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Farmers in India may plant fewer acres of cotton as falling demand from China cuts exports to the lowest level in six years. The area is set to drop as much as 10 per cent in the 12 months starting October 1. A smaller harvest in India, the largest exporter after the US, would ease a global surplus that sent New York prices to a five-year low in January. Exports from India will probably drop to seven million bales in the 12 months ending September from 11.79 million bales a year earlier. That would be the lowest since 2008-2009.
China, the world’s biggest buyer, is importing less of the fiber. That will contribute to a 41 per cent drop in Indian shipments this year. Because of lower prices many farmers in India are thinking of growing less cotton. Farmers worldwide will cut planting by about seven per cent this year, leading to a nine per cent decline in output to 23.9 million tons in the 12 months starting August 1.
Futures in Mumbai rallied seven per cent in April, the biggest monthly advance since December 2013, and they advanced 7.6 per cent in New York. Planting will gather pace with the monsoon rains in June.
Tanzania is perhaps best known as one of Africa's major cotton producers, with average crop yield for the past three years reaching 2,75,700 tons of seed cotton. Of this around 70 per cent is exported as lint after being semi-processed. But the country also has a long history in garment and textile production going back as far as 1966.
There are currently around 16 or 17 big factories in Tanzania, of which four or five export outside the East African Community. Two are just offshore stitching enterprises. Tanzania aims to be an origin for making garments with the potential to integrate knitting, weaving and spinning. The country has benefits like reasonable labor costs, large quantities of locally available cotton and yarn, an infrastructure, unrivalled market access and political stability.
Like many sub-Saharan African countries, Tanzania's garment exports to the US enjoy duty-free access. The country has similar access to European Union markets. Currently, 68 per cent of apparel exports from Tanzania to the US are synthetic knit shirts for men and boys.
By focusing on building a new mass stitching industry, Tanzania can start with a clean industry without built-in compliance issues and can leapfrog several stages of development.
In a major setback to Bangladesh's textile chemical exports to Pakistan, National Tariff Commission (NTC) of Pakistan is planning to impose anti-dumping duty on import of hydrogen peroxide from Bangladesh. The NTC has already issued a notice of initiation and invited the interested parties to attend hearing on the issue. Dumping occurs when a company exports a product to any country at prices lower than the normal value (the domestic price or the cost of production) of the product on its domestic market.
On behalf of the Bangladesh government and exporters, Bangladesh Tariff Commission (BTC) will become parties in the hearing and fight against the allegation of dumping the product as the allegation is not true, say commerce ministry of Bangladesh.
As per World Trade Organisation, the importing country can impose anti-dumping duty on import of the product if it finds proof on investigation that dumping has occurred, such dumping has caused or is causing material injury to the domestic industry and there is a causal link between the dumping and the injury found. Anti-dumping duty cannot be imposed if the conditions are not met.
Hydrogen peroxide is used in bleaching and sterilising process in textile and paper and pulp industry. It is also used in bleaching, oxidizing, detoxifying and deodorising purposes. Pakistan is the second largest importer of the product from Bangladesh importing $1.2 million worth. Bangladesh in July-April of the current fiscal year 2014-15 exported the product worth $6.5 million in different countries including Pakistan, India, Malaysia, Sri Lanka and Nepal.
There is a difference of opinion between the State Bank of Pakistan and the textile industry on what ails textile exports. The bank feels structural issues are the primary cause behind weak textile exports rather than energy constraints. It says there has been a decline in export of cotton yarn and fabrics and this has more than offset the increase in export of knitwear, woven garments and towels.
The central bank says textile exports posted a 0.4 per cent decline in the first half of FY 2015 as compared to the same period last year and this decline comes primarily from low value-added items. However, Pakistan’s textile manufacturers say energy constraints and security risks are the prime factors that have badly affected the textile sector’s performance. They say there is no supportive textile policy and due to unfriendly tax structures there is no incentive for industrialists to upgrade their textile units as per global standards.
Textile units want the duty structure to be relaxed so that manufacturers can import latest machinery and make full use of GSP Plus status benefits and export value-added items like knitwear and readymade garments to the European Union.
The Maharashtra Pollution Control Board (MPCB) has proposed closure directives against the Metro Hi-tech Cooperative Textile Park at Maharashtra Industrial Development Corporation (MIDC), Kolhapur, after it found gross irregularities in the way the firm treats effluents. MIDC is one of the newest industrial parks in the district, set up for attracting more business activities.
MPCB had received a complaint a week ago from a local village near the park alleging that the industry was releasing untreated effluents into canals connecting the Doodhganga river. The river is a tributary of the Krishna river, which enters Karnataka. The sewage treatment plant set up by the park was found to be not working for a long period. The machinery was found lying idle.
The same effluents are released into a pond near Doodhganga canal with a depth of around 40 feet. Samples of the incoming effluents in the sewage plant and the ones released in the pond have been collected and are being examined. The park will be given a notice of 48 to 72 hours, after which its water and electricity supply will be stopped. The notice will be issued to the regional office of MIDC, which is the facilitating agency of the state for industries.
MPCB’s directives will be implemented by the MIDC and the power distribution utility at the district level.
Asia Fashion Fair (AFF) will be held in Japan from October 21 to 23. This is Japan’s biggest and most professional clothing and textile fair. It attracts the country’s largest selection of readymade garments, accessories, home textiles, fabrics and auxiliary materials. The AFF expo was founded in 2003. It is a continuation of the China Fashion Fair. The show held twice a year attracts 300 to 400 exhibitors from China, Japan, Korea and their factories in Burma, Bangladesh, India and Cambodia.
With an exhibition area ranging from 6,000 to 15,000 sq. mt, recent editions of the show have boasted some 300 to 500 booths and more than 5,000 buyers, 85 per cent of whom stay on-site for at least one hour. AFF exhibitors have rich experience working with Japanese enterprises. They can handle all kinds of demands regarding Original Design Manufacturing, high function, fast fashion and low prices.
On an average, each exhibitor meets more than 50 active customers, the share of new targets accounting for 60 per cent. Selected activities such as press conferences, fashion shows, seminars and cocktail parties will be held concurrently with the fair to widen the scope of reaching out to the stakeholders.
Though a slowdown in China, political unrest in Bangladesh and labour and other issues in Vietnam gave an opportunity to Indian textile exporters, the segment managed to expand its performance rate by just 8.2 per cent over the last three years. While the average annual growth rate of Chinese textile and clothing exports slowed to 6.1 per cent since 2012 from as high as 20.1 per cent in 2011, India’s average expansion rate is just 8.2 per cent against 15.8 per cent reported by Vietnam since 2012. Even Bangladesh, despite all the challenges it has been facing, the country has managed a growth rate of 7.8 per cent
Industry experts have blamed lack of incentives, excessive emphasis on cotton fibre and handlooms by the government, flip-flop in raw material policy, faulty duty structure in the man-made fibre segment where imports of certain raw materials like PTA are taxed higher than those of finished products and inflexible labour laws as hurdles to the growth of the textile and apparel sector. The withdrawal of certain export incentives in the recently-announced foreign trade policy 2015-20 will further have a negative impact. However, experts believe that players must stop depending on government sops and focus on investing in modernisation and consolidation of the supply chain to take advantage of the ensued opportunity.
Rise in exports boosts industry’s spirit Driven by a weak rupee and strong overseas demand, textile exports from India increased to $27,699.9 million in April-December, 2014, up from $26,431.54 million in the corresponding period of the previous year, registering a rise of 4.80 per cent. Majority of the segments in the sector registered growth in the range of 7-35 per cent. Readymade garments (RMG), which accounts for nearly half of all textile exports, grew by 21.81 per cent at $395.47million, while made ups grew by 3.27 per cent at $385.32 million. Also, fabric waste segment recorded 34.38 per cent growth.
India is expected to consolidate its position in the coming years. According to the Ministry of Textiles, the domestic textile and apparel industry in India is estimated to reach $141 billion by 2021 from $58 billion in 2011. Apparel exports from India are expected to increase to $82 billion by 2021 from $31 billion in 2011.
After the Narendra Modi-led government took charge at the Center, there were a lot of expectations. The government was able to garner attention through its Budget announcements with a proposal of setting up a few mega textile clusters with a fund allocation of Rs 200 crores. The recent approval of GST, is expected to rollout an ambitious indirect tax reform and expected to raise revenues and boost growth.
After the completion of the 100 days at the centre, the government launched an ambitious new initiative to promote domestically manufactured products and attract investments. ‘Make in India’ campaign covering 25 sectors, including the textile and garment industry, was unveiled by the Prime Minister in the presence of industrialists and biggies from the corporate world of India and abroad at a ceremony in New Delhi.
Impediments to growth
While global textile sourcing is shifting towards India and China, there is a rise in global machinery companies building their manufacturing units in the country posing direct and stiff competition for the homegrown players, who are far behind in bringing the level of technology used by their global counterparts. Lack of proper infrastructure, high power costs are some of the other hurdles to growth. Unlike China and Bangladesh, which have developed large production units, India lacks such set-ups that can cater to large orders and rising demand making it lag behind in the competition.
The textile sector has also not got its due under the new Foreign Trade Policy (FTP) despite it being one of the largest employment providers in country. According to Cotton Textiles Export Promotion Council or (TEXPROCIL) the industry faces the challenges of high tariffs barriers on account of preferential tariff arrangements. Duty sops of 2 per cent only granted to the mainstream cotton textile products, while higher rates were given for handlooms, carpets, coir products under the merchandise exports from India scheme (MEIS). Further, man-made textile industry which is highly capital intensive and the only sector capable of attracting FDI has been discriminated against vis-à-vis the cotton industry. The sector which can help the government achieve its ambitious target has not been mentioned in the list of items granted liberal MEI’S benefits under the FTP announced on the first of April.
MMF textiles that contributes Rs 7,000 crore as taxes and holds high potential has been given lower reward in the FTP’s new scheme. For Europe and the US, MMF products have been given lower incentives as compared to cotton textiles. Further, the benefits for promoting exports to major emerging markets for MMF textiles such as Latin America, Far East and African countries have been completely stopped in the new FTP without giving the sector’s exporters any scope for adjustment.
“So far India has failed to grow beyond its traditional strength in apparel exports. We are not looking seriously at product expansion, category expansion, and market expansion. We are too much dependent on our traditional strengths. To grow exports, India needs to look at new markets and have a broader product basket. We should move away from cotton based and summer based exports. Capacity should be used around the year that will reduce cost of operations, increase profitability and turnover,” avers Rahul Mehta, President, IAF and CMAI.
Cottco Holdings is sub-Saharan Africa’s biggest cotton company. It is seeking partnership to help in funding and reorganising its debt. The company, based in Zimbabwe, operates five ginneries in the southern African country with an annual processing capacity of 1,50,000 metric tons of seed cotton. Zimbabwe has about 2,00,000 cotton farmers.
It posted a loss of $10 million in the six months ended September 30 as the national harvest fell as some farmers switched to other crops with the international price of cotton falling 21 per cent over the past year.
As of September 30 the company had borrowings of $58 million and it applied to be placed under judicial management the next month. Trade in its shares on the Zimbabwe stock exchange was suspended. Cottco, which started as the Cotton Marketing Board in 1969, was sold to private investors in 1994 and began trading on the bourse in 1997.
Zimbabwe’s cotton crop is expected to plunge to between 90,000 and 1,00,000 tons this year from 1,45,000 tons last year. Some farmers have reduced their cotton growing area and moved to other crops including tobacco and soybeans. Increase in acreage for other crops has been higher in areas with generally higher average rainfall.
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About Rs 427 crores will be spent to promote geotechnical textiles in Northeast India. This will be help in stabilising roads, addressing the problem of landslides and preserving water bodies.
Apparel and garment making centers are being opened in every state in the region. Work on these centers for Nagaland has begun. Foundation stones have been laid for apparel and garment making centers in Manipur, Sikkim and Arunachal Pradesh. Under this scheme, each state will have one center with three units and 100 machines. For local entrepreneurs with the requisite background, the required facilities to start a unit will be provided in plug and play mode. Once such entrepreneurs get established, they can set up their own units, allowing the facility to be provided to new entrepreneurs.
The project is expected to be completed in three months. The total cost is Rs 18 crores and the project is expected to enhance skill upgradation, garment development and marketing. The initiative comes under the North East Region Textile Promotion Scheme (NERTPS) of the ministry of textiles. NERTPS is an umbrella scheme for the development of various segments of textiles i.e. silk, handlooms, handicrafts and apparels and garments. The scheme has a total outlay of Rs 1,038.10 crores in the 12th five year plan.
India's apparel exports growth rate slipped from 13.4 per cent in April 2014 to 9.24 per cent in April 2015 in dollar terms. In rupee terms the growth has fallen from 24.7 per cent to 13.58 per cent. Overall exports in April 2015 for readymade garments were Rs 9,063 crores.
However, apparel exports could register a positive growth of 9.24 per cent despite the subdued global economic cues. Non-traditional markets which have a 35 per cent share in India's garment exports are poised to receive a setback due to withdrawal of Chapter 3 benefits. The EU market constitutes 41 per cent of India's readymade garment exports. Market conditions in major markets like EU continue to be subdued. Moreover, India is facing a duty disadvantage of 9.6 per cent compared to competing countries like Bangladesh and Pakistan who have zero duty access under the EU GSP scheme.
The US constitutes 21.7 per cent of India’s readymade garment exports and market conditions in the US are recovering gradually. Prospects of considerable improvement of India’s chances in the market are rather limited due to competition from countries like Vietnam, Mexico, which have zero duty access under preferential treaties with the US.
