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Cotlook A Index - Cents/lb (Change from previous day)
01-05-2020 66.75 (+0.25)
02-05-2019 86.20
03-05-2018 93.50
New York Cotton Futures (Cents/lb) As on 05.05.2020 (Change from
previous day)
May 2020 57.83 (+2.83)
July 2020 54.47 (+0.14)
Oct 2020 58.39 (+0.88)
05th May
2020
Govt may soon allow firms to delay EPF contributions or pay in
installments
FDI: Government approval only above beneficial ownership cap
Day 1 of lockdown 3.0: India limps back, but industry still in limbo
Lockdown easing: Surat textile units in fix as Guj govt runs contra
to MHA
Cotton and Yarn Futures
ZCE - Daily Data (Change from previous day)
MCX (Change from previous day)
May 2020 15700 (-650)
Cotton 11220 (+90) June 2020 16930 (-660)
Yarn 17505 (+120) July 2020 16000 (-360)
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2 CITI-NEWS LETTER
-------------------------------------------------------------------------------------- Cotton procurement through MSP operations continuing at 34 centres in Maharashtra; Total 36,500 quintals of Kapas
equivalent to 6900 bales procured during lockdown period
Empowered Group 6 Engages CSOs/NGOs/Industry/Intl Organisations in India’s fight against COVID-19
Govt may soon allow firms to delay EPF contributions or pay in installments
FDI: Government approval only above beneficial ownership cap
Day 1 of lockdown 3.0: India limps back, but industry still in limbo
MSME package: Loan guarantee, fund to clear dues to small units soon
India offers land twice Luxembourg’s size to firms leaving China
Avoid ‘quick-fix’ economic solution for Covid-19 challenges, says report
Rural self-help groups to list products on GeM portal for government buyers
IIT-Madras startup creating textile with antimicrobial material to tackle coronavirus
How much economy will lose from coronavirus and what to expect from economic relief package 2.0
Cotton Corporation purchases record 7.5L bales from Gujarat growers
Lockdown relaxation: Tirupur garment cluster to resume ops; units start getting queries from abroad
Maharashtra govt withdraws decision to allow sale of BT Cotton seeds from May 1
New power sector amendments propose more government
View: Industrial districts, turn the key
Indian cotton prices may fall further as virus hits demand
Lockdown 3.0: Several firms resume manufacturing after getting nod from local authorities
Lockdown easing: Surat textile units in fix as Guj govt runs contra to MHA
Why India is betting on big storage sheds
----------------------------------------------------------------------------- American companies must go to India,’ The US is working with India to kick China out of the global supply chain
New Turkish duty will affect India's textile exports
Pakistan: Can’t pay workers during lockdown, textile industry owners tell court
South Africa allows some industries to reopen
J. Crew Files for Bankruptcy in Virus’s First Big Retail Casualty
PHILEXPORT seeks revival of Philippine textile industry
-------------------- --- ---------------------------------------------
NATIONAL
---------------------
GLOBAL
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3 CITI-NEWS LETTER
NATIONAL:
Cotton procurement through MSP operations continuing at 34 centres in
Maharashtra; Total 36,500 quintals of Kapas equivalent to 6900 bales
procured during lockdown period
(Source: Press Information Bureau, May 04, 2020)
There have been media reports regarding problems being faced by farmers in selling
Kapas in APMCs in Maharashtra.
The Ministry of Textiles reassures the farmers that the Cotton Corporation of India (CCI)
along with its agent the Maharashtra State Cotton Growers’ Marketing Federation Ltd. is
well geared and ready to implement the MSP operations of the Government of India in
the State of Maharashtra.
MSP procurement is on in Maharashtra since October, 2019. As on 25th March,2020
Cotton Corporation of India (CCI) had already procured 91.90 lakh quintals of Kapas
equivalent to 18.66 lakh bales of cotton valuing Rs.4995 crores from cotton farmers in
Maharashtra through 83 centres.
Till 25th March, 2020 around 77.40 % of total Kapas produced in Maharashtra had
arrived in the markets and sold to CCI and private traders. At the time of lockdown around
22.60 % of cotton was yet to arrive. Out of this outstanding Kapas, it is estimated that
around 40 to 50 % of Kapas valuing approx. Rs. 2100 crore may be of FAQ grade and
growers may wish to avail of MSP rates due to traders not offering better price in view of
the pandemic situation. The MSP operations are continuing and CCI’s procurement is on
at 34 centres currently and a total of 36,500 quintals of Kapas equivalent to 6900 bales
have been procured in Maharashtra during lockdown period.
The procurement is regulated by the state APMCs and 27 centres are coming under red
zones as identified by the District administration wherein procurement is expected to pick
up after 3rd May,2020. In remaining 22 centresthe State Government has been
approached by the CCI for issue of passes/tokens to farmers to bring Kapas and the matter
is being constantly monitored by the Ministry of Textiles through daily status reports on
arrival of farmers &Kapas procurement in the APMCs. The necessary coordination of the
CCI with the officials of Government of Maharashtra is being done through frequent
Conferences for trouble shooting of emerging issues.The Textiles Ministry has also issued
Advisory to the Government of Maharashtra to make appropriate arrangements in
APMCs for facilitating access to the cotton farmers to avoid distress selling.
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4 CITI-NEWS LETTER
Steps have been taken by the CCI to clear the outstanding payment to the farmers for the
procured Kapas. Out of total procurement value of Rs.4995 crores, a sum of Rs.4987
crores has already reached the farmers.
Home
Empowered Group 6 Engages CSOs/NGOs/Industry/Intl Organisations in
India’s fight against COVID-19
(Source: Press Information Bureau, May 04, 2020)
1. As the country faces an unprecedented challenge with the Covid-19 global pandemic
affecting our nation, the Empowered Group 6 (EG 6) constituted by Government of India
and chaired by CEO, NITI Aayog is playing a key role in galvanizing Civil Society
Organisations, NGOs and development partners, Industry partners, and International
Organisations to create synergies with the Government of India.
The Empowered Committee 6 is chaired by Shri Amitabh Kant, CEO NITI
Aayog, include Dr Vijayaraghavan, PSA, Kamal Kishore (Member, NDMA); Sandeep
Mohan Bhatnagar (Member, CBIC); Anil Malik (AS, MHA); VikramDoraiswami, (AS,
MEA); P. Harish (AS, MEA); Gopal Baglay (JS, PMO); Aishvarya Singh (DS, PMO);
Tina Soni (DS, Cabinet Secretariat); and the work of EG6 is serviced by
SanyuktaSamaddar (Adviser, SDG, NITI Aayog). The group has extensively engaged
with CSOs, NGOs, Development partners, UN Agencies, Industry associations in over 15
meetings.
2. CSOs, NGOs and development partners: A whole of society approach in
letter and spirit:
The EG6 has succeeded in galvanising a network of 92,000 CSOs/NGOs, a record
of sorts, to harness their strengths and resources, expertise in key social sectors-nutrition,
health, sanitation, education, and extensive reach in the community. The group has
mobilised over 92,000 NGOs/CSO, appealing them to assist the State Governments and
District Administrations in identifying hotspots and deputing volunteers; delivering
essential services to the vulnerable, including the homeless, daily wage workers, migrants,
and urban poor families; and in creating awareness about prevention, social distancing,
and isolation.
a. All Chief Secretaries were requested to appoint State-level Nodal Officers to
coordinate with all NGOs and resolve their issues apart from leveraging their
resources and networks. Almost all States have appointed Nodal Officers to liaise
with NGOs/CSOs.
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5 CITI-NEWS LETTER
b. All Chief Secretaries were requested to instruct the District Administrations to
leverage the bandwidth of NGOs and CSOs; Nominate Nodal NGO for each district,
or groups of Districts for coordinating with the District Nodal Officer; and identify
areas and sectors to stop duplicity and overlaps.
c. All NGOs wereurged to lift and distribute Rice and Wheat in unlimited quantities
from FCI godowns at the subsidized rate of Rs. 22/ 21 per kg. respectively so that
no one in the country remains hungry
d. AkshayaPatra, Rama Krishna Mission, Tata Trusts, Piramal Foundation,
PiramalSwasthya, Bill and Milinda Gates Foundation, Action Aid, International
Red Cross Centre (ICRC), Pradhan, Prayas, Help-age India, SEWA, Sulabh
International, Charities Aid Foundation of India, Gaudia Math,
BachpanBachaoAndolan, the Salvation Army, Catholic Bishops' Conference of
India and many more organizations are doing a commendable job.
e. The EG 6 is monitoring and coordinating with NGO and CSO networks in all State
/ Union Territories and with 700 District Magistrates in the country on real time
basis to fight the spread of COVID-19. The mobilisation of these 92000 NGOs has
resulted in commendable outcomes as reported by State and District
Administrations, where CSOs are actively engaged in :
Assisting and supporting the local administration in setting up community
kitchens particularly for migrants and homeless population working in urban
areas.
Creating awareness about prevention, hygiene, social distancing, isolation, and
combating stigma.
Supplementing the government efforts to provide shelter to homeless, daily wage
workers, and urban poor families.
Extending support for distribution of PPE and protective provisions – sanitizers,
soaps, masks, gloves etc. for community workers and volunteers.
Supporting the government in setting up health camps.
Identifying hotspots and deputing volunteers and care givers to deliver services to
the elderly, persons with disabilities, children, transgender persons, and other
vulnerable groups.
Developing communications strategy in different vernaculars whereby they
become active partners in creating awareness at the community level so that
COVID-19 spread is tightly controlled.
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A primary area of concern in these times is the mass exodus of migrant labourers
from urban hubs of work to their villages is an area of concern. NGOs are
coordinating efforts and working closely with the district administrations and state
governments so that measures of care, quarantine, and treatment go hand in hand.
In the next phase the group will mobilise Civil Society Organizations/ NGOs for
movement against COVID-19 stigmatisation and in protecting the elderly & senior
citizens
3. Aspirational Districts Programme: Localising collectivised solutions:
The Aspirational Districts Programme piloted by NITI Aayog has been a phenomenal
success in uplifting the lives of millions in 112 most backward (aspirational) districts of
the country. As of now there are about 610 cases in 112 aspirational districts which is
considered fairly low at less than 2% of the national level of infections. Of these six
districts have reported first case after 21st April. Major hotspots are Baramula (62), Nuh
(57), Ranchi (55), YSR (55), Kupwara (47) and Jaisalmer(34).
a. NITI Aayog has taken steps to ensure that these districts are able to contain the
spread of the virus and has actively referred the requirements in testing kits, PPE
& masks etc. to respective Empowered Groups for necessary action in order to
address supply constraints.
b. Collaboration has been one of the guiding principles in ADP and these partnerships
have enabled the District Administrations in ramping up isolation camps, setting
up control rooms, door-to-door Food supplies, distribution of cooked foods,
mobilization of SHGs for making home-made masks, sanitizers and re-usable
&sterilizable protective gear while simultaneously sustaining their livelihoods
during lockdown period. Osmanabad is one such district where a testing centre has
been established by utilizing the CSR corpus.
c. ‘SURAKSHIT DADA-DADI & NANA-NANI ABHIYAN’ programme launched by
the Piramal Foundation in 25 aims at an outreach focused on senior citizens in
order to sensitize them on preventive measures and requisite behavioral changes
and document and address issues related to food, ration, medicines, etc delivery.
d. Bill & Melinda Gates Foundation, in partnership with NITI Aayog and other
development partners, have developed a public good message repository with
standardized content in local languages on mask wearing, hygiene measures, social
distancing, motivation of frontline workers, among others. DMs/DCs of
Aspirational Districts have been requested to examine and suitably use the
resources on this website (indiafightscovid.com) for strengthening the
communication strategy.
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4. International Organisations: Leveraging global networks for local efforts
The EG 6 has mobilised various UN Agencies and facilitated them in creating timely
response action plans in coordination with various States and line ministries through
intensive collaboration with the UN Resident Coordinator for India, and country heads of
WHO, UNICEF, UNFPA, UNDP, ILO, UN Women, UN-Habitat, FAO, World Bank, and
Asian Development Bank. The UN in India has prepared a Joint Response Plan (JRP),
which has been submitted to EG 6, with prevention, treatment and essential supplies as
key components.
1.
a. Skill building of 15,300 trainers, training for 3951 surveillance/ health
officers on Integrated Health Information Platform, infection prevention
and control training in 890 hospitals, support to ICMR for testing,
strengthening risk communication and community engagement capabilities
of healthcare workers, procurement of 2 lakh PPEs and 4 lakh N95 masks,
have been initiated by WHO and UNICEF.
b. UNDP is engaged in the procurement of medical supplies including
ventilators (initially 1000 units as per the current requests, but potentially
higher based on future demand) for 25 States. Further, an order of 10,000
Ventilators and 10 million PPE Kits to UNICEF was expedited by EG 6.
c. The group has been engaging with the Indian Red Cross
Society whose 40,000 volunteers are working with district administration
in over 500 districts. It has created quarantine/ isolation facilities at 33
locations, facilitated donation of ventilators, masks, PPEs, and test kits
valued at INR 5.50 crore, apart from extensive relief and advocacy across
the 500 districts.
5.Engagement with Industry and Start-ups: Private sector interventions for
public good
Empowered Group 6 and NITI Aayog has become the interface for converging,
collaborating and leveraging the strengths of the private sector actors to tide over this
crisis by facilitating and accelerating COVID management measures including creation of
response systems in areas of health sector monitoring and tracing, non-health industry
driven solutions, relief and rehabilitation measures, and nation-wide awareness and
advocacy, in addition to mitigating several challenges faced by different sectors of the
industry and economy.
It has opened up cross-sectoral dialogue within the private sector and start-ups to
engender collaboration and synergetic response action, apart from brainstorming
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suggestions to mitigate the situation across sectors, including MSME, tourism, aviation,
exports and manufacturing and services sectors.
a). Role of the Private Health Care Sector: The private healthcare sector has been
deeply committed in partnering the Government to fight the crisis, offering capabilities
even amid the compelling situation. Manufacturing companies are coming forward and
utilizing their plant, machinery and skilled manpower to mass manufacture equipment.
For example, CII has launched a coalition of high-end manufacturing companies in
automobile, Machine Tools and Defence sectors to mass-manufacture ventilators. This is
to augment the inventory of ventilators of different classifications as the capacity of
ventilator manufacturing by existing manufacturers is low and import of ventilators is
constrained. India's manufacturing companies like Tata, Mahindra & Mahindra, Bharat
Forge, Maruti Suzuki, Ashok Leyland, Hero MotoCorp, Godrej & Boyce, Sundaram
Fasteners, Walchandnagar, Grasim, Hyundai, Volkswagen, Cummins etc. are moving
ahead to manufacture ventilators in large quantities with some them already initiated
production.
b)Non- Health Sector Intervention in Relief and Rehabilitation: EG6 has played
a crucial role in engaging the Industry Associations- CII, FICCI, NASSCOM towards
mobilising relief interventions in coordination with the local administration at the state
and local levels.
I)CII-
1.
1.
i. 50 lakh persons in 28have been benefitted by CII’s response
initiatives.
ii. 47 lakh hygiene materials including 13 lakh masks, 7.5 lakh gloves,
20,880 PPEs and 26.8 lakh sanitizers/ soaps have been distributed
among the vulnerable population, policemen and medical workers.
iii. Over 20 lakh people - including daily wage labourers, migrant
workers, persons with disabilities, marginal farmers, elderly,
children, women workers and nomadic tribes have been supported
with provision of food. 11.75 lakh cooked meals, and 12.5 lakh ration
kits and 1,650 MT of food grains have been provided to the needy.
Community kitchens have been supported across several cities.
iv. CII Foundation has undertaken awareness drives and relief work in
150 villages in six districts in Punjab and Haryana, including making
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9 CITI-NEWS LETTER
provision of ration and hygiene kits for over 8,000 farm labourers
and marginal farmer households.
v. The CIIF Woman Exemplar Network has undertaken awareness and
distribution of Ration kits among 7,400 households from
marginalized communities in UP, Rajasthan, West Bengal, Gujarat
and Maharashtra.
II) FICCI:
1.
1.
vi. Over 3.23 crores cooked meals and 1,50,000 kilos of dry ration have
been served.
vii. INR 3009.56 crores have been spent on COVID 19 related activities
such as distribution of masks, cooked meals, dry ration, PPE,
sanitisers, medical equipment and supplies, and medical facilities.
viii. INR 5123.5 crores have been contributed to PM Cares Fund.
ix. Over 58,57,500 masks, 7,86,725 litres of sanitizers, 25 lakhs PPEs,
10,025 ventilators, and 25,000 testing kits have been distributed.
x. Water ATM facility has been set up for 7 lakh people.
III). NASSCOM:
1.
1.
xi. Cooked meal for 15 lakh people, dry ration and sanitation kits to over
5 lakh families, 2.4 lakh masks and gloves, 3.5 lakh soaps and
sanitizers, and 2,50,000 PPE kits have been distributed.
xii. Tested over 6500 samples under PCR testing.
xiii. Online continuous learning facilities have bene sponsored for more
than 10,000 children.
xiv. Research funding for COVID-19 of INR 4.2 crore is in the pipeline.
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c)Start-ups and technology-driven innovations: Indian frugality at its finest
Realising that entrepreneurs and innovators across the country are quick to respond to
the challenge posed by the Covid-19 pandemic, EG 6 and NITI Aayog extensively engaged
with Indian Start Ups, Start Ups of Indians in the US and other countries to better
leverage their new innovative, low cost designs, applications, and equipments by linking
them up with big industry platforms.
I) A host of new innovations, some emerging from start-ups that have been incubated by
universities, have appeared in recent weeks. There are examples of start- ups developing
robots deployed at entrance of office buildings and public places to dispense hand
sanitizer, deliver public health messages about the virus, to carry food and medicines in
isolation wards of hospitals. Apps have been launched offering online consultation with
doctors and tests at home. Start-ups incubated in IIT Kanpur and IIT Hyderabad are
developing low- cost, easy-to-use, and portable ventilators that can be deployed even in
rural areas of India. Technology is playing a big role. In some states, drones are being
used to monitor social distancing.
II) Industry bodies are playing a critical role by offering platforms for integrating efforts
between universities, industries, start-ups, and the Government, in response to Covid-19.
For e.g., CII is working with the office of Principal Scientific Adviser and have already
received 28 innovative design and solution of ventilators from start-ups of IIT Kanpur,
IIT Madras, IIT Delhi, IISc Bangalore, EDC Pune. By way of leveraging technology, CII
itself have developed an online COVID-19 Critical Care Essential Items - Demand and
Supply Connect Platform that matches buyers with suppliers and manufacturers.
III) Ventilators solutions:
1.
a. Agva : The cost-effective ventilator developed by this start-up is highly
mobile and can be operationalised in ambulances and makeshift COVID
wards like hotel rooms. Small form factor, low power consumption and
minimal training requirement for operators, are some of the other features.
The start-up presently has the capacity to produce 20,000 units per month
and is one of the key maufacturers of Ventialors..
b. Biodesign: Developed a robotic product called RespirAid, which enables
mechanized use of manual ventilators. The product consists of two robotic
arms along with tidal volume control and can be used by any person who
can sedate and intubate a patient. The present manufacturing capacity is
2,000 RespirAid units per month.
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c. Kaaenaat: This product is aimed at being operationalised by people with
minimal ventilator related training like Asha workers and is highly portable.
The ventilator can be used for serving two patients simultaneously and has
an in-built battery, oxygen concentrator and sterilizer cabinet. While the
prototype is ready, the company is looking at a capacity of 5000 units per
month only at the end of June, this year.
IV) Other solutions:
1.
d. Qure.ai: The start-up has developed AI enabled analysis of Chest X-Rays
(CXRs) with a capacity of processing 10,000 CXR images per day. Emerging
research findings demonstrate that COVID-19 infections exhibit bilateral
opacity with respect to CSRs, the analysis of which this solution can execute.
Their Natural Language Processing (NLP) based AI chatbot can also be
utilised for monitoring COVID-19 symptoms.
e. Dronamaps: The advance Geographic Information System (GIS) and geo-
fencing enabled maps developed by this stat-up can be utilised for
informing cluster strategies for hotspots.
f. Mfine: It is an artificial intelligence powered online doctor consultation
and telemedicine platform and can connect diagnostics labs, pharmacies,
etc. The platform also supports a video tool for doctor consultation.
g. MicroGO: The start-up has developed a handwash system for front line
medical professionals which uses minimal resources and captures usage
data. The start-up has presently a capacity of producing 100 units a day.
h. Staqu: The company has developed a AI enabled thermal imaging camera
for screening and is presently working with the authorities in Punjab and
Uttar Pradesh to generate e-pass for essential services and citizens in need.
a. BEML Rail Coach Division: There are also innovative interventions like
converting an old sky train coach into a walk-through sanitizer
tunnel; Ambuja Cement Foundation and ACC TRUST have re-
purposed tankers and vehicles to spray disinfectant to sanitize hundreds of
villages.
j. With social distancing having become the norm, many companies are
turning to digital applications for a solution. SAP is providing open access
to its technologies which can be used for combating the outbreak. IBM has
teamed up with World Community Grid, an IBM social impact initiative that
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allows anyone with a computer and an internet connection to donate their
device’s idle processing power to help scientists study the world’s biggest
problems in health and sustainability. Microsoft technology has
supported the Govt. of Punjab to roll out COVA, their citizen app that offers
real-time and authentic information on COVID-19.
6. AarogyaSetu: Largest participatory risk assessment mobile platform with
telemedicine feature
EG 6 has urged all CSO, NGO, International Organisation and Industry partners to
effectively utilise the ArogyaSetu platform in their operations. The application enables
people to assess the risk of exposure to COVID-19 infection based on their interaction
with others, using cutting edge Bluetooth technology, and Artificial Intelligence enabled
algorithms. It is the world's fastest-growing mobile application with more than 80 million
installations on the Google Play Store, just days after its launch.
It now brings online telemedicine and medical consultations (call and video), Home Lab
Test and ePharmacy. AarogyaSetuMitr, the stack powering this new feature, is developed
under the leadership of NITIAayog and Principle Scientific Adviser, GoI.
AarogyaSetuMitr has voluntary participation from organizations, industry coalitions, and
start-ups
7. PPE and testing kits
EG 6 has also been instrumental in involving several partners who have provided COVID
related equipment free of cost including:
RTPCR testing kits- 70,000 kits have been provided by TEMASEK Foundation
RTPCR Testing Kits- 30,000 kits by BMGF Foundation (given to UP and Bihar)
3 Lac N95 and 5 lac surgical masks through development partners and donors.
Empowered Group 6 is providing a unified platform for mobilising all the key
stakeholders in synergising their sector specific efforts in COVID19 response with not only
the State and district administration where the action lies but also at a macro level by
linking the UN agencies, CSOs, NGOs, start-ups and the industry partners for a
coordinated and effective response. The EG 6 has shared with all stakeholders the
Government's response so far- procurement of PPEs and ventilators, role of MEA,
communication to CSs of all States, engagement with 92,000 CSOs, putting the
stakeholders in touch with each other, immediate solutions to the bottlenecks being faced
by the private sector in coordinating response. Further, collaborations have been created
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by linking the specific issues raised by connecting the industry to other Empowered
Groups dealing with procurement (EG 3), logistics (EG 5) and several other EGs.
Home
Govt may soon allow firms to delay EPF contributions or pay in installments
(Source: Somesh Jha, Business Standard, May 04, 2020)
EPFO CEO tells companies they are legally obliged to make provident fund contribution on
basic pay of up to Rs 15,000
The Union government is contemplating granting relief to companies by allowing them
to delay or pay in installments their contribution to Employees’ Provident Fund (EPF) of
their staff, apart from enabling more firms to make use of the EPF subsidy scheme.At a
meeting with the Confederation of Indian Industry (CII) on April 30,
Employees’ Provident Fund Organisation (EPFO) chief executive officer Sunil Barthwal
told employers that if they get into an agreement with their workers to revise the wage
contract, they need deduct EPF contributions only on the basic pay of up to Rs 15,000,
even if their basic pay is above this ceiling. While on one hand this will allow companies
to lower their wage bills, employees can get higher salary in hand.Employers hailed the
clarification from the EPFO brass for its potential to alleviate the cash crunch due they
have been facing due to the national lockdown which had continued from March 25 till
May 3. While the lockdowmn has now been extended to Mat 17, the Central government
has considerably eased economic activities across the country, beginning May 4.“If you
feel that you do not have full money, you can file the ECR (electronic-cum-challan) and
make payments later on. No damages will be imposed on you. You can also make part
payment, say, 30 per cent on one day and 30 per cent on another. Installment facility will
be available according to your convenience and liquidity position,” the EPFO CEO is
learnt to have told the employers. On April 30, the EPFO had said in a press statement
that the filing of monthly ECR is separated from the payment of the statutory contribution
reported in the ECR.
This means that the companies need to only inform the EPFO about the number of
employees for which they are going to pay for the EPF contribution without the need for
making the statutory contribution towards their EPF dues.
Right now, as soon as the companies have filed their returns, known as ECR, they also
have to subsequently submit the EPF payments of those many employees at one go. Not
doing so attracts a penalty.The EPFO issued a set of ‘Frequently Asked Questions’ on the
move to separate ECR filing from submitting EPF contributions on Sunday in which it
said payment of EPF dues can be done on a later date “as announced by the central
government.” The EPFO CEO told CII executives that the move will allow firms to do
“micro management of liquidity” and they can pay according to their firm’s liquidity
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position.“Since filing of ECR for is now separated from payment process, the time for
filing ECR for April, 2020 is on or before 15.05.2020 and dues may be remitted within
the due date or within extended time, if any, as announced by the central government,”
the EPFO said in the FAQ on its website. Sources said that Barthwal acknowledged the
fact that companies were facing liquidity issue and told them to help out employees in
taking benefit of a scheme through which they can withdraw EPF advance to the tune of
three months of their wages or up to 75 per cent of their balance, whichever is less.The
government is examining a proposal to allow more companies to take the benefit of the
EPF subsidy, under the Pradha Mantri Garib Kalyan Yojana announced by the
government in March. Under the scheme, only companies (with a manpower of up to 100
employees) which employ at least 90 per cent of workers below the monthly wage of Rs
15,000 a month will receive provident fund contribution from the government for 3
months.The industry want the cap of 90 per cent workers earning less than Rs 15,000 a
month in a factory to be removed, which is leading to non-exclusion of many small firms.
The EPF scheme only covers about 16 per cent of its total subscribers and about 68 per
cent of the total firms that make EPF contributions for workers.Till April 29, about 2.6
million workers making up a third of the total eligible 7.9 million workers, were able to
benefit from the subsidy scheme. In terms of the number of establishments, 151,805 firms
took the subsidy from the government, out of total 380,000 eligible
establishments.Barthwal gave an important clarification to employers who asked him
about their PF obligations towards workers at a time when they are facing a cash crunch.
The EPFO CEO pointed to an existing law which mandates companies to make a
contribution on a maximum wage of Rs 15,000.
If the basic wage of an employee is above Rs 15,000, say, Rs 45,000, the employer’s
obligation is to calculate the EPF amount to be deducted only on Rs 15,000. “But you need
to talk to your employees (before making any changes) as it is a contract,” Barthwal is
learnt to have said.At present, 24 per cent of a worker's basic pay goes towards EPF
schemes - 12 per cent as employer's share and 12 per cent as employee's.
Home
FDI: Government approval only above beneficial ownership cap
(Source: Deepshikha Sikarwar, Economic Times, May 03, 2020)
India may set a beneficial ownership threshold above which foreign direct investments
from a bordering country would require government approval. Such a limit would ensure
that small or indirect investments by big-ticket venture capital and private equity firms
from these countries do not get held up in clearances. Under new FDI norms announced
last month, prior government approval is mandatory for investments flowing in from
countries sharing a land border with India, including China.
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Department for Promotion of Industry
and Internal Trade and the finance and
home ministries are in discussions on the
implications for investments by venture
capital funds, alternative investment funds
and private equity firms. “Discussions are
on with stakeholder ministries... A
clarification would be issued soon,” a
senior government official told ET. The
DPIIT has also held interactions with various stakeholders. The official said startup
associations, law firms and other practitioners had submitted several representations.
Clarifications have been sought on aspects including funding in startups by venture
capital funds that may have only a small component of funding from a Chinese investor.
Startup associations had also approached the DPIIT and commerce and industry minister
Piyush Goyal, seeking exemption of VC funds from the latest FDI rule. A clear definition
of beneficial ownership is crucial for such investors. “All aspects are being looked at... But
there is no ban on FDI from these countries... Only approval is needed,” the official said.
The term ‘beneficial ownership’ has not been defined in the FDI policy. However, a
reference could be drawn from the Companies Act, 2013. The Companies Act defines
significant beneficial owner as someone who holds indirectly, or together with any direct
holding, not less than 10% of the shares or voting rights in shares or has a right to exercise
significant influence or control in any manner other than direct holding alone. “The way
regulations are currently worded, beneficial ownership of even a minuscule percentage,
even without control, will entail government approval. This does not seem to be the
intention,” said an expert with a consultancy firm, who did wish to be identified.
According to the expert, this can impact M&A from other countries, too, especially private
equity investments, as many global companies/funds may have some Chinese or Hong
Kong investors. “It is, therefore, important to clarify beneficial ownership,” the expert
said.
Home
Day 1 of lockdown 3.0: India limps back, but industry still in limbo
(Source: Archis Mohan Subhayan Chakraborty Jyoti Mukul Debasis Mohapatra T E
Narasimhan & Avishek Rakshit , Business Stanadrd, May 05, 2020)
With public transport still not allowed in 130 red-zone districts, which comprise some of
the economically important urban centres, people took out their private vehicles.
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Cities and towns across the country bustled with activity on Monday as 40-day Covid-
induced lockdown restrictions were relaxed to allow movement of people and opening of
shops, offices and businesses.
With public transport still not allowed in 130 red-zone districts, which comprise some of
the economically important urban centres, people took out their private vehicles. Some
parts of Delhi, Gurugram, and Bengaluru even witnessed morning-hour traffic jams.
Migrants queued up outside clinics in Mumbai and its suburbs to procure medical
certificates they need to travel to their native places, and there were serpentine queues at
liquor stores. Some shops selling non-essential products traded for the first time in
months.
Relaxed restrictions had people at several places abandon social distancing norms,
making Lav Agarwal, health ministry joint secretary, warn of chances of transmission
increasing rapidly. Delhi Chief Minister Arvind Kejriwal threatened to seal errant shops
and revoke relaxations. Later in the day, Delhi also imposed a 70 per cent ‘special corona
fee’ on liquor from Tuesday.
However, the eased restrictions failed to bring succour to industry. In Gurugram,
Balloons 76, an upscale party shopping store in DLF IV, got two customers. The shop, like
most others nowadays, had markings to meet social distancing norms. Lalit and Tapan,
who stay in the same city, are manning the shop, which normally has half a dozen workers.
“Others stay in Delhi and Faridabad and find it difficult to come. But then, we are also not
allowed to have all the staff,” said Lalit. The metro link to Delhi that connects to Faridabad
is shut and no other public transport is running.
Right outside the Taj hotel, Gulab, a 33-year-old labourer, rued the fact that a contractor
cheated him with hopes of more pay, which made him take one of the last passengers
trains out from the city of Daltonganj in Jharkhand to reach Delhi.
He also took one of last metros to run on March 21 — before being shut on the day of
Janata Curfew the next day — along with two others to work at the local authority’s under-
construction site.
On being apprised that the contractor had no role in the stopping of construction, he
mellowed down and said, “The contractor does pay for our expenses.” Construction for
the underpass began in mid-April and is the only business activity visible in the area.
The IndiGo office next to the Taj is shut and so are the other offices in Sector 44 industrial
area. At the upscale Galleria Market in DLF IV, the famous Bahri Sons bookstore was
open. "A few customers visited but we are mainly getting items delivered," said an
employee.
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The Cyber City area that houses some of the top corporate houses like Reliance Jio, Shell,
GE, Vedanta, PwC, S&P, and EY wore a deserted look. "We would rather err on the side
of safety than risk the lives of our people. There is still uncertainty, so mostly people are
working from home," said an executive of one of the multinationals housed there.
A GE spokesperson said: "We are in touch with our stakeholders to maintain business
continuity to the best of our ability. Our factories and offices in India are either operating
or planning to start in compliance with the various guidelines.”
In Bengaluru’s IT offices, attendance was low. Employees of companies such
as Mindtree and Accenture, with campuses inside Global Tech Park, continued to work
from home. The story was no different at Electronics City, where Infosys is
headquartered. “We didn't see any material change in employee attendance on Monday.
Turnout will increase in phases.
Towards next week, it may rise after we sort out logistics issues," a spokesperson of
Infosys said. Most firms have said they would start gradual resumption of work from
offices only after May 18.
In Tamil Nadu, some districts are against giving a go-ahead for firms to start
manufacturing. The industrial estates in Chennai, according to sources, are not allowed
to work. Auto and auto components makers in and around Chennai continue to remain
shut. Hyundai said they would start production on May 6, but others have not disclosed
their plans. In Gurugram, Hero MotoCorp, India’s largest two-wheeler manufacturer,
resumed operations.
In Kolkata, too, employees of big firms continued to work from home. Sources said ITC
had asked staff to work from home as have Eveready, Goodricke, and others. MSMEs said
they were keen to restart, but were waiting for more clarity from the state.
On the export front, industrial units in Karnataka, Madhya Pradesh, Uttar Pradesh
continued to raise issues of differences in standard operating procedures prescribed by
the home ministry and the health departments of respective states, said a senior
functionary of the Federation of Indian Export Organisations. It said local authorities in
industrial states like Tamil Nadu and Maharashtra were still not permitting units to
reopen, even in the green zones.
Despite demand for pharma products rising, the Pharmaceutical Export Promotion
Council (Pharmexcil) estimates to have lost about $1.5 billion in exports in March due to
restrictions. Now, manufacturers would try push beyond to fulfill remaining export
orders, said Pharmexcil Director-General Udaya Bhaskar.
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Lack of smooth supply chains continued to hit sectors, especially the engineering goods
industry. Export industries told the Department for Promotion of Industry and Internal
Trade over the weekend about the lack of availability of labour. “Industries have now been
finally able to put in place a protocol of action with proper norms for sanitation, and social
distancing. That has helped many start production from Monday. But the supply chain
needs to normalise," said Chandrajit Banerjee, director-general of the Confederation
of Indian Industry.
Several district administrations across states did not allow opening up of shops. Neither
was there uniformity in easing of restrictions. Telangana Cabinet will meet on May 5 to
discuss easing norms. Telangana had extended a strict lockdown until May 7. Jharkhand
said it would not implement any of the relaxations allowed by the Centre from Monday,
and decided to extend the ‘total’ lockdown in the state for two more weeks.
Home
MSME package: Loan guarantee, fund to clear dues to small units soon
(Source: Financial Express, May 05, 2020)
The government is considering a raft of relief measures, including setting up a Rs one lakh
crore fund to expedite clearances of dues owed to MSMEs, guarantee on the enhanced
limit of loans (up to 20%) and a mechanism to help them pay salaries to their employees.
As most small businesses remain on the brink of collapse due to the Covid-19 crisis,
raising the spectre of unprecedented job losses, the government is considering a raft of
relief measures, including setting up a Rs one lakh crore fund to expedite clearances of
dues owed to MSMEs, guarantee on the enhanced limit of loans (up to 20%) and a
mechanism to help them pay salaries to their employees.
Some of these proposals were discussed at a review meeting of the MSME sector, chaired
by Prime Minister Narendra Modi last week, sources told FE. While the total amount of
fiscal intervention for MSMEs still remains unclear, industry executives believe it could
be worth Rs 2-3 lakh crore, including the guaranteed loan amount. The relief for MSMEs
would be part of the next stimulus package that the government has been working on to
prop up a battered economy.
In an interview to CNBC-TV18 on Monday, MSME and transport minister Nitin Gadkari
said the proposal to grant official guarantee on the enhanced limit of working capital loans
is being approved to increase credit flow and ease liquidity problems of small businesses.
The Centre is also firming up a mechanism to facilitate the clearance of dues owed by
various PSUs, central and state government departments and even private industries to
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MSMEs within one month. The minister refrained from specifying the dues amount but
conceded that it remained “substantial”. However, in March, Gadkari had said
government and private undertakings owed MSMEs almost Rs six lakh crore.
Gadkari has also asked labour minister Santosh Gangwar to utilise the Rs 80,000 crore
lying with the Employees State Insurance Corp (ESIC) to address the crisis faced by the
MSMEs amid mounting pressure on them to pay April salaries. This proposal, too, would
require approval of the finance ministry and the Prime Minister’s Office (PMO). Wage
payment to workers remains the most immediate and biggest concern among various
cash-strapped MSMEs, especially when factories are shut, sales disrupted and most of the
orders cancelled.
As for the fund to help clear MSME dues, the government is expected to pay the premium
to insure this fund. It will also devise a formula for sharing the interest burden on loans
to be made available from this fund to various entities for clearing their dues to MSMEs
swiftly, sources said. The proposal will be sent to the Cabinet for clearance after the
finance ministry gives its clearance.
The MSME ministry has also suggested the creation of a Rs 10,000-crore fund to buy up
to 15% equity in crisis-hit, but otherwise well-rated, MSMEs that will list on bourses. The
ministry has submitted this plan with the finance ministry. Having exhausted cash
reserves in paying the March salary to employees, MSMEs are unsure if they will be able
to pay any longer without assistance. Liquidity may be in abundance but credit flow to
most small and medium businesses, which are in greater need of loans than the large
ones, still remains inadequate, in the absence of regulatory forbearance on bad loans or
official guarantee on advances.
While the central bank had allowed a three-month moratorium on loan repayment,
MSME bodies have asked the government to help extend the moratorium to 6-9 months.
Of course, the loan restructuring window for MSMEs is open until December, even this
facility may have to be extended if the crisis stretches longer, they have said. In a report
released last week, Kotak Institutional Equities said only 7% of SMEs surveyed thought
they would be able to survive for more than three months if their business remained
closed. While about 97% of the firms surveyed have paid their employees salary for March,
as many as 34% of the SMEs say they won’t be able to pay April and May salaries (in the
absence of government intervention).
As such, more than a half of the SMEs reported a year-on-year decline in revenue in FY20,
the Kotak report says, with more than 30% having reported revenue drop of more than
10%. This clearly shows the SMEs, which were already in deep trouble, saw their fortune
plummet further after the pandemic hit them hard.
Home
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India offers land twice Luxembourg’s size to firms leaving China
(Source: Shruti Srivastava, Economic Times, May 04, 2020)
India is developing a land pool nearly double the size of Luxembourg to lure businesses
moving out of China, according to people with the knowledge of the matter. A total area
of 461,589 hectares has been identified across the country for the purpose, the people
said, asking not to be identified because they aren’t authorized to speak to the media. That
includes 115,131 hectares of existing industrial land in states such as Gujarat,
Maharashtra, Tamil Nadu and Andhra Pradesh, they said. Luxembourg is spread across
243,000 hectares, according to the World Bank. Land has been one of the biggest
impediments for companies looking to invest in India, with the plans of Saudi Aramco to
Posco frustrated by delays in acquisition. Prime Minister Narendra Modi’s administration
is working with state governments to change that as investors seek to reduce reliance on
China as a manufacturing base in the aftermath of the coronavirus outbreak and the
resultant supply disruption. At present, investors keen on setting up a factory in India
need to acquire land on their own. The process, in some cases, delays the project as it
involves negotiating with small plot owners to part with their holding.
A call to the spokesman of the Ministry of Commerce and Industry went unanswered.
Providing land with power, water and road access may help attract new investments to an
economy that was slowing even before the virus hit, and is now staring at a rare
contraction as a nationwide lockdown hit consumption. The government has hand-picked
10 sectors -- electrical, pharmaceuticals, medical devices, electronics, heavy engineering,
solar equipment, food processing, chemicals and textiles -- as focus areas for promoting
manufacturing. It has asked embassies abroad to identify companies scouting for options.
Invest India, the government’s investment agency, has received inquiries mainly from
Japan, the U.S., South Korea and China, expressing interest in relocating to the Asia’s
third-largest economy, the people said. The four countries are among India’s top 12
trading partners, accounting for total bilateral trade of $179.27 billion. The foreign direct
investments by the four nations between April 2000 and December 2019 stands at over
$68 billion, government data shows. Making unused land available in special economic
zones, which already have robust infrastructure in place, is also being examined. A
detailed scheme for attracting foreign investments is expected to be finalized by end of
the month, the people said. States have been separately urged to evolve their own
programs for bringing in foreign investments. The Prime Minister held a meeting on April
30 to discuss steps to fast-track strategies for wooing investors. Andhra Pradesh, a
southern Indian state, is in touch with several companies from Japan, the U.S. and South
Korea. “We have the advantage of coastline and ready-made industrial parks with
necessary clearance,” Rajat Bhargava, special chief secretary of the state’s revenue
department, said by phone. “We are focusing on certain sectors like IT and related
manufacturing, food processing, and chemicals and have been holding video conferences
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with investors.” The northern state of Uttar Pradesh is also developing an online system
for land allotment for all industrial and commercial purposes and is in talks with global
companies for attracting investments in sectors such as defense and aerospace.
Home
Avoid ‘quick-fix’ economic solution for Covid-19 challenges, says report
(Source: Amiti Sen, The Hindu Business Line, May 04, 2020)
India must resist the temptation for ‘quick fixes’ that do not address the underlying
concerns of the economy even as it copes with the substantial challenges and concerns
thrown up by the Covid-19 pandemic, a joint report by a Delhi-based research body and
an exporters’ council has said. The report instead calls for focus on permanent solutions
to the economic woes.
Resuming businesses on a selective basis in permissible zones, continuing with the fiscal
stimulus packages till the economy rebounds, focussing on labour-intensive sectors and
navigating the incentives to better support agriculture, MSMEs, logistics and
transportation, exports and imports and health, should be the priority, suggests the report
brought out by EEPC India and ASEAN-India Centre (AIC) at Research and Information
System for Developing Countries (RIS).
The report, which is a compilation of 40 essays from India’s leading economists, trade
policy and trade operations experts, focussing on the economic challenges before India
and the way forward, has been submitted to Finance Minister Nirmala Sitharaman,
Commerce & Industry Minister Piyush Goyal and also opposition leaders, an official
told BusinessLine.
Although containing the spread of the virus has been managed well, the report said, the
Covid-19 pandemic has disrupted normal economic activity impacting trade and resulting
in losses in incomes.
World trade
The World Trade Organization has indicated a fall in world trade between 13 per cent and
32 per cent in 2020, perhaps the highest fall since the Great Depression of the 1930s. The
IMF has also slashed growth forecast for the Indian economy, projecting a GDP growth
of 1.9 per cent in 2020.
In this situation, first and foremost for the Indian government is to restore confidence in
the economic system and the governance and resume businesses on a selective basis
continuing fiscal stimulus packages till the economy rebounds, it said.
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Exporters, particularly those of MSMEs, need special incentives. For example, exporters
have requested for extension of the interest subsidy scheme for a minimum of two years
at a higher subsidy rate. However, the incentives can be given to exporters only when
those are compliant with WTO trade rules. “Proper managing of incentives is needed so
that they reach in the hands of real affected people and/or enterprises and structural
reforms are inevitable,” the report added.
Home
Rural self-help groups to list products on GeM portal for government buyers
(Source: Economic Times, May 04, 2020)
The Commerce Ministry's public procurement portal GeM on Monday said it has started
an initiative -- The Saras Collection -- for rural self-help groups (SHGs), wherein they can
display their products on the platform for government buyers. Under this initiative, SHGs
will be able to list their products on the Government e-Marketplace (GeM) in five
categories -- handicrafts; handloom and textiles; office accessories; grocery and pantry,
and personal care and hygiene. In the first phase, 913 SHGs from 11 states have already
registered as sellers and 403 products have been onboarded, GeM said in a statement.
"A unique initiative of GeM and the Deen Dayal Antyodaya Yojana-NRLM, the Saras
Collection would showcase daily utility products made by rural self-help groups and aims
to provide SHGs in rural areas with market access to government buyers," it said. To
develop a scalable model capable of onboarding a large number of SHGs across the
country in a short time frame, GeM has developed an API (application programming
interface) based integration mechanism with the NRLM (National Rural Livelihoods
Mission) database, it said. The onboarding of SHGs under the initiative has been initially
piloted in the states of Bihar, Chhattisgarh, Jharkhand, Karnataka, Kerala, Himachal
Pradesh, Maharashtra, Odisha, Rajasthan, Uttar Pradesh and West Bengal. "The coverage
shall be rapidly extended to enable a large number of SHGs from all the states/Union
Territories to sell their products to government buyers. Potential buyers shall be able to
search, view, cart and procure such products through the stipulated modes of
procurement," it added.
In order to handhold and facilitate SHGs in uploading their products, GeM is assisting
with product catalogue management, order fulfilment and bid participation. Further,
government buyers will also be sensitized through system generated messages/alerts in
the marketplace about availability of SHG products on the portal. Direct access to
government buyers will do away with intermediaries in the supply chain, and ensure
better prices for SHGs. Rural Development and Panchayati Raj and Agriculture and
Farmers' Welfare Minister Narendra Singh Tomar launched the initiative on Monday.
GeM is a 100 per cent government owned firm which was set up as the National Public
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Procurement Portal for procurement of goods and services required by central and state
government organizations. Government departments, ministries, public sector units,
state governments, and Central Armed Police Forces are allowed to carry out transactions
through this portal.
The government has made it mandatory for all the departments and ministries to source
goods and services from the e-marketplace. The portal provides a wide range of products
from office stationery to vehicles. Automobiles, computers and office furniture are
currently the top product categories. Services, including transportation, logistics, waste
management, web casting, are also listed on the portal.
Home
IIT-Madras startup creating textile with antimicrobial material to tackle
coronavirus
(Source: Indian Express, May 04, 2020)
The coated textiles can be primarily used to manufacture N95 masks, surgical masks,
PPE and food packaging bags, among others, with inherent properties of inactivating the
virus.
An Indian Institute of Technology (IIT) Madras-incubated startup Muse Wearables is
developing novel and scalable methods for coating textiles with nanoparticles-based
antimicrobial agents that can inactivate the human coronavirus on contact, the Institute
said on Monday.
These coatings are expected to be effective up to 60 wash cycles, thereby making the
textiles re-usable.
The coated textiles can be primarily used to manufacture N95 masks, surgical masks,
Personal Protective Equipment (PPE) and food packaging bags, among others, with
inherent properties of inactivating the virus.
According to the Institute, Muse Wearables' current pilot machine can coat textiles of
length up to 100 metres within a few minutes, thereby making it a viable commercial
solution that can be deployed immediately.
Muse Wearables was incubated by IIT Madras Incubation Cell.
"They have quickly mobilised and repurposed their offerings in response to the situation
and are striving to make a positive contribution to the nation's anti-virus efforts," Dr
Tamaswati Ghosh, Chief Executive Officer, IIT Madras Incubation Cell, said in a
statement.
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Some highlights of these nano-particles coated textiles include, anti-microbial properties
-- it continuously captures and destroys viruses and other microbes upon contact. Other
viruses are as small as 30 nanometres can also be inactivated permanently.
It does not leach while washing in water and is environment-friendly. At present, the
particles can be coated on materials like cotton, polyester and cotton - polyester. More
fabrics will be tested soon.
It is non-toxic and therefore can be safely used for making masks and other PPEs, the
Insititute.
Currently, the startup is assembling the coating machine and will shortly commence
coating various textiles with different nanoparticle solutions.
Their coated textiles are expected to be ready for testing by the first week of May 2020.
The start-up is also partnering with a mask manufacturing company to launch five-
layered Antiviral N95 Masks at an estimated price of Rs 300 per piece.
Home
How much economy will lose from coronavirus and what to expect from
economic relief package 2.0
(Source: Rukshad Davar & Rahul Datta, Financial Express, May 04, 2020)
The economic impact of the pandemic on India is likely to be around Rs 7-8 trillion with
sectors such as trade, textiles, aviation, transport, and MSMEs facing the brunt of the
impact.
As the nationwide lockdown imposed by the Indian government completes one (1) month,
Indian businesses are starting to feel the bite. With mounting operational costs and
declining (or nil) revenues, a number of businesses are reaching a point where they are
weeks, if not days away, from shutting down permanently. While the Reserve Bank of
India (the “RBI”) has introduced a number of measures to stimulate lending and
improving liquidity, all eyes are now on the Finance Ministry as Indian businesses look
for a relief package to help them survive through these difficult times.
In this update, we analyze the impact of COVID-19 on the Indian economy, the measures
introduced to alleviate the impact so far and the need for a further financial relief package.
Economic Impact of COVID-19
The US-China trade war and the lack of liquidity in the domestic market had left the
Indian economy in the doldrums as growth slowed to historical lows of 4-5% over
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FY2018-19 and FY2019-20. However, the COVID-19 pandemic, and the measures
introduced to contain its spread, have dashed all hopes of a swift recovery in FY2020-21.
With the global economy facing a recession which could turn out to be worse than the
2008 financial crisis and investors fleeing to safe havens to preserve their wealth, Indian
businesses have ground to a halt.
In its statement released on April 17, 2020, the RBI acknowledged that growth could slow
to as much as 1.9%, if not more, in FY2020-21. At the same time, the International
Monetary Fund (the “IMF”) has projected a global growth rate of (-)3% for 2020. While
these projections see India as one of the better performing economies in Asia, the fall in
global demand is likely to have a massive impact on Indian exports. Already, the RBI
estimates that India has seen an export contraction of about 34% in March 2020.
All in all, the economic impact of the pandemic on India is likely to be to the tune of INR7-
8 trillion with sectors such as trade, textiles, aviation, transport, tourism, hotels,
wholesale and retail trading and MSMEs facing the brunt of the impact. At the same time,
the financial sector, especially NBFCs and MFIs, and the real estate sector are also likely
to suffer during this period due to a lack of consumer demand. The fall in revenues and
incomes will cause a substantial fall in revenue collection by the government, which in
turn, will affect the fiscal deficit in the short to medium term. Although the IMF is
predicting a V-curve recovery post the pandemic, this is likely to be an optimal scenario
and the actual recovery will depend on the length of the pandemic and the quality of the
fiscal boost provided by the Indian government.
Measures introduced by the RBI and the Indian government
Since February 2020, the RBI has introduced several long-term repo operation (“LTRO”)
packages, including the LTRO of INR500 billion announced on April 17, 2020 which
specifically targeted the financial sector (NBFCs and MFIs). LTROs are essentially long-
term (one (1) to three (3) year term) loans given by the RBI to banks at low interest rates.
The objective of this measure is to incentivize the banks to undertake onward lending at
correspondingly low interest rates. NBFCs had been requesting the RBI for direct loans
to ease liquidity, however, the RBI has chosen to proceed with indirect loans through
banks. It remains to be seen whether the banks efficiently pass on the benefits to NBFCs
and MFIs, who in turn, will have to strive to pass on the benefits to their borrowers.
Among further rate cuts and other measures, the RBI also announced a cash infusion of
INR500 billion for the All India Financial Institutions, namely, the NABARD (National
Bank for Agriculture and Rural Development), the SIDBI (Small Industries Development
Bank of India) and the NHB (National Housing Bank) which play an important role in
meeting the long-term funding requirements of agriculture and the rural sector, small
industries, housing finance companies, NBFCs and MFIs. The RBI recognized that these
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institutions were not able to raise sufficient funds from the market and therefore, injected
much needed capital in a bid to support the rural economy.
The RBI also permitted real estate promoters to delay the repayment of loans availed from
NBFCs for commercial real estate projects by one (1) year without treating the same as
restructuring. This move will provide much needed relief to the real estate sector.
Separately, in its guidelines for the extended lockdown, the central government
announced that agricultural and related activities will be permitted to remain fully
operational in zones not demarcated as containment zones. As a significant portion of
India’s population derives its income from agricultural and allied industries, this measure
is likely to alleviate the financial impact on this sector and consequently, reduce the need
for fiscal stimulus in a large chunk of the Indian economy.
The government has also permitted information technology-enabled service providers to
operate with an employee strength cap of 50% from April 20, 2020 while industries and
construction activities in rural areas (outside the limits of municipal corporations and
municipalities) have been permitted to remain fully operational since April 20, 2020.
Further, manufacturing and other industrial establishments in SEZs and EOUs have been
permitted to remain operational in a move to boost exports while manufacturers of IT
hardware, production units requiring continuous processes and manufacturers of
essential goods have also been exempted from the lockdown.
The central government’s exemptions appear to be aimed at ensuring that the targeted
sectors are able to rebound from the lockdown and suggest that it is attempting to reduce
the need for a large fiscal stimulus as it seeks to control its fiscal deficit. However, the
impact of these relaxations is likely to be offset by the fall in global and domestic demand
and therefore, it is likely that the Finance Ministry will need to introduce a detailed relief
package in the near future.
Expectations from the Finance Ministry
The measures introduced by the RBI are unlikely to provide a sufficient stimulus as banks
and other lenders are increasingly adopting risk-averse strategies. In fact, the RBI
governor has stated that there is a liquidity surplus in the economy and that on April 15
alone, the RBI absorbed INR6.9 trillion from banks as surplus under the reverse repo
operations. Therefore, it is clear that the RBI envisions sufficient liquidity in the market
and that the benefits provided by the RBI are not being efficiently passed on by banks and
other lenders to consumers. Given this prevalent reluctance, the RBI will likely need to
introduce detailed procedural guidelines to incentivize banks to pump in the additional
funds into the market.
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In our view, the Indian government would need to introduce an immediate fiscal package
of INR2-3 trillion in the short term while the eventual requirement is likely to increase to
a fiscal stimulus package of INR5-6 trillion. The measures that the Finance Ministry could
introduce include:
wage subsidies to workers engaged with MSMEs and other impacted sectors;
contribution by the government towards payment of interest accrued during the
moratorium period for businesses engaged in the affected sectors;
relaxation of interest rates for fresh loans being utilized to deal with the impact
caused by the pandemic;
allowance for delay or exemption in corporate and personal income tax as well as
in goods and service tax liability for entities engaged in the impacted sectors;
trade reliefs in the form of higher export credits and lower import duties;
redirection of the government’s unutilized funds from its budget to provide direct
cash benefits; and
extending direct loans to entities in impacted sectors at negligible interest rates,
and perhaps, waiving these loans if the entire amount is used to pay employees in
a manner similar to the Coronavirus Aid, Relief, and Economic Security Act, 2020
promulgated by the United States.
In the current global scenario, India will need to undertake a shift in its monetary policy
towards fiscal stimulus to ensure that the economy is able to rebound from the fiscal loss
suffered in the short term. If the IMF predicted V-curve recovery is to be achieved, the
government must stimulate consumer spending and foreign investment in the medium
term. So far, Indian businesses have diligently complied with the orders of the Indian
government to stay at home and its advisories to avoid laying-off employees. Now, it is
time for the Finance Ministry to step up and provide the fiscal relief needed by Indian
businesses to ensure that they are able to sustain through the effects of the lockdown.
Rukshad Davar is Partner and Head, Majmudar & Partners, Rahul Datta is Associate,
Majmudar & Partners.
Home
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Cotton Corporation purchases record 7.5L bales from Gujarat growers
(Source: Financial Express, May 05, 2020)
According to an official source, CCI had purchased more than 13 lakh bales in 2008 as that
year too, cotton prices had nosedived due to the global recession.
With prices continuously going southward, the Cotton Corporation of India (CCI) is
proving to be the saviour for Gujarat cotton-growers. CCI has already purchased over 7.5
lakh bales (170 kg per bale) in the current season – the highest procurement by any central
government agency in the state in the past 12 years.
According to an official source, CCI had purchased more than 13 lakh bales in 2008 as
that year too, cotton prices had nosedived due to the global recession. “CCI is purchasing
cotton from farmers at the MSP of Rs 5,500 per quintal decided by the central
government,” the official said.
The price of cotton in Gujarat’s market yards is hovering around Rs 900 per 20 kg or Rs
4,500 per quintal, said Avadhesh Sejpal, president of All India Cotton, Cotton Seed and
Cotton Cake Brokers Association, adding that domestic as well as international demand
has plummeted by over 30% during the lockdown.
Despite the bulk purchase by CCI, farmers wouldn’t be able to get good prices for their
produce in the wake of a bumper cotton crop in Gujarat, Sejpal said. In anticipation of at
least Rs 1,200 per 20 kg, state farmers had increased cultivation this year, but thanks to
the corona pandemic, they were left disappointed.
Though farmers started selling cotton from November 2019, nearly 35% cotton crop is
still piled up with them, according to market sources.
Home
Lockdown relaxation: Tirupur garment cluster to resume ops; units start
getting queries from abroad
(Source: R Ravichandran, Financial Express, May 04, 2020)
The Tamil Nadu government has announced relaxations allowing industries, particularly
export units, to resume operations with standard operating procedure as suggested by the
Union government.
India’s largest exporter hub, Tirupur garments/knitwear cluster, is all set to resume its
operations after more than 40 days of lockdown due to Covid-19 pandemic.
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Having lost their summer exports due to the pandemic across the globe, the exporting
units numbering into over 1,200 are expected to begin their operations on Wednesday as
per guidelines laid down by both the central and state governments and the local
Collectorate.
The Tamil Nadu government has announced relaxations allowing industries, particularly
export units, to resume operations with standard operating procedure (SOP) as suggested
by the Union government.
“It is high time that we need to start our operations as the cluster had already lost its
summer exports, worth more than Rs 2,400 crore. We have been getting enquiries to send
sampling units from our decades-old buyers for spring summer, autumn, winter seasons,”
said Raja M Shanmugham, president, Tirupur Exporters’ Association (TEA).
“Every other units here are gearing up to send samples as they cannot afford anymore to
sit idle. With the competitors such as Bangladesh, Vietnam, Cambodia, Sri Lanka and
China having started their operations in the last few days, it’s inevitable for us to gear up
fast or otherwise buyers will shift sourcing from India, particularly from this cluster,”
Shanmugham said.
“Exporting of garments/ knitwears is a continuous process. It’s round-the-year business.
It’s a people’s product and the demand for seasonal products has always been there,
except for situation like the current Covid-19 one. The buyers, primarily from the US and
European Union, account for more than 70% of total business in Tirupur and equally keep
enquiring us to send sampling products so that they can place orders for the ensuing
seasons well in advance,” he said, adding that while a few units have upfront orders, the
rest will strive hard to grab the rising opportunities from across the world.
Responding to a question, Shanmugham said, those units situated within the corporation
limits have started applying for permission with the Collectorate to resume their
operations. Based on that, he said that an inspection would be done to ensure both their
identity as well as procedures to be followed as prescribed by the state government. It will
be gradual but certain that the units are ready to begin operations on Wednesday, he
added. “For those units situated outside the corporation limits, they can begin operations
without permission but will be inspected whether they follow SOP.”
According to him, there must be some inventory with the units as they were forced to close
down their units due to Covid-19 pandemic in the last week of March. But those are
manageable and can be exported, too. All the units will begin with the manpower available
locally in the radius of 2-5 km as it takes time to bring back migrant labourers from within
the state and without and public transport is not allowed at this point of time.
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For the fiscal ended March 31, 2020, Tirupur would have lost exports anywhere between
Rs 1,000 crore and Rs 2,000 crore over the last fiscal’s Rs 26,000 crore. Since majority
of the units are yet to get their export payments for March, the actual loss in exports will
be known in the next one or two months, he added. For the fiscal 2020-21, it’s too early
to predict the the quantum of business loss, but may take a hit of around Rs 5,000 crore
to Rs 6,000 crore.
Home
Maharashtra govt withdraws decision to allow sale of BT Cotton seeds from
May 1
(Source: Financial Express, May 05, 2020)
The decision was taken after the state agriculture department approached the Central
Institute of Cotton Research (CICR), Nagpur, seeking advice against the backdrop of the
Covid-19 pandemic affecting the country.
The Maharashtra government has recalled its earlier decision to allow the sale of BT
cotton seeds from May 1. The decision was taken after the state agriculture department
approached the Central Institute of Cotton Research (CICR), Nagpur, seeking advice
against the backdrop of the Covid-19 pandemic affecting the country.
VN Waghmare, director, CICR, a major research centre for cotton in the state, pointed
out that taking the current situation into account, it has recommended that the
government create awareness among farmers and educate them to desist from early
sowing. Farmers should be told to opt for sowing operations only by mid-June to prevent
a possible pink bollworm infestation of the crop, the institute said. Waghmare said if BT
Cotton seeds are made available early to the farmers and they go in for early sowing, the
window of sowing gets longer and the chances of pink bollworm infestation is higher. The
institute has recommended sale of seeds from May 25. Cotton is an important kharif crop
and Maharashtra normally sees around 40 lakh hectare area under the crop. Pink
bollworm attack on cotton balls is considered dangerous. Experts say early cotton sowing
leads to pink bollworm attack. The worm survives on cotton and develops during the high
temperatures, they say. Pink bollworm had caused huge damage to the cotton crop in
Maharashtra in 2017, with farmers reporting huge losses. The state agriculture
department has since taken up extensive outreach programmes to inculcate integrated
pest management (IPM). IPM practices had discouraged early sowing and also talked
about usage of pheromone traps (contraptions which trap the male moth by usage of
‘lures’, which have the female pheromone smeared on them).
Home
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New power sector amendments propose more government
(Source: Amar Patnaik, Financial Express, May 05, 2020)
The proposed amendments must focus more on how to deal with the prevalent losses than
to bring in more complex enforcement mechanisms
The Ministry of Power (MoP) published draft amendments to the Electricity Act, 2003,
on April 17. Power is in the Concurrent List and administered both by the central and state
governments. In the draft amendment Bill 2020, MoP, inter alia, proposed setting up of
Electricity Contract Enforcement Authority (ECEA), which will have jurisdiction to
adjudicate upon matters regarding specific performance of contracts even while retaining
State Electricity Regulatory Commissions (SERCs) set up under the earlier Electricity Act,
2003. There are also several other changes proposed.
Questionable intent
Firstly, MoP has proposed certain amendments to Section 86(1)(f) of the 2003 Act to
avoid any conflict with the newly incorporated Section 109A which talks about ECEA. The
original Section 86(1)(f) of the 2003 Act entrusted the power of adjudication of disputes
between the licensee and generating companies to state commissions, who could refer
them to arbitration, if necessary. The Supreme Court, in GUVNL v Essar Power, had held
that all disputes, and not merely those pertaining to matters referred to in clauses (a) to
(e) and (g) to (k) in Section 86(1), between the licensee and generating companies can be
resolved by state commissions or an arbitrator appointed by it. Post amendment, this
position will get altered and the powers of state commissions in dispute resolution will be
enjoyed by ECEA.
Secondly, the amendment proposes to make it mandatory for ERCs to reduce cross-
subsidy in the manner as will be provided in the tariff policy to be announced by the
Centre from time to time (as per Section 3 of the parent legislation), by withdrawing this
power from SERCs who currently enjoy this power under Section 42 of the parent Act. It
was up to the discretion of SERCs to order removal of such cross-subsidies. Post
amendment, this power of state governments or SERCs will be scrapped. The potential
consequences of such an arrangement could be problematic as tariff rates suggested by
the Centre might not address state-specific challenges.
Therefore, MoP has to clearly specify the intention behind the proposed amendment and
how it would succeed in achieving the objective of continuing reforms in this sector.
More government
There is also the question of the need for creating another authority when there is already
ERC. Several other sectors such as telecom, civil aviation, etc, which have their own
regulatory bodies, do not have such a dual authority structure. The regulators also
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32 CITI-NEWS LETTER
perform the function of enforcement in these cases. The Association of Power Producers
(representative body of private power generators) has raised apprehension that “we may
waste great effort and time on fight for jurisdictional space between ECEA and ERCs. For
instance, on the multi-state PPAs, it took three years to get clarity from the Supreme
Court. There should be a clear demarcation between the two authorities.”
Centre superseding states’ rights
The Centre plays a major role in ensuring monitoring, reporting and accounting of crucial
parameters in this sector. Given the varying ground-level realities and governance
frameworks in states, directing more powers to the Centre would mean subversion of
states’ rights and possible impairment of their interests, thereby dealing a lethal blow to
cooperative federalism. There will be no flexibility at the state level to alter the design and
implementation to suit states’ needs. Thus, changes proposed to Section 42 and 86, being
in direct encroachment of state powers, must be revisited.
Other lacunae
While discoms can engage franchisees or sub-distribution licensees to distribute
electricity on their behalf in a particular area under new proposals, the amendment is
silent on signing of the requisite PPA between them. Absence of a legal contractual
backing denudes the entire arrangement from the trust that is so essential for successful
and efficient implementation of this arrangement. Such a clause was prevalent in the 2018
draft amendment Bill and needs to be reincorporated in the new draft.
Conclusion
The 37th report of the Parliamentary Standing Committee on Energy noted that the power
sector had Rs 6 lakh crore of bank loans as of June 2017. Of this, Rs 37,941 crore is NPAs,
while restructured advances amounted to Rs 60,858 crore. It would have been worthwhile
had the proposed amendments focused more on how to deal with the prevalent losses
than to bring in more complex enforcement mechanisms so as to confuse consumers.
The author is a Rajya Sabha MP
Home
View: Industrial districts, turn the key
(Source: Chandrajit Banerjee, Economic Times, May 04, 2020)
Confederation of Indian Industry (CII) poll of about 100 CEOs conducted on May 4 has
revealed that most of them expect the economy to contract this year. As per an earlier poll,
one-third of firms expect their revenues to contract more than 40% this year. Almost half
of those surveyed felt that it would take more than a year to achieve economic normalcy
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33 CITI-NEWS LETTER
post-lockdown. GoI’s May 1 decision to extend lockdown from May 4 by two more weeks,
with further relaxations in places, is welcome, as it provides for a safe and calibrated
opening of the economy while also containing Covid-19’s spread. This also allows
governments both at the Centre and states additional time to build necessary medical
capacity required, in case there is a spike in the number of Covid-19 cases. Under the new
guidelines, all industrial activities in rural areas are permitted, while it is restricted in
urban areas to specified areas like industrial estates, special economic zones (SEZs),
export oriented units (EOUs) and industrial townships with access to control.
GoI has also divided districts into red, orange and green zones. Economic activities in red,
and especially containment, zones continue to be restricted. The guidelines leave out large
segments of economic activities not located in industrial sectors. As a result, this does not
cover many business units, including MSMEs, belonging to unorganised sectors.
Providing financial stability to these business units is of critical importance. A focused
strategy needed to minimise the adverse impacts of the lockdown without compromising
the efforts to restrict the contagion.
The exit strategy should focus on districts with heavy presence of industrial and economic
activities, or industrial clusters. The top 100- 150 industrial districts could be identified
and classified, based on their contribution to the national economy, presence of industrial
clusters, and number of registered enterprises. Second, the focus should be on restarting
all economic activities in all parts of an economic district — including in containment
zones — with all necessary safety measures in place. The classification of zones into
containment zones, orange zones and green zones could be done on the basis of safety
precautions required. These zones could be marked in terms of concentric circles around
the hotspot. Identified industrial districts would require a separate working protocol and
monitoring mechanism for business operations under various zones. Guidelines
pertaining to movement of people and vehicles, sanitisation procedures, door-to-door
testing, health and social distancing protocols, etc, should be strictly followed in
containment zones. Given the economic significance of these industrial districts, more
should be spent in taking measures to contain the spread of Covid-19 — e.g., free
distribution of personal protective equipment (PPE), masks, close monitoring, etc. The
benefits from the resumption of economic activities in such districts will hopefully
outweigh the additional costs incurred on protective measures for containing the
pandemic.
Third, all business activities — essential or non-essential, within specified industrial zones
or outside of them — should be restarted in urban areas. Standalone facilities or industrial
clusters that are not notified should be permitted to open up at the earliest. This would
also enable supply chains to operate smoothly across the country. Real-time availability
of data on all types of zones within industrial districts can help businesses plan better. It
is also important to permit public transport for workers and selfemployed people with
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34 CITI-NEWS LETTER
requisite precautions, so that they can travel to work. Standard operating procedures for
workplaces and establishments in case of Covid-positive cases are available to avert a
start-and-stop situation. Focusing on the reviving industrial districts may reduce
potential loss of industrial activity by around 50%. This, in turn, could provide relief to
the national economy, along with providing financial sustainability to business units,
preserving livelihoods and bringing relief to all workers.
The writer is director general, Confederation of Indian Industry (CII)
Home
Indian cotton prices may fall further as virus hits demand
(Source: Kavita Desai, Cogenics, May 04, 2020)
After a steep fall in March, cotton prices are expected to fall another 10% by July as the
nationwide lockdown to curb the spread of the novel coronavirus has hit demand in the
domestic and overseas markets.
Demand from the spinning and textile industry has declined substantially and that may
lead to a glut in the market, said traders.
"With the average monthly domestic use of 2.5-2.7 mln bales, India has lost almost 2
month consumption since the start of lockdown on Mar 23," said Gurusamy
Rathakrishna, the director of Coimbatore-based Shree MTK Textiles.
Currently, mills in Gujarat and Maharshtra are not running full capacity because of labour
shortage, said Rathakrishna, adding that it will take at least 4-6 months for mills to start
running full capacity.
The nation-wide lockdown has washed out demand for made-ups, apparel and garments
during wedding season and Id, and is likely to remain dull for a longer period.
On Friday, the government had extended the nationwide lockdown by another two weeks
till May 17.
Arun Sekhsaria, the managing director of DD Cotton, said that consumption by mills in
India is projected to fall considerably to 26.5 mln bales in the current season from 32.4
mln bales in the year-ago period as mills are holding sufficient inventory and with the
slowdown because of COVID-19, mills may not need cotton at least till Jul-Aug.
"Exports are also unlikely to gain momentum in the near future. However, Bangladesh is
the only market which may push India's exports," said Sekhsaria adding that since
October India has exported 2.5 mln bales and is likely to take it to 3.5 mln bales by end of
the season.
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35 CITI-NEWS LETTER
The Cotton Association of India has projected export estimate at 4.2 mln bales for 2019-
20 (Oct-Sep) and domestic consumption at 33.1 mln bales.
Besides local demand, exports of cotton have also taken a hit as everything has come to a
standstill. Indian traders have not signed any new deals for exports after lockdown, said
traders.
A similar situation is likely for imports. India is likely to miss the import estimate of 2.5
mln bales, set by the Cotton Association of India, as the country is buying very minimal
this season because of the higher domestic crop and lower prices. Since the start of the
season, traders have contracted imports of 1.0-1.2 mln bales of cotton, of which 900,000
bales have arrived, traders said.
However, despite the lockdown, Atul Ganatra, the president of the Cotton Association of
India, is optimistic that the 4.2 mln bale export target for the year could be achieved if
domestic prices remains below 35,000 rupees per candy (1 candy = 356 kg), attractive
price for exports.
Cotton prices are currently at 34,000-34,500 rupees per candy in Gujarat and at 33,000-
33,500 rupees in Maharashtra.
PRICE OUTLOOK
With no fear of supply shortage, outlook for cotton in the near term is bearish. Weak
demand and trade disruption across the globe are likely to keep cotton prices under
pressure in the coming months, said traders.
On the Multi Commodity Exchange of India, cotton futures had hit a low of 15,660 rupees
per bale in March, the lowest since March 2016. Currently, the May contract of cotton on
the domestic bourse was down nearly 4% at 15,700 rupees per bales.
"In the next three months, cotton prices are expected to witness a downside with prices
touching to around 14,500 rupees on MCX and may face a resistance at 16,500 rupees,"
said Gnanasekar Thiagarajan, the director of brokerage house Commtrendz Research.
With little hope of price recovery, market participants will closely watch the acreage data
of 2020-21. The acreage numbers may not help turn the trend bullish, but may just
stabilise the prices if area declines, said market experts.
This year, cotton acreage may slightly increase in northern zone, but would barely offset
the decline expected in other parts of the country. Cotton acreage in central and southern
India is likely to fall this year as farmers could opt other competitive crops like soybean,
urad, groundnut, turmeric and chilli, which offered better returns last season.
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Biren Vakil, the head of Ahmedabad-Paradigm Commodity Advisors, said farmers in
Gujarat, Rajasthan and Maharashtra may shift some area of cotton to oilseed like
groundnut, as it was the only commodity trading above minimum support price.
Cotton had been planted across 12.6 mln ha in the country in 2019-20, according to
Cotton Advisory Board estimates. The overall acreage is likely to remain largely at the
same level or 5% lower compared with the previous year, they said.
Home
Lockdown 3.0: Several firms resume manufacturing after getting nod from
local authorities
(Source: Outlook India, May 04, 2020)
Several manufacturing companies, ranging from auto to textiles, breweries to chemical
and fertilizers, have resumed manufacturing operations after getting permission from the
respective state governments under the third phase of the lockdown, which began from
Monday.
The manufacturers have informed the bourses about partial resumption of their
manufacturing facilities with adherence to the safety precautions mandated by the
government and the local authorities, and are also waiting for the approval/nod for other
units.
The development comes after a recent notification from the Union Home Ministry, which
had last week permitted companies to resume manufacturing operations in red, green
and orange zones with certain riders.
Commercial vehicle maker SML Isuzu has got permission from Punjab government to
start its manufacturing plant situated in district Shahid Bhagat Singh Nagar in Punjab.
“We wish to update that the Company has got the State Government permission to restart
manufacturing operations at its Plant with limited workforce effective from today - 4th
May, 2020,” the company said in a regulatory filing adding “Work from Home Policy” will
continue as per the government directions from time to time”.
Rajasthan-based Chambal Breweries and Distilleries has also informed the exchanges
about resumption of operations.
”As per the orders and directions issued by the Government of India and respective State
Governments for lockdown to prevent the spread of coronavirus , now the operations at
the Company have started,” it said in a regulatory filing.
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37 CITI-NEWS LETTER
Automotive and industrial lubricant manufacturing company Castrol India has also
started operations at its plant in Silvassa in Dadra and Nagar Haveli.
“The operations at Silvassa are being carried out in complete compliance with
the precautionary measures, conditions and directions as mentioned in the guidelin
es / orders from respective Government authorities regarding the COVID-
19 safety advisories,” it said.
Hardware manufacturer Cerebra Integrated Technologies said that the company has
resumed its manufacturing operation after receiving the required permission from the
local authorities.
“The Company has resumed its manufacturing operations at its facilities located in the
States Peenya Industrial Area Bangalore and Narasapura KIADB Industrial Area Kolar
District in the state of Karnataka and will gradually scale up its production,” it said.
Pune-based process and project engineering company Praj Industries has also resumed
operations in certain areas.
“The Company has obtained permission from the Office of the Development
Commissioner, Kandla Special Economic Zone (SEZ) regarding partial resumption of
operations at Company’s SEZ Unit II and Unit I at Kandla with effect from 21st April,
2020 and 22nd April, 2020 respectively,” it said.
Similarly, Amines and Plasticizers Ltd, the largest producer of Ethanolamines, Alkyl
Alkanolamines, Morpholine Derivatives, has also partially resumed operations.
“We are pleased to inform that the Company has partially resumed its operations after
receiving required permissions and having ensured all health and safety measures as
prescribed by the local authorities and State Government,” it said.
Ferro alloys manufacturer Nava Bharat has resumed operations (Power and Ferro Alloys)
at plants situated in Paloncha, Telangana and Dhenkanal, Odisha, after receiving the
“permissions with restrictions” from the respective state governments.
“However, the operations of our subsidiary, Nava Bharat Energy India Limited (150 MW
Unit) at Paloncha, Telangana continue to be under shutdown, as there is no bilateral
contract and there being no alternative viable market on the power exchange,” it said.
Integrated Printing, Logistics and Courier solutions provider DJ Mediaprint & Logistics
has also informed exchanges that it has got permission from Maharashtra government to
start factory in few shifts from Monday.
“We have received the Permission for Commissioning of Factory under lockdown from
the Government of Maharashtra, Department of Industries , Enery & Labour started few
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38 CITI-NEWS LETTER
shifts effective from today with limited manpower adhering to all compliances as
mentioned in the permission as well as various Central/State/District Authority Orders,”
it said.
Export-oriented terry towels and tufted rugs manufacturer Riba Textiles has also got the
nod to start manufacturing operation.
“We are pleased to inform that the Company has partially resumed its operations after
receiving required permissions and having ensured all health and safety measures as
prescribed by the local authorities and State Government,” it said.
On Friday, the Home Affairs Ministry issued new guidelines to regulate different activities
in this period based on risk profiling of all the districts into Red (hotspot), Green and
Orange zones.
India is under a lockdown since March 25 to prevent the spread of the coronavirus. On
Friday, the government extended it for two weeks from May 4 with certain relaxation.
According to the latest updates from the Health Ministry, the number of cases from
COVID-19 has climbed to 42,533 and death toll risen to 1,373 in the country.
Home
Lockdown easing: Surat textile units in fix as Guj govt runs contra to MHA
(Source: Vinay Umarji, Business Standard, May 05, 2020)
Industet, which produces 45% of man-made fibre in the country, seeks clarity from state
govt, wants some relaxation in order to stay afloat
With the Gujarat government not permitting any lockdown relaxation, especially within
municipal corporation limits of red-zoned areas, the revenue hit Surat-based
synthetic textile industry has sought some clarity on the issue.
Led by the Synthetic and Rayon Textiles Export Promotion Council (SRTEPC), several
associations have made representations to the state government to allow some economic
activity to resume in the diamond and textile city of Surat.
With Surat accounting for 45 per cent of total man-made fibre or synthetic textiles
produced and synthetic textile yarn, fibre, fabrics and made-ups accounting for annual
exports of $6 billion, SRTEPC has said sought some easing in order to revive the industry.
On Sunday, Gujarat government had issued a notification under which a
total lockdown remainsin force over the next two weeks in areas falling under the
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municipal corporation limits of Ahmedabad, Vadodara, Surat, Gandhinagar, Rajkot and
Bhavnagar. Large parts of these cities are in red zones due to high number of Covid-19
cases. This is contrary to Ministry of Home Affairs (MHA) guidelines on the
extended lockdown till May 17 issued on Friday that permitted movement of individuals
in private vehicles, reopening of private offices with 33 per cent strength, resumption of
shops selling non-essential items even in red zones with certain restrictions.
According to a letter written to the government by SRTEPC, cities like Surat,
Ahmedabad,Vadodara, Gandhinagar, Bhavnagar, Rajkot and certain areas mentioned in
the notice issued by Government of Gujarat are highest contributor to state revenue and
maximum number of industries and their offices with large workforce are situated in
aforesaid cities.
"Since 22nd march no commercial activities have taken place which has big negative
impact on trade and industry with respect to sales and revenue when almost 90-95 per
cent commercial activities are in lockdown condition. How will industry provide salaries,
wages, electricity charges, bank interest, bank repayments, loan instalments and other
fixed expenses in absence of any revenue and survive if the lockdown is extended? We
fear keeping in view huge number of unemployed workforce and absence of cash flow will
create the state of anarchy in the area," SRTEPC has said in its representation to the
government.
As such, since the entire textile is decentralized into spinning, weaving/knitting,
merchant manufacturers, processing, value addition, wholesale trade, garment
manufacturing and retail, the industry can only start if all the activities related to
production and trading are started together, the industry body has stated.
Narain Aggarwal, chairperson of SRTEPC has also said that the industry body has asked
the state government to allow as many migrant workers as possible to go back to their
home states. "If they want to go back to their home states then they should be allowed.
Anyway if relaxation is provided, units may not be able to resume operations at a higher
capacity till some time," Aggarwal added.
Home
Why India is betting on big storage sheds
(Source: Goutam Das, Live Mint, May 05, 2020)
In mid-April, Albinder Dhindsa, the co-founder of grocery e-tailer Grofers, found himself
in a tricky situation. The company’s top team—including the supply chain head—was
stuck in a Gurugram township that got earmarked as a containment zone. And demand
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40 CITI-NEWS LETTER
for grocery was skyrocketing. “Initially, we could let one out of eight customers check out,"
Dhindsa told Mint, adding that “traffic now is 25-30 times of what it was in February."
The Grofers management team worked remotely, scrambling to add both workforce and
warehousing capacity over the following weeks. The company ran 26 warehouses before
the lockdown. It quickly added three more as demand spiked in April. Another five will
open over the next two weeks. “These are smaller facilities. The warehouses were already
built, which we are repurposing for our use," Dhindsa said.
Warehousing, or sheds where goods are stored, have become crucial in the post-covid
world. Inside, storage racks can go up to five levels. If you can’t store enough, you cannot
meet the demand and neither can you deliver fast. Most crucially, additional warehouses
will now allow firms such as Grofers to create a buffer of goods.
Many warehousing complexes are expected to come up across India, more so in the post-
covid world. Many e-commerce categories are expected to boom, as people make a
behavioural shift from buying offline to shopping online.
Also, over the next couple of years, industrial warehousing is expected to see a sunrise as
(as some expect) manufacturing shifts out of China. India wants to be prepared—
developers, particularly. They are building warehouses at a frantic pace, often with private
equity (PE) booty.
As things stand, across eight Indian cities—NCR, Mumbai, Bengaluru, Pune, Kolkata,
Chennai, Hyderabad and Ahmedabad—quality warehousing stock totalled 211 million sq.
ft in 2019. The stock is expected to rise to 253 million sq. ft this year and further to nearly
300 million sq. ft in 2021, JLL, a real estate services firm, projected.
“There is little vacancy. Of the 211 million sq. ft, about 21 million sq. ft is vacant today,"
said Chandranath Dey, head of industrial operations, business development and
industrial consulting at JLL India. Who stands to gain from this warehousing rush? And
how real, and long-lasting are the assumptions behind this investment spree to build large
sheds across India?
Bulking up
Much of the new warehouses going live this year are sophisticated top-quality stuff. Such
quality comes at a cost and increasingly, warehousing is becoming a big boy’s club. In
April 2019, the Hiranandani Group set up a new company, GreenBase, which has entered
into a joint venture with PE major Blackstone Group to build logistics and warehousing
assets. The company has invested ₹500 crore.
“We have 250 acres in Pune, 115 acres in Oragadam (in Chennai), and 73 acres in Nashik.
This is the time to do it (build warehouses)," Niranjan Hiranandani, co-founder and MD
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of Hiranandani Group, said. “The first 30-acre complex in Oragadam would be ready by
the end of the year."
Other developers trying to corner the market have strong PE or institutional backing too.
IndoSpace is India’s largest developer of industrial and warehousing parks, with 35 parks
and 15 million sq. ft ready. In 2020, the firm plans to build an additional 5 million sq. ft.
IndoSpace, backed by PE firm Everstone Group, has invested over $3 billion thus far.
Then there’s Bengaluru-based developer Embassy Group, which has invested $100
million and has committed to another $250 million. The firm has leased out three million
sq. ft and is constructing about seven million more.
About 80% of the demand for warehousing is generated by e-commerce firms, third-party
logistics firms who move the goods for many fast moving consumer goods (FMCG)
brands, besides engineering firms. “Covid-19 will strengthen warehousing. People will
move away from offline retail modes of shopping to the online modes because of social
distancing," said Dey.
Behavioural shifts
Naresh Dangwal’s motorcycle has a curfew pass taped on the handlebar. Everyday, he
rides from Dwarka in Delhi to Samalka, where he works. He is assistant manager of
operations in a warehouse maintained by Ecom Express Pvt. Ltd, a third-party logistics
company that manages shipments for e-commerce firms. This warehouse is more of a
processing centre where bags full of goods are loaded in trucks before being sent to
different cities.
In complicated e-commerce supply chains, warehouses are important nodal points. Think
of them as the point where batons are exchanged during a relay race.
Between a Xiaomi phone manufactured near Chennai and its delivery to a home in Aizawl
in Mizoram by Amazon, there are at least six big and small warehouses. One of Xiaomi’s
contract manufacturers maintains three warehouses. The assembled phone is shipped by
a seller to Amazon’s warehouse in Kolkata. It is further connected to a smaller warehouse
in Guwahati and finally, to another one in the destination town, Aizawl.
Without an efficient network of warehouses and processing centres, like the one Dangwal
works in, deliveries would take way too long than we have come to expect.
The 34-year old’s job is timely connections. In the near past, this centre shipped 17,000
parcels across India every day. The volume has shrunk to a tenth now. “Only essentials—
medicines, masks, gloves, and sanitizers—are moving," he said. “Previously, this hub
dispatched everything from electronic goods to home appliances." These non-essentials
are now stocked up in larger warehouses.
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Because only essentials are being dispatched, Dangwal can do with fewer people. He has
just five people in a shift now, about 10% of the warehouse’s pre-covid employment. “It
helps us with social distancing as well," he said.
The fact is that even when the lockdown ends, the non-essential market may not be as
buoyant. A category shift is likely, hinted Anshul Singhal, managing director of Welspun
One Logistics Park. The company is building a 110-acre warehousing park in Bhiwandi
near Mumbai, the largest hub of warehousing in India.
“From more expensive items, people would now buy more basics online. The quantum
required to service the basic requirements are higher. Eventually, you would need more
warehousing space, more delivery workers, more handling workers, more automation.
That would drive the demand for warehousing," he said.
Meanwhile, the warehousing market could expand to tier-two cities as well. Work from
home (WFH) may result in a resource shift to smaller towns. “People have realized that
WFH works. If employees are based out of tier two, it would increase local consumption
of daily requirements. Warehousing and supply chain companies will therefore look at
smaller cities more favourably," Singhal explained.
Government nudges
While e-commerce companies have pushed the boundaries, thus far, most of India’s
logistics remain unorganized and inefficient. The Indian government appears keen to
change this.
A draft National Logistics Policy stated that logistics cost in India is estimated at 13-14%
of gross domestic product (GDP), very high compared with more efficient global systems.
In the US and Europe, logistics accounted for 9-10% of the GDP and in Japan, about 11%.
Modern warehousing will now play an important role as India tries to cut through the
inefficiencies.
Indian warehousing, historically, were low-grade concrete godowns that dotted the
highways around many transit hubs. GST, which came into force in 2017, was the first big
bang moment for the sector. From a network of smaller warehouses across multiple
states, set up to be tax efficient, companies now picked fewer but larger warehouses in
more strategic locations since India became a single tax country. The larger warehouses
are made of steel, are often pre-fabricated and more automated. Besides robotics,
software systems drive the business. Technology giant IBM, which manages the back-end
technology for FMCG companies such as Amul, said that Indian warehouses are likely to
invest more in technologies that aid business continuity, going ahead. Data recovery
services and cyber security solutions are two of them.
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“We have had very mature policy level initiatives," said Singhal. “Besides GST,
warehousing was given an infrastructure status and not a real estate status—it gives the
sector better lending rates and better lending terms with higher limits." In addition, the
warehousing sector allows 100% FDI. And in some states, developers can build
warehousing parks with fewer approvals compared to other segments of real estate.
The China imperative
Just as the lockdown hit, Aditya Virwani, the chief operating officer of Embassy Group,
moved into his father’s farm house along with his brother Karan Virwani (the India chief
of co-working company WeWork) and his step sister. It’s family time. Even so, both the
brothers are busy handling rent waiver requests from corporate clients who occupy the
developer’s sprawling offices.
“In warehousing, it is more about the fastest fish eating the slow fish rather than the big
fish eating the small fish," said Aditya Virwani during a Zoom call. “Everyone is racing for
scale right now. Because once you have scale, you can control rents," he added.
There is e-commerce, of course. But the rents of the future could come from
manufacturing shifting from China. The virus outbreak is forcing companies to re-think
their supply chains and India stands a chance to benefit. Global manufacturers would
require world-class warehousing to store components and finished products.
“Capitalizing on the China opportunity will be massive," Virwani said. “It is something
the government should help with. The investment committees of private equity funds are
pushing them to do more warehousing deals in India because they are foreseeing the same
thing," he added.
Indeed, some state governments appear to be at work. The industries and mines
department of the government of Gujarat said it is eyeing to increase its FDI from Japan
as there is “a perceptible trust deficit between Japan and China post covid-19 outbreak".
The Japanese government has announced a $2.2 billion economic stimulus package to
help Japanese manufacturing units move out of China.
“We have already written to political and business authorities of Japan, inviting them to
shift their commercial units and operations from China to Gujarat," Manoj Kumar Das,
principal secretary of the industries and mines department, noted in a statement.
Manufacturing shifts, nevertheless, take a long time. Right now, industrial warehousing
could gain because manufacturers aren’t sure on the direction trade policies could take.
“Inventory management will become more important now. Manufacturers will increase
their inventories because they don’t know what’s going to happen in trade policy with
China, going forward," Rajesh Jaggi, vice-chairman of real estate in Everstone Group,
said.
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There are negative riders to the industrial warehousing growth story. Many industrialists
such as Niranjan Hiranandani warned that India could lose out on the exit-China story if
politicians and the bureaucracy botch up. Over the last many years, China’s exports in
textiles have shrunk, for instance. That business has moved to Bangladesh, Vietnam, Sri
Lanka and even Pakistan.
In conclusion
Besides, the warehousing apple-cart could tumble because of high land prices, about 30%
of the project cost. Warehousing is a horizontal development and not a vertical one like
other commercial spaces. The right shape of land is important, so is the right zone with
access to road and rail networks.
“If you have to buy expensive land, it is a non-starter. Indian Railways has a lot of land,
as does the government. For a sustainable logistics supply chain model, the government
needs to open up these spaces," said an executive from a ports company who didn’t want
to be quoted. The government, for instance, can become a shareholder in a project where
its equity participation is the land, he felt.
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GLOBAL
American companies must go to India,’ The US is working with India to kick
China out of the global supply chain
(Source: Amit Agrahari, TFI Post, May 01, 2020)
In the last few decades, China emerged as the ‘factory of the world’, thanks to Western
countries, especially the United States, which encouraged its companies to set up
manufacturing units in the Communist country.
But with the economic prowess, China became a problem for the US and its allies. After
the outbreak of Coronavirus pandemic, China not only refused to share crucial data with
the countries around the world, but also threatened countries like Australia and member
states of European Union of retaliatory action if they take any steps to hold the
Communist government responsible.
Therefore, now the US has decided to break the backbone of Chinese
economy- manufacturing. US Secretary of State Mike Pompeo said that the
country is working with its “friends” to restructure the global supply chain.
“We’re working with our friends in Australia, India and Japan, New Zealand,
the Republic of Korea, and Vietnam to share information and best practices
as we begin to move the global economy forward,” said Pompeo at a press
conference on Wednesday.
“Our conversation certainly involved global supply chains, keeping them
running smoothly, getting our economies back to full strength and thinking
about how we restructure the supply change chains to prevent something like
this from ever happening again,” he added.
Pompeo said that the United States is willing to work closely with India, as it helped the
United States in critical times. “One example of our work together is with India.
It has lifted export bans on critical medical supplies, including
pharmaceuticals, used to treat some COVID-19 patients,” said Pompeo.
On the other hand, the US seems to be endorsing India for US companies to shift to in the
event of their exodus from China. “India can quickly become a favourable
jurisdiction for more of the industrial activities that are happening currently
in China,” Thomas Vajda, assistant secretary of state for South Asia in the US
Department of State, said in a meeting. He also said, “Government relations
between the two countries will be supportive.”
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Meanwhile, Prime Minister Modi has signaled that the government is ready to do áll it
takes’ to attract the firms exiting China and integrate India into global supply chain. PM
discussed the strategy to attract these companies with ministers of top bureaucrats, as per
a report by Times of India.
Since the outbreak of Coronavirus, the hatred against China has grown manifold in
countries around the world. Western countries, which fuelled the Chinese economy by
setting up factories in the Communist country, are hard hit by Coronavirus. So far, the US
and Europe account for more than half of total cases around the world and above two-
third of total deaths. The global economy is reeling due to Coronavirus lockdown, and the
countries which have been hit are trying to get their businesses out of China.
If the leader of the Western world, United States, is willing to help India in integrating
global supply chain and encourage its own companies to set up units in India, it gives a
great head-start to India.
A few weeks ago, Shinzo Abe led Japanese government announced financial package for
Japanese companies which are planning to shift their base out of China. Out of a
stimulus package worth whopping 108.2 trillion yen (US $993 billion) – equal to 20
percent of Japan’s economic output –it has earmarked US $2.2 billion to help its
manufacturers shift production out of China.
220 billion yen ($2 billion) is pledged for Japanese companies shifting production back
to Japan and the remaining 23.5 billion yen for those seeking to move production to other
countries.
‘Pack up and get out of there,’ Japan to spend $2.2 billion to get Japanese companies to
exit China
If the Modi government does not want to lose a golden opportunity like this once again
then it must fast track the land, labour, capital, and judicial reforms from the war room to
make sure that the companies fleeing China move to India, not Vietnam or Bangladesh.
Home
New Turkish duty will affect India's textile exports
(Source: Fibre2Fashion, May 04, 2020)
Additional duties imposed recently by Turkey will adversely affect India's exports of
textiles to that nation, according to The Cotton Textiles Export Promotion Council
(TEXPROCIL). The new duties are applicable on shipments effected from April 20, 2020
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and will be valid till September 30, 2020. This further aggravates the problem for textile
exporters.
Vide a notification issued on April 20, 2020, Turkey has imposed additional duties on a
wide range of products, which includes 'Textiles & Clothing' products. Additional duties
of 8 to 12 per cent on cotton yarn, 25 per cent on made-ups, and 35 per cent on apparel
has been imposed.
“The additional duties imposed by Turkey will adversely affect exports of cotton yarn and
fabrics to Turkey,” said TEXPROCIL chairman KV Srinivasan. He pointed out that there
was already an additional duty of 20 per cent imposed on fabrics in 2011 and this has now
been increased to 25 per cent.
Indian textile and apparel exporters are already facing unprecedented challenges on
account of COVID-19 and are reeling under the combined impact of closure of production
facilities due to lockdown on the one hand and cancellation of export orders on a large
scale and non-receipt of payments against shipments already made on the other hand.
With huge disruptions caused in the main export markets of the US and EU due to
COVID-19, the additional duties imposed by Turkey has further aggravated the problems
for textiles exporters, according to Srinivasan.
“In these crisis times, countries should not create additional tariff barriers for commonly
traded commercial products but enable normal development of trading activities,” said
Srinivasan in a press release.
He urged the Indian government to take up this matter immediately with the Turkish
government so that textile products exported from India to Turkey are exempted from the
additional duties.
He also appealed to the government to include cotton yarn under the MEIS since Turkey
is an important market for this product.
Home
Pakistan: Can’t pay workers during lockdown, textile industry owners tell
court
(Source: Pakistan Today, May 04, 2020)
As the lockdown continues across the country to contain the spread of coronavirus, textile
industry owners on Monday informed the Sindh High Court (SHC) that they would not
be able to pay their employees because of the suspension of economic activities.
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12 major textile industries had filed a petition in the court against the Sindh government’s
order against laying off employees during the lockdown and the obligation on industry
owners to pay their employees in full. As Justice Muhammad Ali Mazhar of the SHC heard
the petition, the Sindh Home Department and Labour Department submitted their
responses to the case.
Secretary Labour Rasheed Ahmed Solangi said that there was a lockdown across the world
due to the pandemic and industrial businesses have been shut down, therefore, the
provincial government shut down business due to the same reason.
He said that under Sindh Payment of Wages Act, 2015, industry owners are liable to pay
their employees. He added that the provincial government has taken all measures
lawfully. However, the lawyer for the petitioners stated that the payment demanded for
employees was, in fact, in violation of the law mentioned by the labour secretary.
“Industries are closed; we cannot pay the employees,” the counsel responded. He added
that this was an important matter and they want the case to be concluded as early as
possible.
Upon hearing this, Justice Mazhar adjourned the case and asked the involved parties to
continue their arguments on May 6.
Home
South Africa allows some industries to reopen
(Source: International Leather, May 04, 2020)
After five weeks of restriction, industries such as footwear, chemicals and automotive,
including components manufacturing, are now allowed to scale up in phases to 100%
employment.
South Africa eased lockdown restrictions from May 1 as part of the country’s approach in
dealing with the coronavirus spread. According to Dr Zweli Mkhize, South Africa’s
Minister of Health, the government has so far succeeded in pushing back the peak with
the measures put in place and “flattened the curve”. Around 1.5 million workers in
selected industries are to return to work under strict health conditions, it is claimed. The
terms of the proposed lockdown policy, published on April 25, say that workers from the
automotive, chemicals, footwear and textile manufacturing sectors will be allowed to
return to work, with these sectors scaling up in phases to 100% employment, while some
other manufacturing sectors are to scale up in phases to 50% employment. As far as retail
is concerned, and in addition to what is already being sold, businesses will be able to sell
all clothing, home textiles and footwear articles, as well as automotive.
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“Should the country avoid a sharp increase in the levels of infections with the return to
work of large numbers of workers and expanded testing and healthcare facilities, the
economy could shift to Level 3 as soon as possible”, said Ebrahim Patel, South Africa’s
Trade Minister. “The country does not need to stay at Level 4 for a specific number of
weeks but can move rapidly to a lower level should risks be mitigated.” The South African
government has also eased restrictions for domestic air travel, with a limited number of
flights daily. The authorisation for travel is to be justified and subject to the ports of entry
arrangements.
Home
J. Crew Files for Bankruptcy in Virus’s First Big Retail Casualty
(Source: Vanessa Friedman, Sapna Maheshwari and Michael J., New York Times, May 04, 2020)
It was struggling before the coronavirus pandemic, but J. Crew is unlikely to be the last
retailer to fall.
J. Crew, the mass-market clothing company whose preppy-with-a-twist products were
worn by Michelle Obama and appeared at New York Fashion Week, filed for bankruptcy
protection on Monday. It is the first major retailer to fall during the coronavirus
pandemic, though other big industry names including Neiman Marcus and J.C. Penney
are also struggling with the toll of mass shutdowns. J. Crew announced that its parent
company, Chinos Holdings, had filed for Chapter 11 protection in federal bankruptcy
court for the Eastern District of Virginia. As part of its financial reorganization plan, it
will hand over control to top creditors, including the hedge fund Anchorage Capital, by
converting $1.65 billion of its debt into equity. The company, which has secured a $400
million debtor-in-possession loan, also plans to hold onto its Madewell brand, which it
had considered spinning off into a public company.
J. Crew added that its online business would continue to operate normally throughout its
restructuring, and that it planned to reopen its J. Crew and Madewell stores once
lockdowns are lifted. Gift cards and returns and exchanges would not be affected, it said in
a message to customers, adding that it planned to serve shoppers “for years to come.”
“This agreement with our lenders represents a critical milestone in the ongoing process
to transform our business,” Jan Singer, J. Crew’s chief executive, said in a statement.
The pandemic has been disastrous for the already weakened retail industry. In March,
sales of clothing and accessories fell by more than half. The numbers for April are
expected to be worse, because many stores were open for at least some of March (e-
commerce, a relatively small contributor to total sales for most store chains, is not enough
to make up for the closures). Retailers have furloughed employees, slashed executive
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salaries and hoarded cash in a desperate attempt to survive until the shutdowns are lifted.
And there is widespread acknowledgment that J. Crew is unlikely to be the only retailer
to face the brink.
J. Crew was carrying a debt burden of $1.7 billion based on a leveraged buyout in 2011 by
two private equity firms — TPG Capital and Leonard Green & Partners — even before the
coronavirus brought clothing sales to a near-halt in its 181 stores, 140 Madewells and 170
outlets. It had also struggled to adapt to changing consumer tastes.
But it seemed to be making strides in recent months toward a more viable future. The
company named Ms. Singer its new chief executive in January and was planning an initial
public offering of Madewell this spring in order to pay down some of the debt and
rehabilitate the J. Crew brand.
The coronavirus pandemic scuttled those plans and eventually toppled the company. J.
Crew started life in 1947 as a family-run low-priced clothing line for women called Popular
Club Plan, and in 1983 it was renamed and reinvented as a catalog company selling
turtleneck tops and crew neck sweaters in “Preppy Handbook” shades. It made the leap
to household name and 21st century fashion fairy tale in October 2008 when Mrs. Obama,
whose husband was then the Democratic candidate for president, appeared on “The
Tonight Show With Jay Leno.” This was just days after it had been revealed that Sarah
Palin, the Republican candidate for vice president, had been given a costly wardrobe
makeover. “I want to ask you about your wardrobe,” Mr. Leno said to Mrs. Obama. “I’m
guessing about 60 grand? Sixty, 70 thousand for that outfit?”
“Actually, this is a J. Crew ensemble,” Mrs. Obama replied, referring to her $148 yellow
pencil skirt, $148 yellow and brown print tank top and $118 matching yellow cardigan.
“Ladies, we know J. Crew. You can get some good stuff online!”
It was a priceless marketing moment. After that, everyone knew J. Crew, which seemed
to embody the high/low mix-and-match trend of the moment.
The company was purchased by TPG in 1997 in a leveraged buyout from the founding
Cinader family, and was taken public in 2003 — only to be reacquired for approximately
$3 billion by TPG and Leonard Green & Partners nearly a decade ago.
Its creative director, Jenna Lyons, who first joined as part of the design team in 1990,
became a boldface name, known for her black-rimmed glasses, gangly frame and love of
sequins and camouflage. Newspaper reports crowed about the comeback of the
company’s chief executive, Millard S. Drexler, who had previously led Gap Inc. for years.
Mr. Drexler, who goes by Mickey, became famous for riding his bicycle around the office
and checking in with store associates via speakerphone. In 2011 J. Crew became the first
mass-market accessible brand to breach the high fashion parapet and present at New York
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Fashion Week. Vogue crowned the brand “a significant voice in the conversation on
American style.” As the face of the brand, Ms. Lyons attended the Met Gala and, in 2014,
played a role on the HBO show “Girls.”
In 2017, however, after two years of falling sales, Ms. Lyons left the company. J. Crew, the
criticism went, had gone too fashion, falling into the trap of prizing quirk over quality and
pricing itself out of practicality. It had diminished its own brand with a heavy push into
outlet merchandise. (There are now nearly as many full-price J.Crew stores as factory
stores.) And it had never focused enough on e-commerce. Madewell, its younger, simpler
— “more authentic” — sister brand, acquired by Mr. Drexler in 2006, was the company’s
new shining star. Indeed, after Ms. Lyons left, Madewell’s designer, Somsack
Sikhounmuong, who had switched over to J. Crew in 2015, took the top creative spot.
Much was made of a return to core values.
It was too little, too late. For a fashion brand to thrive it must be either needed or wanted.
J. Crew, sitting somewhere in the netherland of style and price, was neither. A few months
after Ms. Lyons’s departure, Mr. Drexler stepped down and Mr. Sikhounmuong left two
months later, starting a round robin of executives and designers. That served ultimately
to confuse rather than clarify the identity of the company and its strategy. Jan Singer,
formerly of Nike and Victoria’s Secret, was named J. Crew’s newest leader in January.
Madewell, which filed for an I.P.O. in the fall, was expected to go public this spring while
J. Crew remained private, but those plans were ultimately scrapped in March as the stock
market spiraled, adding a new wave of pressure and question marks to J. Crew’s future.
J. Crew clearly had plenty of problems even without its massive debt load. Ongoing
interest payments and looming maturities only added to the company’s challenges, and
in the eyes of some, left it ill-equipped to adjust to a new shopping environment.
As the retail landscape has shifted, “these businesses have faced a huge investment need,”
said Raya Sokolyanska, a senior analyst at Moody’s. “Having a burdened balance sheet
certainly greatly diminishes their chances of doing this successfully.”
That’s even more challenging for fashion retail, she said, which is “notoriously fickle.”
Now the question is whether the upheaval of the retail industry — which predates the
pandemic, with the collapse of Barneys New York late last year — will continue.
“The companies going into bankruptcy, for the most part, were companies that were
struggling before Covid — we have not seen true Covid-only bankruptcies,” said James
Van Horn, a partner at the law firm Barnes & Thornburg and a specialist in retail
bankruptcy. However, he added, “depending on how the current situation continues, that
may change.”
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For instance, Brooks Brothers, another quintessential American shopping institution, is
already facing questions about its future. “In the ordinary course of business, Brooks
Brothers consistently explores various strategic options to position the company for
growth and success, in partnership with its financial advisers at P.J. Solomon,” a
spokesman said, in response to question about a potential sale.
Vanessa Friedman is The Times's fashion director and chief fashion critic. She was
previously the fashion editor of the Financial Times.
Sapna Maheshwari covers retail. She has won reporting awards from the Society of
American Business Editors and Writers and the Newswomen’s Club of New York
Home
PHILEXPORT seeks revival of Philippine textile industry
(Source: Fibre2Fashion, May 04, 2020)
The Philippines must revive its textile industry following global supply chain disruptions
during the novel coronavirus outbreak, which cut off its garment industry from imported
raw material, according to PHILEXPORT textiles, yarn, and fabric trustee Robert M
Young, who recently said the country is the only one without a textile industry. The
Philippine Exporters Confederation, Inc. (PHILEXPORT) is the umbrella organisation of
Philippine exporters. The Philippines cannot continue to rely on imports and must attain
some degree of self-reliance in textile production, he said in a webinar. Orders of garment
and apparel from retailers will reduce by half and 50-70 per cent of recent orders have
been cancelled by buyers, he said.
The Philippines should continue its negotiations for free trade agreements (FTA),
especially with the United States, he said “Selected goods such as garments, apparel,
wearables can enter the USA tax-free, meaning we will have more business. Foreign
buyers will be buying more from Manila because they will be paying zero tax,” he was
quoted as saying by a Philippine newspaper report.
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