FW
"As is well known now, a recent investigation on luxury beddings offered by Welspun India to Walmartm the world’s largest retailers, has dented the futures of Indian textile industry among global peers. As per investigation, major American retailers, including Target and Walmart, have been selling premium-priced sheets purportedly made with Egyptian cotton – a byword for luxury in linen – but that may be woven with lower-quality cotton blends in reality."
As is well known now, a recent investigation on luxury beddings offered by Welspun India to Walmartm the world’s largest retailers, has dented the futures of Indian textile industry among global peers. As per investigation, major American retailers, including Target and Walmart, have been selling premium-priced sheets purportedly made with Egyptian cotton – a byword for luxury in linen – but that may be woven with lower-quality cotton blends in reality.
Three law suits seeking to be certified as class-actions have been filed against supplier Welspun India -- and a separate one last week was directed at Walmart. The complaint, filed in New York by customer Dorothy Monahan, accuses the world’s largest retailer of questioning the fibre content of Welspun’s products as early as 2008 but not halting its sales until after Target did so in August. The other lawsuits, all filed in the US against Welspun, allege the company fraudulently labelled its bedsheets as Egyptian cotton. If all reports are to believed, it’s PR machinery which is to be blamed for placing high-quality cotton and Egyptian cotton as synonymous.
Target has already ended its partnership of its $90 million in annual business with the Indian supplier, and Walmart Stores has stopped selling Welspun sheets that had been labelled 100 per cent Egyptian cotton. Bed Bath & Beyond Inc. followed suit.
The fake Egyptian sheet episode came to light after exhaustive work by Target investigators who analysed sheet fibres under microscopes and tracked their journey through a global supply chain. The probe found that 750,000 of Target’s Egyptian cotton sheets, sold for as much as $75 a pop, didn’t contain any Egyptian cotton at all, but a mix of lower-quality fibers from cheaper sources. It may also create a dent for Indian textile manufacturers in the race to supply Western consumers with high-quality sheets and towels, thereby making way for its competitors such as China to take on business.
The sheets fiasco reflects a simple reality: There’s a scarcity of Egyptian cotton. It first became a key export product in the early 19th century, when it arrived in France and became sought after for its silky feel. Production has been falling since the 1990s, however, and last year Egypt’s post-revolutionary military government ended subsidies for cotton farmers to shore up the state budget. A gradual decline in output has become a precipitous plunge. The U.S. Department of Agriculture estimates there will be a 53 percent decrease in production this year, to an all-time low of 160,000 bales.
Egyptian Cotton Certification Scenario
The system for certifying Egyptian cotton is administered from Cairo by the Cotton Egypt Association, an industry group that grants stamps of approval to suppliers of 100 per cent Egyptian cotton products. To receive one, a manufacturer pays an initial fee of $5,000 and submits records of Egyptian cotton purchases and product samples, which undergo DNA analysis to identify whether the fibres were grown in Egypt or elsewhere. The companies are charged an additional $3,000 annually for the certification.
But once a certification is granted, producers are mostly left alone until they need to renew their label a year later. Typically, suppliers like Welspun purchase cotton in raw form from Egypt for import to Asia, where it is converted into finished products for sale in the US and elsewhere. The highest-quality Egyptian material costs twice as much as the standard grade sourced from India, providing a powerful incentive to cheat. Factories have mixed the Egyptian cotton with other low quality cottons to make profit, which has ruined the reputation of Egyptian cotton.
Blending blunder
Blending has been rampant in the industry and is quietly compromised by many retail chains. Sometimes that means mixing good-quality non-Egyptian cotton that maintains the same feel amid shortages of the real thing, but it also often includes using cheaper grades to save money.
The United States Department of Agriculture (USDA) says, on account of higher demand from spinners and garment makers in the country, this year’s cotton consumption in Bangladesh is expected to rise 4.91 per cent year-on-year to 6.4 million bales. The report predicts that in the current cotton year that begins on the first of August next year and ends on July 31, 2018, more than 430 spinning mills in Bangladesh will consume 6.4 million bales of cotton.
Vice President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Mahmud Hasan Khan adds cotton consumption and import in Bangladesh are related to the export of garment items. Since garment exports are increasing, cotton consumption and imports will also increase. Moreover, the country spends more than US $3 billion on import of cotton in a year. More than 80 per cent of its apparel products are cotton-based and the rest 20 per cent include viscose, polyester and other materials. Currently, local spinners can supply nearly 90 per cent of raw materials for the knitwear and 40 per cent for the woven sector. As a result of its geographical proximity and competitive price line in the category, Bangladesh imports 50 per cent of its total annual demand of cotton from India.
Most of the textile and apparel industry does not avail of CENVAT, says the Textiles & Apparel Achievement Report released by the Ministry of Textiles. It goes on to say that the CENVAT route will prepare the textile and apparel industry for GST when it comes into force. Central Value Added Tax (CENVAT) is a tax levied on the manufacture or production of movable and marketable goods in India.
The report released by Department of Industrial Policy and Promotion (DIPP) on November 24 shows that there has been an upward revision of duty drawback rates wherein All Industry Rates (AIR) of Duty Drawback has been revised for various products from November 23, last year (2015). The report also shows comparison of Duty Drawback rates when CENVAT is availed by exporters and when it is not.
In case of cotton yarn, when CENVAT was not availed, the duty drawback rates were in the range of 2.8-4.7 in the year 2014 and between 2.5 - 4.5 in 2015. However, when the CENVAT was availed, the duty drawback rate were in the range of 0.9 – 1.3 in 2014 and between 1.2 – 1.4 in 2015. In case of apparel, when the CENVAT was not availed the duty drawback rates were in the range of 7.2 – 10.5 in 2015 while when the CENVAT was availed, the rates were in the range of 2.0 – 3.5 in 2015. Similar were the cases with cotton fabric, man-made fabric and home textiles.
The report also highlights the textile sector in India accounts for 10 per cent of the country’s manufacturing production, 5 per cent of India’s GDP and 13 per cent of India’s exports earnings. Textile and apparel sector is the second largest employment provider in the country employing nearly 51million people directly and 68 million people indirectly in 2015-16.
The World Trade Organisation has issued new expanded editions of two of its annual statistical publications, Trade Profiles and World Tariff Profiles.
The revamped Trade Profiles provides a series of key indicators on trade in goods and services for 195 economies. For each economy, the data is presented in a handy two-page format, providing a concise overview of global trade. The profiles begin with a snapshot of the importance of trade for each economy — indicating its world ranking for trade in both goods and commercial services.
For trade in goods, data is provided by product category along with the major origins and destinations for these products. Also listed are the most exported and imported goods for each economy. For trade in commercial services, data is broken down by services category, major origins and destinations, foreign affiliates statistics and foreign direct investment in services.
World Trade Profiles has been expanded to provide information on tariff and non-tariff measures imposed by over 170 economies. The publication starts with summary tables showing the average tariffs imposed by each economy. This is followed by individual one-page profiles, providing a more detailed breakdown of tariffs. The profiles display the tariffs each economy imposes on its imports as well as the tariffs it faces for exports to major trading partners. A new section covers the use of non-tariff measures, which are becoming increasingly important in international trade.
The cash crunch triggered by the sudden withdrawal of high-value currency notes has crippled the economy of Tirupur that depends on thousands of labourers who earn their wages in cash. So much so that the year-end that is normally a cheerful time in Tirupur when holiday orders pour in from the US and Europe is now in a gloom.
As M P Muthurathinam, Owner of Rooban Clothing says he is currently working with 10 workers of the 90 he deploys. This is because the rest of the workforce have either gone on leave or have left jobs due to the cash crunch. Muthurathinam is not able to pay them.
His main worry now is that his clients may cancel a chunk of his export orders since he won’t be able to deliver the goods on time. Generally, November and December are happy months as good business orders flow materialise due to the Christmas and New Year season abroad.
The textiles cluster of Tirupur employs some 500,000 people directly and does an annual business worth Rs 40,000 crore. While Rs 25,000 crore comes from exports, the rest comes from the domestic business. The textiles belt, often referred to as the Manchester of south India, has remained to be crippled over the past 15 days and its impact will be felt for at least three to four quarters, factory owners and their association believe disputing claims that the pain will be short-lived.
Upbeat on the domestic textile sector, the Taiwan Textile Federation (TTF) is looking to export textiles products worth around $500 million to India in the next five years. According to Sean Tsai of Taiwan Textile Federation Overseas Market Development, India is a very dynamic market with lot of potential and scope for Taiwanese companies. The focus of Taiwan is to tap new business opportunities in India, Bangladesh and Sri Lanka where there is huge demand for innovative knit and woven textile products like synthetic, fancy, functional etc as well as garment accessories. Tsai was talking on the sidelines of a buyer-seller meet in Mumbai.
He further said Taiwan’s main aim was to export around $500 million worth of functional textiles in the next five years to India. This can be seen by the bilateral trade between the two countries that has grown from $1.19 billion in 2001 to $6 billion in 2014. For over 10 years, the TTF had been organising buyer-seller meets in India and has been quite successful in connecting and supplying innovative and trendy textiles to the leading fashion garment exporters' as well domestic brands in India.
Organised by the TTF and the Bureau of Foreign Trade and represented by Worldex India Exhibition & Promotion, Taiwan Textile Fair showcased Taiwan's innovative and value-added yarns, fabrics, trimmings and clothing accessories were displayed to apparel exporters, fashion brands and labels, retailers, importers, distributors based in Mumbai. Taiwanese textile industry is known in the world for its innovative and high-quality products and are sourced by leading global brands for sports and active wear, outdoor wear, functional wear, formal wear, suiting and shirting by leading global brands such as such as DKNY, S. Oliver, C&A, Victoria's Secret, GAP, Nike, Adidas, Calvin Klein, H&M, Marks & Spencer, Tescouk, Tommy Hilfiger among others.
Spanish textile companies would like to have their supplies from nearby Tunisia rather than from China or Bangladesh. These companies happen to be those that are active in areas like ready-to-wear, denim, lingerie, bathing suits and sportswear. To forge contacts with suppliers, they are visiting Tunisian textile and clothing factories.
The textile and clothing industry in Tunisia plays a critical role in the socio-economic development of the country as it accounts for more than 40 per cent of industrial employment. The industry provides jobs for an estimated 2,00,000 workers, 75 per cent of which are women.
Tunisia is looking to strengthen and improve its value chain and diversify its product offering. EU countries are the main customers of Tunisia for textiles with 36 per cent for France, 32 per cent in Italy, 10 per cent in Germany; followed by Belgium, the Netherlands, the UK and Spain.
Tunisia is among the top 15 garment suppliers in the world, and has the advantage of being close to the European market. It is the fifth largest supplier to the European Union as well as the leading trouser supplier to the EU. Other important products are work wear and lingerie. The main foreign investors in the apparel sector in Tunisia are France, Germany, Belgium and Italy.
Many Chinese companies like Texhong Textile, Luthai Textile, Bros Eastern and Huafu have built textile plants in Vietnam. By the end of 2015, Texhong Textile had around 2.2 million spindles and 572 sets of looms. Texhong’s yarn capacity is expected to rise 28 per cent to touch 2.81 million spindles in 2016 including 1.57 million spindles in China and 1.24 million spindles in Vietnam.
The first phase of Luthai Textile in Vietnam covering 10 million meters of yarn-dyed fabric started production in August 2016 and the rest covering 20 million meters is scheduled to begin batch production in mid-2017.
The project of Bros Eastern in Vietnam covering three stages is scheduled to start complete operation by the end of 2016, and Phase I and II have started production. The spinning capacity of Bros Eastern in Vietnam is expected to be around 0.5 million spindles by the end of 2016.
Huafu Top Dyed Melange Yarn owned more than 30 companies plants in 2015, with a total capacity of 1.35 million spindles including around 0.12 million spindles in Vietnam. Huafu intends to expand by 0.08 million spindles in Vietnam annually in the next two years. The spinning capacity is expected to reach 0.28 million spindles by the end of 2017.
Based on current market supply and demand condition and market operation status, China state cotton reserves will not be arranged during the period when new cotton comes into the market (till end February 2017), says the a news released by National Development and Reform Commission and Ministry of Finance, China.
Moreover, state cotton reserves sales of 2017 will begin from March 6, till August end. In principle, the daily selling volumes will be 30,000 tons, but if domestic and international cotton prices go up during a period and more than 70 per cent of reserved cotton is sold per day for three days in a week, the daily selling volumes can be added and the selling time can be extended, it has been noted.
Pakistan’s continued aggression has led to suspension of imports of cotton from India though unannounced. Sources in the textile sector say high officials of the plant protection department that works under federal ministry of food security have issued verbal orders to the staff to stop issuing permits of import of cotton. The issuance of import permits from India has been suspended for three days.
Sources claimed many textile exporting manufacturers import cotton as well as chemical dyes from India in heavy quantities. Import of cotton without proper permit has been banned. Some importers were importing cotton without permit. This facility has been cancelled after recent tensions with India.
Last month, traders from Gujarat decided to stop supplying vegetables especially tomatoes and chilli to Pakistan, it is understood. Ahmedabad General Commission Agent Association general secretary Ahmed Patel claimed that Gujarat used to send 50 trucks with 10 tons of vegetables, mainly tomatoes and chillies to Pakistan from the Wagah border but this has been stopped since the last two days considering the tension between the two countries. This happens to be the first time in almost two decades that Gujarat traders decided to stop supply of essential vegetables to Pakistan, he said.
