as dying mediums — in truth, I don’t actually know what is in them. Of course I can research using the internet or books, but that’s not the same as the experience of growing the actual material.” He adds, “For me to really gain the full understanding, I would need to grow my own indigo, and replace aluminum acetate with ashes, which I am contemplating right now.” For Shirai, the unknown aspects of his work make him uneasy. “I really need to know why a certain process has to be handled in a particular way,” he says. “I can only feel confident (that I have the level of knowledge needed) after repeated trial and error, and by facing what I don’t know. It is time-consuming work, but I need it.” With fast fashion offering convenient cheap factory-made garments, this philosophy of single-handedly perfecting every process of textile making may seem counterintuitive to contemporary needs. But it is the uniqueness of every woven piece, something that can only be achieved by hand, that has made Shirai’s work desirable. “Thanks to mass-production we are lucky to have a choice of clothing at really affordable prices,” he says. “So I have to increase the value of my work rather than chase ways to produce it more cheaply.” This value is the luxury of knowing the provenance and techniques behind products. Not knowing about things we consume, that uncertainty of how safe or ethical they really are, is now a common concern. Together with the unique texture of Shirai’s work, something that can only be achieved by hand, such traceability has become worth paying for. The Great East Japan Earthquake and tsunami also brought to light another aspect of Shirai’s work — its sustainability without man-made energy. The aftermath of the disaster highlighted the nation’s heavy dependence on electricity and other utilities. “Chiba was affected, too, but I realized that I could still continue to weave,” he says, pointing out that he could still hand-spin, use the loom and sew during a power outage. Even for water, he says, “We have a common well in the corner of the community farm.” Shirai’s old-school approach gives fresh insight into the general perception of work life balance and offers viable alternatives within an industry dominated by mass-manufacturing.
Source: The Japan Times
Last year was tough for Vietnam’s garment industry with an export revenue of $39 billion, $1 billion lower than its target, according to Le Tien Truong, general director of Vietnam National Textile and Garment Group (Vinatex), who said it is critical for the sector to make moves to comply with origin rules to enjoy the preferential tariffs in free trade deals. Lower-than-expected export revenue last year showed the industry was facing problems in participating more deeply in the global value chain and expanding exports to niche markets, according to a report in a Vietnamese newspaper. Truong said Vietnam needs to invest in fabric production to meet origin requirements when exporting to countries with which it has bilateral or multilateral trade deals. This would not be easy as the country must compete in designs, quality, prices and delivery time with other major fabric producers like China and India, he said. He said investing in fabric production needs careful consideration in terms of production scale because Vietnam’s garment industry uses less than a billion metres of woven and knitted fabric every year, or 18 per cent of global exports. If fabric production targeted only Vietnam, production scale would be too small while investing in large-scale production and competition with China and India must be taken into account, Truong added. A report from the industry ministry said many garment firms had only 80 per cent of the order volume for 2020 as they did the same time last year. According to statistics by the Vietnam Garment and Apparel Association (VITAS), the garment and textile industry ran a trade surplus of $16.62 billion in 2019, up $2.25 billion compared to the previous year.
Source: Fibre2Fashion
MPs said the agreement should be canceled to protect the local market from harmful Turkish dumping practices. Egypt's MPs teamed up during a meeting held by parliament’s industrial committee on Sunday morning to ask the government to cancel a free trade agreement that was signed with Turkey in 2005. Farag Amer, the head of the industry committee, said the agreement has done a lot of harm to Egyptian industry and products.“The Turks used the agreement to flood the local market with a lot of cheap and substandard products,” said Amer. Amer indicated that the committee has repeatedly asked the Ministry of Industry and Trade to cancel the agreement with Turkey because it has done much harm to many Egyptian industries in the last two years. “The Turkish side has clearly been exploiting this agreement to flood the local market with substandard products that cause a lot of harm to counterpart local industries, particularly in the areas of reinforced steel, wood, paper, and textile products,” said Amer. “These harmful practices should force the Ministry of Industry and Trade to revoke the 2005’s free trade agreement between Egypt and Turkey and lodge a complaint with the World Trade Organisation in this respect.” Amer said that Turkey’s hostile policies towards Egypt in recent years should be another reason for the government to sever the 2005 free trade agreement. Mohamed El-Ghoul, an Upper Egypt MP, said the agreement allows Turkish products to enter the local market free from custom duties or tax fees. “The free trade agreement between Egypt and Turkey was signed in 2005, but it came into effect when the Muslim Brotherhood reached power in 2013,” said El-Ghoul, indicating that “while Egypt imported EGP 4.6 billion worth of Turkish products in 2018, Turkey imported just EGP 1.1 billion worth of Egyptian products, and this shows that this agreement primarily serves the Turkish side.” According to El-Ghoul, the agreement states that beginning January 2020, Turkish products will be allowed to enter the Egyptian market without custom duties. “But Turkish products have already been entering the Egyptian market without custom duties since 2018 in a way that has done a lot of harm to the local market and despite. Turkey’s aggressive attitudes towards Egypt,” said El-Ghoul, accusing a number of Egyptian local importers who have a lot of business with Turkey of manipulating the agreement in their favour and at the expense of local products.” El-Ghoul said that substandard Turkish imports have done much harm to Egypt’s wood industry. “For example, a fibre board wood factory in the Upper Egypt governorate of Qena is on the verge of collapse because of dumping practices by Turkey and China,” said El-Ghoul, urging the government to follow the example of the United States, which has imposed high tariffs between 10 to 25 percent on Chinese aluminium imports that did harm to American products. Ibrahim El-Sigini, head of the Ministry of Industry and Trade’s commercial deals department, said the government is ready to impose protection fees on Turkish products once local producers file complaints corroborated with all the documents proving that Turkey is exercising illegal dumping practices that have done them harm.
Source: Arham Online
The World Bank placed Pakistan among lower-middle-income countries based on its gross national income (GNI) per capita of $1,580 in 2018. A low GNI per capita is the major obstruction to human development. The country’s value on the human development index (HDI) was 0.562, which was less than the average HDI value of 0.645 for countries in the medium human development group. It was also less than the average of 0.638 for South Asian countries. A low value on the HDI shows large gaps in human development that must be bridged on an urgent basis — something that requires substantial investment. A huge investment is needed to improve infrastructure in different sectors, including oil and gas, power, telecommunication, transportation, construction, textile, trade, financial services, water and sanitation, education and health. Importantly, the investment-to-GDP ratio of 15 per cent in Pakistan is considerably lower than around 30pc prevailing in China, India and South Korea. Among other factors, the tax regime has a major role in attracting investment, especially foreign direct investment (FDI). It is empirically established that the tax regime is important for attracting efficiency-seeking FDI. The tax policy plays a significant role in attracting FDI. A well-structured corporate tax policy plays a crucial role in persuading businesses to start investing. The rate of return on investment depends on the corporate tax rate. Businesses generally invest in countries where they expect the highest rate of return on investment. Keeping the significance of FDI in view, the government has recently adopted an FDI-friendly regime that allows non-residents to invest in debt securities and government securities through special convertible rupee accounts maintained with banks in Pakistan. The tax payment system has been amended entirely through the Tax Law (Second Amendment) Ordinance 2019 enacted on Dec 26 last year. Now every banking company or financial institution maintaining a special convertible rupee account of a non-resident company with no permanent establishment in Pakistan is obliged to deduct final tax at the rate of 10pc from capital gains arising on the disposal of debt instruments and government securities, including treasury bills and Pakistan investment bonds. Importantly, there will be no restriction on the repatriation of funds from special convertible rupee accounts, which incentivises investment in the local debt market by non-resident investors. Furthermore, the tax regime has significantly been amended to encourage investment in the local debt market. For example, the enhanced rate of withholding tax for persons not on the active taxpayers’ list will not be applicable to capital gains and profit on debt earned by non-resident companies. Similarly, special convertible rupee accounts being maintained by non-resident companies having no permanent establishment in Pakistan will be exempted from the collection of advance tax on banking transactions. No such benefit will be available in case they withdraw cash from such accounts. Also, a non-resident company will not be required to pay advance tax in respect of capital gains. Additionally, requirements concerning filing the statement of final taxation and registration will be applicable to a non-resident company solely by reason of capital gains or profit on debt earned from investments in debt and government securities. The introduction of the tax-friendly regime for non-resident companies aiming to attract FDI is a significant step in the right direction. Developments in the regional tax regimes, especially in India, might have a triggering impact on the introduction of tax amendments concerning non-resident companies. The Indian government has adopted a number of tax-related measures to attract investment. With effect from 2019-20, the corporate tax rate on the income of domestic companies has been reduced to 22pc provided that such companies will not avail any exemption or incentive. It is even less than the tax rate of 23pc prescribed for small companies in Pakistan for 2019-20. The effective tax rate is 25.17pc inclusive of surcharge and cess, which is almost three percentage points less than the corporate tax rate of 28pc for 2019-20. Additionally, Indian domestic companies are not required to pay the minimum alternate tax. Corporations in Pakistan are subject to minimum tax as well as super tax that banking companies will continue to pay. In India, new domestic manufacturing companies commencing production on or before March 31, 2023, but incorporated after Oct 1, 2019, pay income tax at 15pc subject to the condition that they will not avail any exemption or incentive under the tax law. The effective tax rate is 17.01pc inclusive of surcharge and cess. Further, such companies are not obliged to pay alternate minimum tax.
Source: The Dawn
