FW
Pakistan's cotton ginners have asked the government to immediately withdraw the 0.6 per cent withholding tax (WHT) on all banking transactions for non-filers as it would discourage banking transactions, promote non-banking and cash transactions and would lead to harmful consequences for the economy.
An adjustable income tax at 0.6 per cent has been imposed on all banking transactions of over Rs 50,000 in a day for non-filers in a bid to compel them to become filers. However, there is apprehension this decision would lead to many complications in the economy as it would cause a drop in bank deposits, promote the culture of cash transactions, affect the profit margins of taxpaying businessmen and enhance turnover tax for filers.
Ginners say the WHT could become counter-productive as it would further give incentives to non-filers to conduct cash transactions and promote the informal economy in the country. The imposition of this tax would also give rise to inflation as non-filers would pass its burden to the common man who would pay high prices on purchases.
Another objection is that the levy would affect the objective of financial inclusion. Since the government was already charging 0.3 per cent withholding tax from banks on transactions of Rs 50,000, the imposition of 0.6 per cent tax on non-filers would push many businessmen towards the informal economy. Ginners say the government should have taken the business community on board before imposing the new tax.
Pakistan has missed its cotton sowing target by about 10 per cent. Due to unprecedented rains during the early cotton sowing season, and low cotton price, wheat harvest was prolonged, so there was a significant decline in cotton sowing. The recent heat wave led to shedding of cotton flowers while the standing water may kill cotton plants.
The government has set the cotton target for the 2015-16 season at 15.49 million bales. Punjab was projected to produce 10.5 million bales from six million acres. However it missed the sowing target and the area under cultivation registered a decline of about six per cent. Sindh was projected to produce 4.4 million bales from 1.6 million acres. However only 1.4 million acres were cultivated and therefore the target was missed by 10 per cent. Balochistan and Khyber Pakhtunkhwa also missed their sowing targets. The cotton sowing target for the current season has been set one per cent higher than last year.
Punjab province which produces about 70 per cent of the total cotton has been hit hard and sowing remained well below target. Due to lower cotton prices, growers were hard hit last year and could not even cover costs. This discouraged farmers who grew less cotton this year.
India's spun yarn export earnings continued to decline for the 13th consecutive month in May 2015 while volume shipment growth remained positive. In May 2015, spun yarn exports were up two per cent in terms of volume but down 11 per cent in terms of value. Unit value realisation on export of yarns made of 100 per cent man-made fibers declined sharply in May particularly that of polyester yarn. Total volume too declined during the month in comparison with the export in the same month a year ago.
Polyester yarn exports were down four per cent in value while viscose yarn export was down by 35 per cent during the month. Acrylic yarn export too declined 19 per cent in May. Viscose yarn was exported to 22 countries in May. Belgium remained the single largest importer of viscose yarn followed by Iran.
Exports of blended spun yarns did much better than exports of 100 per cent cotton and 100 per cent manmade fiber yarns. In May, 6.7 million kg of PC yarns and 2.5 million kg of PV yarns were exported. Unit price realization was down 19 cents for viscose and 42 cents for polyester from a year ago.
The surplus yield of cotton in states like Maharashtra, Madhya Pradesh, Andhra Pradesh and Gujarat has already led to a huge pile up in many godowns across the country. The price of freshly harvested cotton in Tamil Nadu hovered around Rs 3,500 to Rs 4,000 because of the arrival of poor quality fibers moistened by the rain.
India is one of the largest cotton producing countries in the world. In fact there is a fast accumulating buffer stock of cotton globally. Other cotton producing countries like China and the United States are seeing a growing buffer stock of cotton produced in their own countries. The global accumulation of cotton stock is 21.82 million tons during 2014-15.
Last year, India’s cotton export had fallen to 0.89 million tons compared to 2.02 million tons the country exported in 2013-14. This was because of sluggish markets and a fall in buyers. Last year the country produced 6.4 million tons from 12.4 million hectares.
Recently harvested cotton is currently being sold below the minimum support price fixed for the commodity by the cabinet committee on economic affairs. The committee had fixed prices of Rs 3,800 for medium staple cotton and Rs 4,100 for long staple cotton. In many parts of Maharashtra and Odisha, however, traders are buying medium staple cotton for Rs 3,500 and lesser and long staple cotton for Rs 3,800 to Rs 4,000.
Last year China’s textiles and apparel exports to the US rose by 1.6 per cent. However, Vietnam’s exports to the US grew by 14.1 per cent. The country was responsible for a large share of the overall growth in US textile and apparel imports in 2014. Vietnam’s growth as an important supplier in recent years reflects the country’s low labor costs and industry’s focus on specialisation, modernisation, and increasing value adds.
In 2013, many new textile and apparel plants began production in Vietnam, largely fueled by foreign investment stimulated by the negotiation of the Trans-Pacific Partnership agreement. In 2014, around 20 international firms invested in Vietnam’s apparel industry. US retailers and brands are continuing a long term trend of diversifying their import sources to countries such as Vietnam and India as production costs in China’s textile and apparel industry increase. But as of now China remains the largest supplier to the US.
India is the third largest supplier of textiles and apparel to the US. US total exports of textiles and apparel rose three per cent in 2014. Fabrics, fibers and yarns (except raw cotton and raw wool) and apparel together accounted for just over three-quarters of the value of US exports in 2014.
Falling demand from China for cotton and cotton yarn has hit Indian exports as there has been a 20 per cent decline in cotton prices in financial year ’15. China’s decision to liquidate cotton stocks has been an inflection point for the world cotton trade and has led to a glut in the cotton market with exporters facing waning demand.
As the Chinese off take has slowed down, the Indian government has asked exporters to focus on markets like Latin America, the CIS countries and Africa. However, the focus market scheme and additional incentives have been withdrawn and duties on yarn, fabrics and garments are making India less competitive against Vietnam and Pakistan.
India has a big opportunity to increase domestic manufacturing of value-added products and grow exports in textiles if the government gets proactive on some issues faced by the exporters. Import and central excise duties on manmade fibers are hurting the export competitiveness of Indian synthetic yarn. The duties can be reduced. The yarn industry has to get raw material at lower rates. The government also has to liberalise tariffs on textile exports by signing free trade agreements with markets like European Union and China to make Indian exports competitive in the international market.
The US is the second major destination of Bangladeshi garment products after the EU. Bangladesh’s earnings from export of readymade garments to the US were up 2.85 per cent in fiscal year 2014-15 compared to the previous year. But there has been continuous fall in growth in the last two years. In financial year 2013-14 readymade garment exports to the US rose by 2.9 per cent, sharply down from 10.31 per cent in 2012-13.
Low demand, increased competition, political unrest and rise of production cost due to implementation of factory compliance are responsible for the slow-down. Buyers could not come to Bangladesh to place orders and further business negotiations because of the political turmoil. It hampered the export growth to a major destination.
The new challenges of competition from countries like Vietnam and Cambodia have caused a slowdown in export growth. Orders are being shifted to new competitors like Vietnam which can avail of the duty-free facility to the US market after signing the much anticipated TPP deal.
Another reason is increased production cost due to the compliance process. Although production costs have risen, prices haven’t, making Bangladesh less competitive in the global market. Myanmar, the emerging exporter of readymade garments to the US, has posted a 123 per cent growth in the first four months of this year.
Export performance of the Tirupur knitwear industry shows that it has grown considerably in recent times. It grew by 15.5 per cent in the fiscal year 2014-15 touching Rs 21,000 crores as against 18,000 crores in 2013-14. And this trend is expected to continue as India is the chosen country due to its abundance of raw materials and skilled workforce. Motivated by this growth curve, three decades old garment trade company, K P R Mill has added a brown field capacity of 10 million garments and a green field capacity of 12 million garments. This totals to 59 million garments per annum. With this increase, the garment revenue rose by 34 per cent during the year.
Since the industry is set to grow further with the rise in Asia as a strong trade block for textiles and apparel exports, KPR plans to tap this potential and add a large greenfield manufacturing facility of 36 million garments per annum at an estimated cost of Rs 175 crores. Once this is commissioned the total capacity would rise to 95 million garments per year, one of the largest in the country. The project is expected to be completed during this financial year.
The company Board agreed to approve the proposal in event of the surge in orders from existing buyers and the encouraging response from the US market.
Zimbabwe is being flooded with cheap imports, mainly from China. Imports of low-priced Chinese goods have had a negative impact on the viability and growth of local clothing industry in Zimbabwe. So, textile Zimbabwean manufacturers want a complete ban on polyester knitted fabric and finished blankets entering the country. They want tariff codes that carry 10 per cent duty to be aligned with the tariffs codes that carry duty of 40 per cent. They want a level playing field with a customs duty regime which forces the imported product to be in the same price range as the local product. They want the competition to be based on quality, reliability and delivery.
Small traders want support from the government so that they can grow their businesses. Cheaper imports have made local products uncompetitive. Many textile companies are on the verge of closure as most people now prefer to import rather than to support the local industry. China gives 14 to 20 per cent export incentives. So Chinese manufacturers are able to produce goods at cost or slightly above and still retain profitability.
The textile and clothing industry in Zimbabwe was in the past considered the biggest employer after agriculture.
Birla Cellulose, the flagship company of Aditya Birla Group recently launched Liva, a New Age fabric brand with Bollywood actress, Kangana Ranaut, as its brand ambassador. Made from natural cellulosic fibres using wood pulp, a natural resource, Liva lends fluidity, comfort and fashion quotient to any piece of clothing. At the recent 61st National Garment Fair organized by CMAI in Mumbai, Birla Cellulose promoted Spring/Summer 2016 line of Liva fabrics.
These fabrics showcased innovation in line with consumer trends forecasted by international design consultants. The innovations had unique blends like modal wool, Amicor modal, Cuprammonium modal as well as dobby and jacquard structures. The company has also launched a unique concept called ‘Liva Accredited Partner Forum (LAPF)’ in March 2015. LAPF is a community of spinners, fabricators and processors, who work closely with Birla Cellulose on innovation, quality and technology to deliver Liva fabrics to consumers.
Birla Cellulose being the world leader in manmade cellulose fibre is increasingly engaging with the end consumer directly as well as through leading garment brands in India like Global Desi, Allen Solly Women, Chemistry, Pantaloons, Van Heusen, Fusion Beats, 109F and Lifestyle, among others. Liva fabrics would be made available to quality focused brands across the country. Co-promotion will also be rolled out in a phased manner through tagging for which a qualification matrix has already been worked out.
