Cotlook A Index - Cents/lb (Change from previous day)

04-12-2019 73.50 (-0.65)

03-12-2018 86.80

01-12-2017 83.15

New York Cotton Futures (Cents/lb) As on 06.12.2019 (Change from

previous day)

Dec 2019 64.70 (-0.20)

Mar 2020 65.84 (+0.04)

May 2020 66.96 (+0.15)

06th December

2019

Parliament okays corporate tax cut; FM says software developers,

miners not eligible for lower rates

Textile exports up 6.3% post-GST

Bengal govt to set up 'design bank' to revive silk sarees produced

in the state

VN exporters can only take advantage of CPTPP with preparation

Cotton and Yarn Futures

ZCE - Daily Data (Change from previous day)

MCX (Change from previous day)

Dec 2019 19040 (-80)

Cotton 12470 (-120) Jan 2020 19210 (-40)

Yarn 20675 (+145) Mar 2020 19990 (+490)

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2 CITI-NEWS LETTER

-------------------------------------------------------------------------------------- Parliament okays corporate tax cut; FM says software developers, miners not

eligible for lower rates

While trade war between US & China escalated, couldn't have waited to slash

corporate tax: Nirmala Sitharaman

Textile exports up 6.3% post-GST

Monitoring of Textile Industry

5% GST slab may be increased to 6%: Panel considering ways to boost revenue

Fifteenth FC may have kept devolution of divisible tax pool unchanged

India's manufacturing capacity utilisation declines to the lowest ever

Bengal govt to set up 'design bank' to revive silk sarees produced in the state

Growth a national objective: Shaktikanta Das

Cotton to remain in a tight range in short term, all eyes on US-China trade deal

NGOs, activists slam brands, seek 6-fold hike in MSP for cotton

India, 6 others object to restrictions on services trade, workers’ movement

Southeast Asian corridor eyes business opportunities with Delhi via Bay of

Bengal

Welspun promoters acquire majority stake in warehousing firm One

Industrial Space

------------------------------------------------------------------------------ Garment-textile roadmap sees potential 45% increase in exports

VN exporters can only take advantage of CPTPP with preparation

Green products can give textiles an edge in EU market: report

APTMA criticises raise in power tariff through quarterly adjustments

Coloreel joins the Textile Machinery Association of Sweden

--------------- --------------------------------------------------

NATIONAL

---------------------

GLOBAL

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3 CITI-NEWS LETTER

NATIONAL:

Parliament okays corporate tax cut; FM says software developers, miners not

eligible for lower rates

(Source: Economic Times, December 05, 2019)

Parliament on Thursday approved the Taxation Laws (Amendment) Bill, 2019 that

replaces an ordinance promulgated to cut the base corporate tax rate, with Finance

Minister Nirmala Sitharaman stating that mining companies, software developers and

book printers will not be eligible for the lower 15 per cent rate available for new

manufacturing companies. Lok Sabha had earlier this week passed the bill and the Upper

House returned it on Thursday without making any changes.

Replying to a debate on the legislation, Sitharaman said a negative list of activities that

do not constitute manufacturing has been created and will not be eligible for the lower 15

per cent tax rate for manufacturing firms that are set up after October 1 and that begin

operations by 2023. The negative list includes the development of computer software in

any form or in any media, mining, conversion of marble blocks or similar items into slabs,

bottling of gas into cylinder, the printing of books or production of a cinematograph film.

Sitharaman had on September 20 announced lowering of the base corporate tax rate to

22 per cent from 30 per cent for companies that do not seek exemptions, and reduced the

rate for new manufacturing companies to 15 per cent from 25 per cent. Including

surcharges and cesses (levies to raise funds for specific purposes), the effective corporate

tax rate will drop by nearly 10 percentage points to 25.2 per cent for corporates in general

and 17.01 per cent for new manufacturing companies.

The corporate tax cut followed other measures by the government to prop up slowing GDP

growth adopted since the May general elections. These include efforts to reduce red tape

and boost foreign direct investment (FDI), and plans to consolidate the state-owned

banks. The finance minister said the reduction in corporate tax was done to make India

an attractive destination for firms looking to invest outside of the US and China following

their trade tensions.

A lower rate of 15 per cent was offered for new manufacturing units to draw new

investment, thus reviving economic activity and creating jobs, she said. Sitharaman also

promised to continue the rollout of reforms to boost the economy. GDP growth rate in

July-September slowed to a six-year low of 4.5 per cent on a slump in manufacturing and

drop in consumer demand.

On demands by MPs for reducing personal income tax to provide more money in the

hands of people, thereby boosting consumption, she listed out the rebates and reliefs

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4 CITI-NEWS LETTER

offered during the previous five years of the Modi government but did not commit to

further cuts. She also countered the narrative of a slowdown in private consumption,

saying the share of consumption in gross domestic product (GDP) rose from 56.2 per cent

during 2009-2014 to 59 per cent in the first five years of the Modi government. In the first

half of 2019-20 fiscal, it was 58.5 per cent, still higher than during UPA-II, she said.

Justifying rollback of higher surcharge on foreign portfolio investors that was introduced

in her maiden Budget, she said fringe benefits tax and banking transaction tax was

introduced in 2005 but rolled back in 2009 and 2008 respectively. During the debate,

Congress member Jairam Ramesh attacked the corporate tax reduction as a curtain-raiser

to Prime Minister Narendra Modi's 'Howdy Modi' event in Houston.

"The changes were welcomed. But the timing was quite extraordinary. Two days later

there was a Howdy Modi in Houston. Prime Minister always likes to go on a foreign trip

accompanied by major policy announcements and I think what happened on September

20, 2019, was the curtain-raiser for the event to follow the event in Houston," he said.

While BJP members including GVL Narasimha Rao said the bill would help the Indian

economy and boost the growth rate, Sukhendu Sekhar Ray of the Trinamool Congress

doubted it saying rural spending has slid after four decades and there is a decline in

consumer expenditure. KK Ragesh of CPI-M termed the cut as a "scandal" while

Samajwadi Party's Ravi Prakash Verma said that the economy was in "panic stage".

Responding to the members, Sitharaman said the Prime Minister has taken one initiative

after another seeing the developing situation and the government did not wait for the next

Budget to announce measures including tax cuts.

She said many MNCs want to shift their base from China in view of the Sino-US trade war

and that is the subtext of the government's decision. Stating that the government policy

was to phase out exemptions and reduce tax rates, she said the corporate tax cut would

also benefit small and medium enterprises. Responding to the members' criticism on

rollback of Budget proposals, the finance minister said "rollbacks are not wrong per se"

and cited the same done during the UPA regime. Defending taking the ordinance route

and not waiting for two months for the next Parliament session for making changes, she

said the previous Congress-led UPA had promulgated 61 ordinances in its 10-year rule,

including 16 on finance-related matters. She also attacked the UPA for leaving unpaid

bills for the new government in 2014, including Rs 1.4 lakh crore in dues to oil firms.

Sitharaman also said she has asked income tax officials not to harass taxpayers and the

department has introduced faceless assessment. However, she said the government

would not spare tax evaders and defaulters.

Home

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5 CITI-NEWS LETTER

While trade war between US & China escalated, couldn't have waited to slash

corporate tax: Nirmala Sitharaman

(Source: Nishtha Saluja, Economic Times, December 05, 2019)

The ongoing trade war between the US and China was an impetus for India to slash

corporate tax rates through an ordinance, and waiting for the FY21 budget was a delay

which the government wanted to avoid, Finance Minister Nirmala Sitharaman said on

Thursday.

Sitharaman had in September announced corporate tax rate cut from an effective 35%

(including surcharges and cesses) to an effective 25.17% while the rate for new

manufacturing companies reduced to 15% from 25%. The Rajya Sabha on Thursday gave

its assent to the Taxation Laws (Amendment) Bill, 2019, replacing an ordinance that was

used to slash corporate tax rates to stimulate growth. The Rajya Sabha cleared the

legislation with a voice vote without any changes. The Lok Sabhahas already passed the

bill.

As per rules, the Rajya Sabha cannot amend a money bill but can recommend

amendments. “Considering the trade war between the US and China, which was looming

large, everybody was speculating, there were several companies which were likely to come

out of China even if they kept their operations there, they wanted to shift,” Sitharaman

said. The minister said while Southeast Asian countries like Thailand and Vietnam were

rolling out tax concessions as the global trade war escalated, India had to respond well in

time to attract investments at the earliest. “Should India be waiting for a golden moment

to come up with this kind of a concession, instead of getting it sooner rather than later,

and drawing these companies to come to India and invest,” Sitharaman said. Clarifying

further on the bill, she gave a negative list of activities that did not classify as

manufacturing. “Certain activities are not in the nature of manufacturing, such as

development of computer software, printing of books, mining, etc shall not be allowed as

manufacturing for the purpose of allowing lower taxation regime available to new

manufacturing companies,” Sitharaman said.

Cutting down the corporate tax rate, is not just good for headline, it is not just good PR,

it is not just good atmospherics, it is good reform,” she added. The minister said the

government had taken a “conscious call” on the new tax regime applying to fresh

investments. “The idea of giving a lower tax rate for new manufacturing companies is

because we want fresh investment to come in,” Sitharaman said. “It should not become

that the whole lot of existing production capacities and investment just transfer to the

new one with no additional investments coming in.”

Sitharaman said she had been constantly in touch with trade bodies, industry leaders, to

address issues they were facing and responding almost fortnightly with recuperative

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6 CITI-NEWS LETTER

measures since August this year. Countering the criticism on declining consumption, she

said private consumption in the first half of 2019-20 was still 2% higher than that during

the UPA-II regime. “Private consumption during UPA-II was 56.2% of GDP. This

increased to 59.0% during NDA-1. Even in the first half of 19-20, private consumption is

58.5% of the GDP, still about 2.2% higher than that during UPA-II,” Sitharaman said.

Home

Textile exports up 6.3% post-GST

(Source: Kirtika Suneja, Economic Times, December 05, 2019)

Textiles minister Smriti Zubin Irani on Thursday told Parliament said textile exports have

increased 6.2% post-Goods and Services Tax (GST) as compared with corresponding

period pre-GST.

“India faces competition from countries like Vietnam, Bangladesh and Sri Lanka which

enjoy duty free access to key markets while India faces a duty disadvantage,” she said in

reply to a question in Rajya Sabha.

Besides, Bangladesh and Vietnam have the benefit of scale in apparel manufacturing and

a large and productive labour force. In a separate reply to a question on decline in export

of cotton yarn, she said: “There is no information regarding closure of spinning units due

to decline in exports of cotton yarn”.

Citing data from Directorate General of Commercial Intelligence and Statistics, she said

cotton yarn exports from India is reported at 226 million kg during April-September 2019

as compared with 338 million kg during April- September 2018.

Home

Monitoring of Textile Industry

(Source: Press Information Bureau, December 05, 2019)

The Government is responsible for policy formulation, planning and development of the

textile industry by providing a conducive policy environment and creating enabling

conditions for promotion of the textile industry all over the country including state of

Rajasthan.

In order to promote and develop various sectors/ segments of the textiles industry,

the Government has been implementing various policy initiatives and schemes which

support/ improve the lives and livelihoods of textile weavers through employment

generation and promotes production and export competitiveness of the textile industry

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7 CITI-NEWS LETTER

such as Schemes for the development of the Powerloom Sector(Power-Tex), Schemes for

Technical Textiles, Scheme for Integrated Textile Parks (SITP), Scheme for Additional

Grant for Apparel Manufacturing Units under SITP (SAGAM), SAMARTH- The Scheme

for Capacity Building in Textile Sector (SCBTS), Jute (ICARE- Improved Cultivation and

Advanced Retting Exercise), Integrated Processing Development Scheme (IPDS),

National Handloom Development Progarmme, Comprehensive Handloom Cluster

Development Scheme (CHCDS), Silk Samagra, Integrated Wool Development

Programme (IWDP), North East Region Textiles Promotion Scheme (NERTPS) and

Rebate of State and Central Taxes and Levies (ROSCTL).

Further, to encourage the domestic apparel sector including Rajasthan to compete in

International market, Government announced key reforms under a Special Package that

includes additional incentives under the Amended Technology Upgradation Fund

(ATUFS), relaxation of Section 80JJAA of Income Tax Act and introduction of fixed term

employment for the apparel sector. Under Pradhan Mantri Rojgar Protsahan Yojana

(PMRPY), Government is providing entire 12% of employer’s contribution.

The textile sector schemes mentioned above support the promotion of commercial

ventures, setting up of new units as well as expansion of the existing units in the country

including Bhilwada, Rajasthan. However, indicative physical targets are allotted to

States/implementing agencies including in the State of Rajasthan and funds are released

based on viable proposals received and utilization of previous funds.

The state-wise data of exports is not maintained. In the state of Rajasthan there are 38

cotton and man-made spinning textile mills (NON-SSI). As per the data available the

estimated production of spun yarn and cloth in Rajasthan during last two years is given

below:

2017-18 2018-19

Spun Yarn (Mn.

Kg)

495 524

Cloth (Mn.Sq.mtr) 281 254

The following activities have been implemented in the State of Rajasthan in the last five

years (2014-15 to 2018-19) to promote Handloom sector: -

i) As per 4th All India Handloom Census (2019-20), there are 6446 handlooms, 8687

handloom weavers and 1403 allied workers in Rajasthan.

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8 CITI-NEWS LETTER

ii) Rs. 38.00 lakh has been released for one Block Level Cluster covering 554

beneficiaries.

iii) Rs. 99.00 lakh has been released for 4 marketing events covering 5820 beneficiaries.

iv) Loan worth Rs. 66.00 lakh has been disbursed under Weavers’ MUDRA Scheme

covering 380 beneficiaries.

v) 10.03 lakh kg of yarn worth Rs. 9.42 crore has been supplied at mill gate price and

9600 kg of yarn worth Rs. 16.71 lakh has been supplied to the weavers of Rajasthan under

10% subsidy scheme of Yarn Supply Scheme (YSS).

vi) 1963 beneficiaries have been enrolled under Mahatma Gandhi Bunkar Bima Yojana

(MGBBY) and 18 beneficiaries have been enrolled under Pradhan Mantri Jivan Jyoti

Bima Yojana (PMJJBY)/Pradhan Mantri Surakha Bima Yojana (PMSBY).

This information was given by the Union Minister of Textiles, Smriti Zubin Irani, in

written reply in the Rajya Sabha today.

Home

5% GST slab may be increased to 6%: Panel considering ways to boost

revenue

(Source: Dilasha Seth, Business Standard, December 06, 2019)

The panel is also looking at bringing under GST items like foodgrains that faced either

value-added tax or purchase tax

The panel for shoring up muted goods and services tax (GST) collection is examining slab

restructuring by increasing the 5 per cent rate to 6 per cent to begin with — a move that

can result in additional revenues of Rs 1,000 crore per month. The 5 per cent slab covers

essential commodities like basic clothing, footwear, and food items.

The exercise assumes GST collection of Rs 1 trillion a month. According to the official

data, the 5 per cent slab accounts for roughly 5 per cent of GST collection. However, the

government’s monthly GST collection target is around Rs 1.18 ...

Home

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9 CITI-NEWS LETTER

Fifteenth FC may have kept devolution of divisible tax pool unchanged

(Source: Arup Roychoudhury, Business Standard, December 06, 2019)

The interim report is likely to be made public just before or on the day of the Budget

The Fifteenth Finance Commission is believed to have maintained status quo for now, by

recommending that the devolution of the divisible tax pool to states be kept at the existing

42 per cent for 2020-21. The Commission (FC) submitted its interim report for the

financial year 2020-21 to President Ram Nath Kovind on Thursday, and apprised the

President of the recommendations, an official statement said.

An official confirmed that the FC had kept the devolution to states unchanged for now.

This is even as it uses the extra time it has been given to navigate challenging

circumstances like the economic slowdown, unrealistic fiscal and revenue targets by the

centre and states, and the status of Jammu and Kashmir as compared to other union

territories like Delhi and Puducherry, before the submission of its final report in October

2020.

The interim report will now be given by the President to the Finance Ministry, and will

enable Finance Minister Nirmala Sitharaman and her bureaucrats to prepare the 2020-

21 budget. The interim report is likely to be made public on or just before the day of the

budget, when it is tabled in Parliament, another official said.

Late last month, the Cabinet had extended extension to the term of 15th FC by eleven

months. The commission will submit a full report for fiscal years 2021-22 to 2025-26.

This takes the period for which the 15th FC will

recommend its award to six fiscal years instead

of the usual five. However, this does not fall

foul of what has been mandated in the

Constitution of India.

Article 280 of the Constitution states that the

President shall constitute a Finance Commission at the expiration of every fifth year or at

such earlier time as the President considers necessary.

Simply put, this means that while 15th FC can give recommendations for six years through

two reports (2020-21 to 2025-26), when the Sixteenth Finance Commission is set up, it

will consider devolution for 2025-26 to 2029-30, and not from 2026-27. This will

essentially keep the award period of the 15th FC at five years, since these are just

recommendations which the government accepts.

The extra time had been given to 15th FC for the new union territories of Jammu and

Kashmir and Ladakh.

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10 CITI-NEWS LETTER

The issues regarding Jammu and Kashmir and Ladakh surround the fact that while

technically union territories don’t get a share of the divisible tax pool, and their resources

come from the centre’s share of the divisible pool, the Jammu and Kashmir

Reorganization Act mandates the 15th FC to consider the Union Territory of Jammu and

Kashmir to be paid out of the divisible pool, i.e it should be treated like a state. Ladakh on

the other hand, is expected to get funds out of the centre’s share, like any other Union

territory.

Home

India's manufacturing capacity utilisation declines to the lowest ever

(Source: Aditi Divekar/Abhishek Waghmare / Amritha Pillay, Business Standard,

December 06, 2019)

Capacity utilisation had improved gradually from 71 per cent in the aftermath of

demonetisation to 76.1 per cent in January-March 2019

Capacity utilisation in India’s manufacturing sector plummeted to 68.9 per cent in the

September quarter (Q2 FY20), its worst-ever level since 2008. It had reached a six-year

high of 76 per cent two quarters ago, in March 2019, the Reserve Bank of India’s monetary

policy committee (MPC) said in a statement on Thursday.

Capacity utilisation had improved gradually from 71 per cent in the aftermath

of demonetisation to 76.1 per cent in January-March 2019.

“The slowdown in manufacturing activity was also reflected in the decline in capacity

utilisation (CU) to 68.9 per cent in Q2FY20 from 73.6 per cent in Q1 in the early results

of the Reserve Bank’s order books, inventories, and capacity utilisation survey

(OBICUS),” the statement said.

This data corroborates the severity of the current slowdown in industry. A sharp drop of

4.7 percentage points, from 73.6 per cent to 68.9 per cent, is also unprecedented. Even

the seasonally adjusted CU stood at 69.8 per cent. This indicates that whenever demand

picks up from here, companies would first improve capacity use, before investing into new

capacity.

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11 CITI-NEWS LETTER

Industry players said they were indeed seeing a serious fall in

capacity usage, though some sectors were seeming to prevent

further fall in the overall CU.

Cement is one crucial industry segment, that indicates demand for

construction and infrastructure — be it roads, highways, or metro

projects. For India’s largest cement producer, UltraTech, CU fell to

62 per cent in Q2 from 73 per cent in Q1, the company said.

Mahendra Singhi, MD and CEO at Dalmia Bharat, and president of

the Cement Manufacturers Association, said there had been “de-

growth” in cement demand (sector level) in the last eight months.

“For probably the first time, demand for cement from the rural contracted in the first half

of FY20. This is an area of great concern,” he told Business Standard.

At Dalmia Bharat, capacity utilisation has touched 72 per cent. Experts said that while the

cement sector started the year with near-80 per cent capacity utilisation, they estimate it

to be close to 67 per cent this fiscal year. This echoes the CU in the manufacturing sector.

“Capacity utilisation in the capital goods sector remained in the range 50 and 65 per cent

across sub-segments. In normal times, this could have gone up to 80 per cent. We expect

Q3 (current quarter ending December) to be worse, with a recovery in Q4,” said MS

Unnikrishnan, MD & CEO at Thermax. Jindal Steel and Power, however, said the

company held up capacity utilisation. “In the September quarter, our capacity utilisation

was 85 per cent and has risen to 100 per cent in current quarter,” VR Sharma, managing

director at JSPL, said.

When the global financial crisis hit India's economy in 2008, the RBI started surveying

the manufacturing sector's capacity utilisation (CU). In Q1 of 2008-09, CU stood at 73.7

per cent, which crossed the 80 per cent mark in 2009-10.

“Sentiment in the manufacturing sector remained in pessimism in Q3 due to continuing

downbeat sentiments on production, domestic and external demand, and the

employment scenario,” the MPC statement said.

Home

Bengal govt to set up 'design bank' to revive silk sarees produced in the state

(Source: Sutanuka Ghosal, Economic Times, December 05, 2019)

West Bengal government has decided to set up a 'design bank' to revive the silk sarees

produced in the state. This will be done with the help of students of art colleges in the

state and other artistes against remuneration that will be provided by the state

government.

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12 CITI-NEWS LETTER

Bengal silk was once famous worldwide. Under the patronage of the nawabs of

Murshidabad Bengal silk products reached Europe and were later exported by the British

merchants. The quality of Murshidabad silk was premium and the designs were exclusive.

However, with time, the Murshidabad silk lost its glory along with Bishnupuri silk.

The state chief minister Mamata Banerjee has taken active interest to revive the lost

heritage. In order to popularise the silk products manufactured in the state, she has

advised the weavers to bring about variations in designs so that they look more

modern.The weight of the sarees will also be reduced, sources added.

Home

Growth a national objective: Shaktikanta Das

(Source: Economic Times, December 06, 2019)

A year after his unexpected entry into the Reserve Bank headquarters, governor

Shaktikanta Das said the relationship between the government and the central bank had

improved and that growth was a “national objective” which was making both work

together.

Das, while speaking at the postpolicy press conference on Thursday, said at a critical

juncture where growth was slacking, it was of paramount importance that monetary

policy and fiscal policy work in coordination to achieve the best results in the national

endeavour to revive growth. “The government and the RBI will continue to work together

to achieve the national objective of reviving growth. It is not one individual authority’s

problem,” he said. “Growth is the responsibility of both the government and the RBI and

both will continue to work in a coordinated manner. So far, there is good coordination

between the fiscal and the monetary authorities. To say that one is looking at the other

for growth is wrong. Both are committed towards the revival of growth.”

The career bureaucrat entered the RBI headquarters last December, at the most turbulent

time in the relationship between the central bank and a government going into election

amid sputtering economic growth. Das’ entry was also much talked about, due to the

unexpected exit of predecessor Urjit Patel because of the pulls and pressures of the

government on several issues ranging from bringing troubled state-run banks out of the

prompt corrective action framework to more dividends from the RBI reserves. Das said

hopes were pinned on the upcoming budget and a possible stimulus from the government

to revive the economy.

“With regard to the budget, it is not a question of worry that the fiscal deficit will be high.

In fact, I have gone to the extent of saying that in situations like this, when growth itself

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13 CITI-NEWS LETTER

has fallen, the monetary and the fiscal authorities will continue to work together in greater

coordination,” he said. “We would like to have greater clarity with regard to the kind and

nature of counter-cyclical fiscal and other measures if any to be announced by the

government in the budget. It will give us greater clarity, it’s not a question of worry.”

Home

Cotton to remain in a tight range in short term, all eyes on US-China trade

deal

(Source: Vedika Narvekar, Money Control, December 05, 2019)

An outcome on the trade-deal front is the only factor that could push the ICE

cotton-futures near-month contract above 65 cents.

On the MCX, prices of raw cotton dipped below Rs 19,000 a bale (170kg) in late November

as arrivals, though delayed, gathered momentum across India. The December cotton

contract on the MCX settled 1 percent lower in November. Greater cotton output and crop

arrivals have piled pressure on prices. The Cotton Advisory Board has estimated India's

2019-20 cotton crop up by 9.1 percent at 360 lakh bales.

In the physical markets of Maharashtra, prices of ginned cotton have recovered in the last

one week but are still below the MSP (Rs 5,550 a quintal). Procurement of cotton by the

Cotton Corporation of India is on in full swing; thus, the downside is limited.

On fundamentals, cotton supplies for this season (2019-20) are no doubt higher than in

2018. But, the board estimated lower imports at 25 lakh bales (versus 31 lakh in 2018)

while exports are seen to be higher at 50 lakh bales (against 44 lakh in 2018).

Also, the board pegged India's consumption at 381 lakh bales, compared with 359.5 lakh

in 2018. Still, the 2019-20 closing stock has been estimated at 48 lakh bales, higher than

the 44 lakh of 2018-19, mainly on account of greater output.

In global markets, ICE cotton futures were unable to hold above 65 cents (the near-month

contract) as no concrete conclusions resulted in the trade-deal front. On December 3, ICE

cotton futures fell more than 1 percent to a more-than-one-week low as comments from

US President Donald Trump diluted optimism about a potential breakthrough in the US-

China trade dispute.

An outcome on the trade-deal front is the only factor that could push the ICE cotton-

futures near-month contract above 65 cents. Otherwise, fundamentally, demand and

supply factors do not support any major upswing. The global demand is on the weaker

side. The International Cotton Advisory Committee says the textile industry in southeast

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14 CITI-NEWS LETTER

and east Asia, the 'engine' of expanding consumption in recent years, is stalling amid

weakening consumer demand for goods. Supply-side fundamentals, though, are strong.

The crop-progress report from the US Department of Agriculture on December 2 showed

that the US cotton crop had been 83 percent harvested in the week to December 1, above

the five-year average of 81 percent.

Considering developments in domestic and global markets, we expect cotton to trade tight

in the short term.

(The author is Research Analyst- Agro Commodities at Anand Rathi Shares & Stock

Brokers)

Home

NGOs, activists slam brands, seek 6-fold hike in MSP for cotton

(Source: Times of India, December 06, 2019)

Activists came down on companies advocating organic cotton saying that the rates — after

adding the premium — the brands give on the organic variety to the growers are below

the minimum support price (MSP). NGOs and farm activists sought a straight hike of

three times than the current (MSP) for cotton at Rs15,000 a quintal. For organic cotton,

they pressed for a rate of Rs30,000 a quintal at the the Cotton Trailblazers — Organic

Cotton Summit held in the city on Thursday. The MSP for the current Kharif season is

Rs5,550

The activists said the case was worse for growers of organic cotton. The textile brands

encourage them to go for organic by offering a premium over and above the market rates.

However, even with the premium added, the amount they get is less than the MSP fixed

for conventionally grown cotton. The contentious issue came to fore during the panel

discussion on ‘Spotlight on local handloom enterprises engaging directly with farmers of

their own state and paying a premium price for cotton in-transition towards organic”.

Taking potshots at the manufacturers, Kisan Seva Sangh president Avinash Kakde alleged

that the premium on organic cotton is a sham. “The garment companies are fooling the

farmers. They are buying cotton at low prices and selling finished products at an

exorbitant cost. If you consider how much cotton a shirt requires, then their per quintal

income stands at Rs30lakh in the country and Rs3crore in international market,” he said.

Kakde said even leaving out making, processing and other charges, the ultimate profits

are too high for textiles and companies. “Farmers are getting just 0.5% of the profit.

Chemical farmers must get thrice more than MSP while organic growers must get six

times more rates,” he said.

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15 CITI-NEWS LETTER

The GM crops yield around 15 to 30 quintals of cotton on one acre while it is just 2.5

quintals per acre through organic farming. “If you want organic, then be ready to pay

more,” he said. Tinni Sawhney, CEO of NGO Aga Khan Foundation, said brands could

think of announcing a fixed amount. “Farmers don’t get premium on MSP. Why brands

do not make MSP as the base? They give premium at the market rate,” she said.

She said there should be greater transparency in full value chain. “The farmer must know

how much his cotton is selling at to the brands,” she said.

Home

India, 6 others object to restrictions on services trade, workers’ movement

(Source: Kirtika Suneja, Economic Times, December 05, 2019)

India led seven countries at the World Trade Organization (WTO) in objecting to some

nations trying to bring in rules to erect barriers to services trade and cross-border

movement of professionals through qualification and licensing requirements, and

technical standards.

India teamed up with South Africa, Sri

Lanka, Tunisia and Zimbabwe on Tuesday

and raised objections to disciplines being

built around requirements such as

recognition of professional qualifications

and professional bodies, among other

requirements called domestic regulations in

trade parlance. Ecuador and Venezuela

joined in expressing their concern. Arguing that the joint initiative of the 59 members of

the WTO was “not mandated to and cannot assume the role of making disciplines”, they

said that some members were trying to “establish a competing and parallel mechanism to

pursue and achieve the same objectives, without the consent of the entire membership”.

The European Union, China, Australia, Japan, Korea and Russia are part of the joint

initiative, which has proposed rules for services suppliers including those related to

gender and seeks to encourage recognition dialogue between the professional bodies of

“relevant” WTO members. “These members said that a clear multilateral pathway is

already in place, even though those negotiations have not concluded due to disagreement

about whether the disciplines are necessary or what parts of the disciplines are

necessary,” said an official.

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16 CITI-NEWS LETTER

The move assumes significance in the wake of the US, the EU, Canada and Australia

erecting barriers through domestic regulation conditions to deny market access to short-

term services providers from India under the Mode 4 of General Agreement on Trade in

Services. Mode 4 or movement of natural persons is one of the four ways through which

services can be supplied internationally. It includes movement of natural persons such as

independent professionals and is of key interest to India. Questioning the competence of

the joint initiative, the group of opposing countries said the Working Party on Domestic

Regulation (WPDR) was established in 1999 precisely to put in place those disciplines.

India said that the proposal does not include “any of the commercially significant

disciplines in the area of Mode 4 and more specifically on qualification requirements and

procedures, all of which were integral part of the earlier work done in the WPDR”. A group

of 35 WTO members had formed a plurilateral on services domestic regulation at the last

ministerial conference in Buenos Aires in 2017 and is trying to get specific commitments

at the next ministerial conference in Kazakhstan next year. “These rules and the way they

are being sought to be put in place, are against the multilateral rules based system and

will tie the hands of developing countries, most of which are service economies,” said a

Delhi-based expert.

Home

Southeast Asian corridor eyes business opportunities with Delhi via Bay of

Bengal

(Source: Dipanjan Roy Chaudhury, Economic Times, December 05, 2019)

India's decision to stay out of the Regional Comprehensive Economic Partnership (RCEP)

may increase Southeast Asia’s dependence on China, but a recently opened corridor

between Thailand and Myanmar could ease those concerns by bringing new business

opportunities for five ASEAN countries and India.

The new bridge - part of the East-West Economic Corridor between Thailand and

Myanmar that opened a few weeks ago will give Cambodia, Laos, Myanmar, Thailand and

Vietnam access to the vast Indian market and reduce heavy reliance on China, ET has

learnt. The second Thai-Myanmar Friendship Bridge across the Moei River, which

connects Myawaddy, a city in Myanmar’s eastern region, and Mae Sot district in western

Thailand, was built at a cost of about $140 million, according to the Thai government.

Distribution of goods will become smoother on this new highway link. The East-West

Corridor is a project to build a large economic bloc along a 1,700-km land route from

Vietnam to Myanmar via Laos and Thailand. From there, Southeast Asian states can gain

access to India over the Bay of Bengal.

India has built a port at Sittwe in Myanmar, which will be linked to Mizoram state in the

north via a multi-modal transport network. Besides, a highway connecting India with

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17 CITI-NEWS LETTER

Thailand via Myanmar could become operational by 2020 and may be expanded to

Vietnam. India and Thailand recently signed pacts for port connectivity, adding meat to

the Act East Policy and the Indo-Pacific vision. Besides, India is expediting a maritime

connectivity link between the Andaman and Nicobar Islands and Aceh in Indonesia,

where it will build a port in Sabang. India has major plans to expand its presence in the

Ganga-Mekong region, which covers the five ASEAN states. "These initiatives are to be

linked with the eastern water grid that the Government of India is planning to develop

over the Ganges, Brahmaputra, Brahmani and their tributaries. We should think about a

multi-modal connectivity ecosystem in the Bay of Bengal region including encouraging

these countries to explore digital connectivity," Bipul Chatterjee, Executive Director,

CUTS International, a leading public policy body, told ET.

Eastern Myanmar was initially designated as the western end of the East-West Economic

Corridor. But it was extended to Yangon, the biggest city in Myanmar, and will be linked

to the Thilawa Special Economic Zone, being built in collaboration with Japan, where

Toyota Motor Corporation is building a plant. “With completion of GMS's East-West

Economic Corridor, regional connectivity between india and Southeast Asia becomes

stronger. Trilateral Highway connects GMS's EWEC at Myanmar-Thailand border,

further opening up prospects of value chain linkages between Northeast India and CLMV-

T. We need to negotiate Motor Vehicle Agreement with Myanmar and Thailand to

facilitate seamless movement of cargoes,” according to Prabir De Professor, ASEAN-India

Centre (AIC), Research and Information System for Developing Countries (RIS).

Following the opening of the bridge, Myanmar and Thailand have begun testing their

cross-border transport agreement, which allows passage for vehicles from both sides. The

countries will issue licences to logistics companies to directly transport goods between

the Thilawa SEZ and Laem Chabang Port, Thailand’s largest maritime port. Construction

of an arterial road is also ongoing in Vietnam, Laos and Thailand. In Myanmar, while

construction work had been hampered by ethnic conflicts in the border area, there has

been some progress. The development of a 90-km section started about two years ago and

the Myanmar government expects the road to open in 2021. Thereafter, transportation

between Thailand and Myanmar will take less than 24 hours.

Home

Welspun promoters acquire majority stake in warehousing firm One

Industrial Space

(Source: Times of India, December 05, 2019)

Welspun group promoters have acquired a majority stake in One Industrial Space, which

is into development of warehousing space, in their personal capacities.

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18 CITI-NEWS LETTER

One Industrial Space, which was founded in July 2019 by Anshul Singhal, will be re-

branded as 'Welspun One Logistics Parks', a company statement said. The deal value has

not been disclosed. Singhal will be the managing director of Welspun One. "The

promoters of the USD 2.7 billion Welspun Group have acquired a majority stake in One

Industrial Spaces, an integrated fund, development and asset management organisation

focused on the warehousing sector in India. The investment was made by the promoters

in their personal capacity through a closely held family office investment vehicle," it said.

The Welspun Group has business interests in line pipes, home textiles, infrastructure, oil

& gas, advanced textiles and floorings solutions. "Welspun One will also be the exclusive

development manager for a portfolio of ready land assets owned by the promoters in their

personal capacity with an estimated value of USD 50 million and development potential

of over 5 million square feet of Grade-A industrial or warehousing space," the statement

said.

This includes around 3 million square feet project in MMR. B K Goenka, chairman,

Welspun Group said: "The warehousing sector presents an attractive investment

proposition as it provides both development returns as well as stable long-term rental

yields."

Indian consumers demand same day delivery both online and offline, which has resulted

in an increased strategic back-end storage requirement, he said. "We have been looking

to enter this space as warehousing demand is poised to grow aggressively," Goenka said.

Singhal said: "Currently, a big challenge for existing players in this space is the land

acquisition and approvals. As Welspun One, we are uniquely positioned to address these

challenges. We can now leverage their deep understanding and experience in buying large

land parcels and successfully executing millions of square feet of industrial and

infrastructure projects pan India."

Welspun One will continue to build its core business of fund, development and asset

management, which includes raising funds from domestic and foreign institutional

investors to invest in the industrial asset class in India in an organized, transparent and

institutional manner.

Home

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19 CITI-NEWS LETTER

GLOBAL

Garment-textile roadmap sees potential 45% increase in exports

(Source: Bernie Cahiles-Magkilat, Manila Times, December 05, 2019)

The Philippines garment and textiles industry roadmap sees the Philippines become one

of the top ten global players with annual exports growth of 45 percent should it

implements some recommendations including elimination of the popular “ukay-ukay”

(used imported clothing) that proliferates anywhere in the country and the utilization of

natural fibers.

At the industry forum and launch of the Textile-Garments Industry Roadmap, the plan

covering 2020-2029 was divided into three milestones: short-term (2020-2022),

medium term (2023-2025) and long-term (2026-2029).

Under the short term milestones, the Philippines should already be among the top 20

garment exporters with annual growth of 12.3 percent in garment exports and 3-5 percent

increase in textile exports.

This should be made possible with the increase in the utilization of natural and synthetic

textile fiber by 5-10 percent.

Under this milestone, the government was urged to address smuggling and proliferation

of “ukay-ukay” by strictly implementing RA 4653. The government must also reinstate

the SGS pre-shipment inspection and to cancel business permits related to trading of used

clothing.

Incentives to the industry was also pushed in the short term for the innovative product

processing that promotes sustainability and green environment. Reduction of the 12

percent value added tax was also pushed.

For the short term milestone, the roadmap forecasts the Philippines to improve its world

ranking in garment exports into the top 15 largest globally. It is expected to increase its

garments by 21.7 percent annually and 10 percent increase in natural and synthetic textile

fiber.

This milestone has called for government to address infrastructure gaps and logistical

bottlenecks. It also urged for production efficiency, transportation , communication and

distribution through high-quality infrastructure and logistical services.

Export market diversification must also be pursued with more bilateral free trade

agreements with emerging markets to reduce dependency on the US and EU markets.

Improved R & D must be pursued to come up with innovative products.

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20 CITI-NEWS LETTER

For the long-term, the roadmap said that an annual 45.8 percent annual increase in the

exports of garments is attainable by 2026-2029. This milestone has foreseen the

Philippines already at the top ten of the world’s biggest garment exporters.

The Philippines is already a unique, well-known affordable and great for everyday wear

global brand as the industry has already upgraded to original brand manufacturer with

homegrown Filipino labels.

The industry has already a textile manufacturing that could fully support garment

producers offering a more diverse range of products both for the local and export market.

Home

VN exporters can only take advantage of CPTPP with preparation

(Source: Vietnam News Association, December 06, 2019)

With preferential tariffs provided under the Comprehensive and Progressive Agreement

for Trans-Pacific Partnership (CPTPP), Việt Nam has the opportunity to increase exports

of garments, footwear, timber products, and beverages to other member countries.

But Vietnamese enterprises’ ability to take advantage depends on their preparation,

Nguyễn Thị Thu Trang, director of the Việt Nam Chamber of Commerce and Industry’s

WTO and Integration Centre, said.

Speaking at a conference titled 'Opportunities and Challenges from CPTPP for Việt Nam’s

Garment and Textile, Footwear, Timber Products and Beverage Sectors' held in HCM City

on December 5, she said: “Our exports of footwear, garment and textile, timber products,

and beverages to CPTPP member countries account for 12.5 per cent, 16.04 per cent, 20

per cent and 23.46 per cent of their total exports.

“We export a lot to CPTPP member countries, but our market share remains modest, for

instance at 2-2.9 per cent of their footwear imports and 0-6 per cent of garment and textile

imports. Therefore, there is still much more room for Vietnamese firms to boost exports.

“Canada, Mexico and Peru are countries that Việt Nam does not have free trade agreement

with, thus CPTPP offers great opportunities for Vietnamese firms to access these markets

through preferential tariffs.”

But to capitalise on the opportunities, the products must meet the CPTPP’s rules of origin

and conform with sanitary and phytosanitary (SPS) requirements and technical barriers

to trade (TBT), she said.

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21 CITI-NEWS LETTER

“If we do not meet their requirements, we cannot utilise the preferential tariffs that

CPTPP member countries offer to us.”

Japan, Malaysia, Singapore, Australia, New Zealand and Chile are countries that Việt

Nam has bilateral or multilateral FTAs with.

The CPTPP creates another preferential tariff scheme for businesses, who, depending on

which FTA offers more advantages, should choose that to export under, she said.

Khưu Thị Thanh Thủy, general secretary of the HCM City Textile and Garment -

Embroidery Association, said Vietnamese garment and textile firms have faced difficulty

in meeting the CPTPP’s rules of origin since their raw material imports from countries

outside the CPTPP remain high.

Local and foreign firms are now investing in the underdeveloped textile, dyeing and fabric

segments to increase the local content rate, she said.

Nguyễn Chánh Phương, deputy chairman of the Handicrafts and Wood Industry

Association of HCM City, said: “Meeting the rules of origin is not a difficult task for the

wood products sector.”

But the sector has not benefited much in terms of tariff duties from the CPTPP because

import tariffs on Vietnamese furniture were already very low and even zero in many

markets, he said.

“Most companies in the timber industry make their products in the form of OEM

(according to customers’ orders). Firms mainly wait for buyers to come. With the current

good market situation, for example, a strong increase in exports to the US, firms may not

find new opportunities.”

He said local firms should do market research to appropriately target exports, adding that

businesses, especially large ones, need to have market research divisions to discover new

opportunities brought by FTAs and changes from competitors.

Võ Tân Thành, director of the Việt Nam Chamber of Commerce and Industry’s HCM City

branch, said: “Tariff commitments in the CPTPP come with relatively detailed and

complex rules of origin, which not all businesses know how to comply with.

“Therefore, understanding CPTPP commitments, the conditions required to take

advantage of the opportunities, their impacts on market prospects and development

trends in these sectors are important for Vietnamese enterprises to take advantage of the

exciting opportunities arising from the CPTPP.”

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22 CITI-NEWS LETTER

Domestic market

While offering benefits in terms of creating export opportunities and improving incomes

for millions of workers, the agreement also creates competitive pressure in the domestic

market since Việt Nam has also to lower tariffs on imports from other member countries.

Theoretically, CPTPP would bring intense competition in the domestic market, Trang told

the media on the sidelines of the conference.

“But our competitiveness in these sectors is relatively strong. In addition, at least seven

partners in the CPTPP have FTAs with us and we have already opened the market wide to

them. Therefore, there has been competition in these sectors after the CPTPP took effect,

but it is not a big shock.

“We are very successful in exporting these products and account for rather large market

shares in many foreign markets.

“But firms did not pay much attention to the domestic market. So I hope businesses pay

attention to the domestic market since many foreign companies consider our market a

delicious piece of cake.”

Competing at home would be easier for local firms and so they should tweak their strategy

to focus more on the domestic market, she added.

Home

Green products can give textiles an edge in EU market: report

(Source: Javed Mirza, The News, Decemeber 05, 2019)

Pakistan's trade mission in Spain has recommended the textile sector exporters to adopt

sustainable business processes and add 'green products' to their range so that they could

differentiate themselves from other competitors in the European market.

“Fairtrade, organic and/or responsible concepts give a competitive edge in Europe and

may ease market entry. In addition to complying with common sustainability standards

and certification, this can give access to a promising niche market,” noted a report issued

by the commercial section of Pakistan’s Embassy in Madrid.

“The European market is highly competitive, characterised by strong buyer power and

rivalry. Price sensitivity is high, requiring suppliers to offer quality at a competitive price.”

The trade mission officials in the report pointed out the higher market segments were the

most promising, as they allowed exporters to distinguish their products.

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23 CITI-NEWS LETTER

The Madrid commercial office also urged the Trade Development Authority of Pakistan

(TDAP) to encourage exporters for creating their own brands as well for catering to

specific niche areas in the textile sectors as well like in hospital, hotel textile, and

safety/work wear textiles.

“We reiterate that TDAP should send a high-level delegation [to Spain] as already asked

by this office as soon as possible to sensitise supply chain and also to give more

opportunities to our exporters,” the commercial officials said in the report.

Having undergone a massive restructuring, the textile in the European Union (EU) had

now become more capital-intensive, the report said, adding that trade in this sector was

entering a more liberalised and more competitive world.

“Therefore, in order to enhance exports, Pakistani manufacturers need to go for modern

technology and should emphasise on the quality of finished products. The government

should introduce and monitor the global quality standards, ISO 9000 and ISO 14000 in

the production of textile products,” the report said.

The report predicts Pakistan is likely to continue to confront stiff competition from China,

India, Vietnam, Bangladesh, Turkey, Italy, Portugal, and Myanmar. China, India and

Vietnam are amongst EU’s major suppliers of textile products, while countries like

Turkey, Italy, Portugal, and France have the advantage of being in proximity and assured

timely supplies, with minimum financial cost of small inventories.

According to the study, there are different subsidies given by various countries to

manufacturing sector affecting costs of doing business, also depending on various utilities

and labour rates.

“Also, our competitors are better in artificial leather. Pakistan needs to develop in terms

of value-addition in producing artificial leather clothing, which is more in vogue due to

ever changing fashion trends and its more affordable value in the European market,” the

report recommended.

“Further, we need to inter-alia attract more buying houses to Pakistan, as our competitors

have more buying houses established in their countries”.

Textile exports edged up 2.95 percent to $3.371 billion in the first quarter of the current

fiscal year with outbound shipments of knitwear and readymade garments rising in

double digits during the period.

Pakistan Bureau of Statistics (PBS) data showed that textile exports amounted to $3.275

billion in the corresponding period a year earlier.

Home

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24 CITI-NEWS LETTER

APTMA criticises raise in power tariff through quarterly adjustments

(Source: Mushtaq Ghumm, Business Recorder, December 06, 2019)

An increase in power tariff through quarterly adjustments has frittered away the

initiatives of the government meant for the export sector.

These comments came from All Pakistan Textile Mills Association (APTMA) in a letter to

the Prime Minister Adviser on Commerce, Industries and Production and Investment,

Abdul Razak Dawood. The copies of the letter have also been sent to the Secretary to

Prime Minister, Azam Khan, Secretary Commerce and Textile, Chairman Task Force on

Textile, Ahsan Bashir and DG, RDA Cell, Ministry of Textile, Kanwar Usman.

According to the textile sector, realizing that the power tariffs for industry in Pakistan are

well above the regionally prevailing competitive tariffs the government notified a tariff of

7.5 cents/kWh in January 2019. Since July 2019, Discos are charging a quarterly

adjustment in addition to 7.5 cents/kWh.

“We now understand that it is proposed to charge FPA in addition to these as well which

essentially means that the exporter will not be aware of his energy cost and will therefore

have to export on a presumptive cost basis which naturally will be higher to cater for

unforeseen costs," said Shahid Sattar Executive Director APTMA in his letter. Textile

sector maintains that setting tariff in cents was done so that the increase in tariff occurs

automatically whenever there is devaluation of the rupee and to provide a stable

internationally competitive rate. In this particular case, the per unit additional rate of the

zero rated industry has increased by Rs 1.2 from Rs 11.38 per unit.

“We can't understand the logic of charging another Rs 4-5 per unit on top of this which

will defeat the purpose of a dollar based competitive tariff," Sattar added. APTMA claims

that the exporting sector, charged Rs 15 to Rs 16/kWh, would also be subject to

continuous change. Power Division is marketing additional power to all and sundry at a

fixed price of Rs 11.7/Kwh. The bulk of this use would be competitive rather than being

productive. This is inexplicable as the critical need of Pakistan's economy and future is

expanding exports for a sustainable balance of payments. Further, 7.4 cents tariff was

specially approved by the ECC and the Cabinet. It is surprising that a decision of the

government was altered without first getting approval of the ECC and the Cabinet and is

now being regularized retrospectively which will lead to unnecessary litigation.

Textile sector further contended that Pakistan's exports, which have shown remarkable

progress of 30 percent in volume terms and are set to contribute an addition $ 2 billion

to the country's export, will lose their competitive edge. “The situation now is that

industry is not sure of its costing as energy forms a significant proportion (35 percent) of

the conversion cost. Under these uncertain conditions the government instead of

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25 CITI-NEWS LETTER

facilitating and providing a regionally competitive energy tariff and ease of doing business

is actually doing exactly the opposite. The Prime Minister and government's initiatives to

facilitate exports are being frittered away," Sattar continued.

Textile industry has requested the Adviser to Prime Minister to ensure the continuation

of power tariff at 7.5 cents/kWh inclusive of all charges.

Home

Coloreel joins the Textile Machinery Association of Sweden

(Source: Fibre2Fashion, December 05, 2019)

Coloreel joins the Textile Machinery Association of Sweden (TMAS) and will take part in

seminars, trainings, exhibitions, and other events to further develop the business. The

company has developed the Coloreel technology, a ground-breaking innovation that

enables high-quality colouring of textile thread on demand, opening amazing new design

possibilities.

“We want to be a forerunner in the textile industry that takes charge and leads the

development. We want to increase awareness and spread the word that we are here to

start a revolution. Joining TMAS will help Coloreel to further market and network in the

best arenas, both in Sweden and globally,” Magnus Hellström, VP sales and marketing at

Coloreel said in a press release. “We are happy to welcome Coloreel to our industry and

the TMAS association. Coloreel is making important contributions to the industry’s

sustainable future with completely new technology on the market. They improve

efficiency and quality and reduce waste in their production process, benefits that are in

line with the expectations for the textile production of the future,” TMAS secretary general

Therese Premler-Andersson said.

TMAS was founded in 1997 to support and promote Swedish textile machinery

manufacturers. TMAS is made up of the leading Swedish companies within textile

technology, automation, and production processes. Coloreel has started delivering

Coloreel units to customers all around Europe. World-leading companies in textile,

fashion, and sportswear are standing in line to use the revolutionary product.

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