It is unlikely tofuel inflationary pressures,says expert
Minimum Support Price, or MSP, is a good step that will help boost farm productivity, which will in turn spur rural economy and give a fillip to consumer spending.
According to Arindam Banik, Director, International Management Institute Kolkata, the Budget has taken the right step in announcing a MSP for farm produce. MSP will be 1.5 times the cost of production.
Farmers obviously are still not prepared to react positively to market-determined prices and take a call on their produce. As such, MSP comes in as a viable solution.
“MSP will trigger productivity across the farm sector. I do not think it should lead to a rise in food inflation. However, the increased farm productivity will lead to a spurt in rural growth and consumer spend,” he told BusinessLine on the sidelines of a seminar organised by the Merchants’ Chamber of Commerce and Industry.
In order to produce $1 worth of rice, the United States provides a subsidy (both direct and indirect put together) of 45 per cent and Europe provides around 65 per cent. Compared to it, the subsidy component in India is just 12 per cent. As Banik points out, Indian farming has to be more efficient and this will need some people to move out of the sector. But for that to happen, manufacturing activity needs to pick up.
No inflationary pressure
Moreover, it is unlikely that the newly-announced MSP calculations will breed inflationary pressures as has been the fear in many quarters. According to Mayank Jalan, CMD, Keventer Agro, the government may not use comprehensive cost of production, or C2 costs, as the benchmark for calculating returns. C2 takes into account multiple components. This includes A2 costs or costs incurred by farmers on seeds, fertilisers, chemicals, hired labour, fuel and irrigation, the imputed value of unpaid family labour, and the rentals and interest forgone on owned land and fixed capital assets.
“In the past MSP was set at C2 plus 10-15 per cent. When the announcement of offering 1.5 times MSP came, we thought that it will lead to food inflation. We wanted it to be done in a phased manner. However, we, later realised that the formula of calculation has changed,” said Jalan at a post-Budget interactive session, which was organised by FICCI on Friday. The MSP is likely to be offered 1.5 times on A2. “Hence it will not lead to inflation,” he pointed out. With the Centre looking to push through its flagship social-sector schemes, including the Modicare health project, it is most likely that it will resort to market borrowings. This means an end to the low interest rate regime and infrequent rate cuts by the RBI, said IMEI’s Banik.
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The decision of the Union Government to extend the trial run of e-Way billing operations and thereby, deferring its implementation, has come as a temporary relief for hosiery manufacturers in Tirupur knitwear cluster.
Plea
South India Hosiery Manufacturers Association joint secretary R. Damodaran said the members’ continued plea would be to altogether exempt hosiery job working units from the e-Way billing operations.
The system, meant for transportation of goods exceeding the value of Rs. 50,000 and for a distance of above 10 km would not suit the job working units here since they would have to transport the same materials multiple times within the apparel production chain.
The government might constitute a committee of experts, either in the finance ministry or NITI Aayog or jointly to study all existing procurement models to ensure the largest possible number of farmers benefit from the heightened Minimum Support Price (MSP) scheme announced in the Union Budget.
The new MSPs are promised at 1.5 times the production cost. These are expected to be calculated on the basis of what is termed A2+FL — this covers all paid-out expenses in both cash and kind, plus derived value of unpaid family labour. Not on the basis of what is termed C2; this is defined as comprehensive cost, including all paid-out expenses, imputed value of unpaid family labour, beside rentals and interest forgone on owned land and fixed capital.
Thinking within the government is that margins cannot be calculated on expenditure where actual money has not been spent. The decision on an ideal mechanism to ensure maximum benefit to farmers might be announced ahead of the kharif sowing season in June. And, as announced in Thursday’s Budget proposals, cover a larger number of crops.
NITI Aayog will study all existing models. That includes Madhya Pradesh’s recent Bhawaantar Bhugtan Yojana (Price Deficit Scheme). Also, models of direct procurement being run by states. And it will explore the possibility of enabling private entities to procure on behalf of the government. “We will approach the entire issue with an open mind and are not fixated on any one approach,” NITI Aayog member Ramesh Chand told Business Standard.
In the 2018 rabi season, the MSP of wheat fixed by the Commission for Agricultural Costs and Prices (CACP) is 112.4 per cent more than the A2+FL cost. For gram, 73 per cent more; for mustard, 84 per cent more. Chand was instrumental in driving the MP scheme. He said the Telangana government’s model of direct subsidy payment was not being considered at this juncture, as it was not an income support scheme in the strict sense. “If you can ensure the maximum number of farmers get the benefit of MSP or are able to sell at a guaranteed price, then too you would be providing income support, as it would lead to higher spending on insurance and other inputs,” said Chand. “MSP itself will ensure farmers get income support.”
Basing the MSP on the C2 cost was a formula recommended by the MS Swaminathan panel on the issue.
In The Best Interests Of Farmers
Centre to look at Madhya Pradesh’s Bhavantar Bhugtan Yojana, along with direct purchase and greater involvement of private sector, to ensure farmers benefit from the Minimum Support Price (MSP) scheme MSPs likely to be fixed at 1.5 times the production cost (A2+FL) and not comprehensive cost (C2)
Work on the procurement model to start as soon as it gets cleared in Parliament
Telangana’s model of direct subsidy payment is not being considered at this juncture, as it is not an income support scheme in the strict sense
The Indian Directorate General of Anti-Dumping and Allied Duties (DGAD) has recommended to halt an antidumping investigation into polyester staple fiber imports from numerous countries, including Indonesia.
“This creates an opportunity for the Indonesian yarn industry to export more to India,” Trade Ministry International Trade Director General Oke Nurwan said in a written statement on Friday.
Polyester staple fiber is a synthetic material used in the textile, automotive and furniture industries because of its elasticity and strength.
The antidumping investigation began on Feb. 2, 2017, but recently the Indian government found that polyester staple fiber imports from Indonesia only accounted for 7 percent of supply in the Indian market and did not harm domestic industries.
In 2013, Indonesian polyester staple fiber exports to India amounted to just US$26,500. They reached a peak of $10.1 million in 2015 but then declined to only $6.1 million in 2016. Meanwhile, from January-November 2017, the polyester staple fiber exports increased by 38.4 percent to $7.8 million from $5.6 million in the same period of 2016.
Finance Minister Arun Jaitley today hiked the outlay for the textiles sector to Rs 7,148 crore for 2018-19 and announced doubling of customs duty on silk fabric to 20 per cent.
The revised outlay for the Ministry of Textiles was Rs 6,250.8 crore in the current financial year, budget documents showed.
“The government had approved a comprehensive textile sector package of Rs 6,000 crore in 2016 to boost the apparel and made-ups segments. I now propose to provide an outlay of Rs 7,148 crore for the textile sector in 2018-19,” Jaitley said while presenting the Budget 2018-19 in Parliament.
“Grateful to PM @ narendramodi ji & FM @arunjaitley ji for allocating Rs 7,148 crore for Textiles that will stimulate growth of the sector (sic),” Union Textiles Minister Smriti Irani said in a tweet.
The budget documents also showed that the proposed allocation for Remission of State Levies (ROSL) has been increased from Rs 1,855 crore in 2017-18 to Rs 2,163.85 crore in the coming financial year.
“This will help the exporters of made-ups and apparels as backlog will be cleared and working capital released,” Confederation of Indian Textile Industry Chairman Sanjay Jain said.
According to the budget documents, the proposed outlay for the Amended Technology Upgradation Fund Scheme has also been raised to Rs 2,300 crore from Rs 1,956 crore.
Jain said this would mean that companies will get their arrears faster.
“Basic custom duty on silk fabric increased to 20 per cent from 10 per cent would save the industry from dumping from China. The industry post GST is facing higher imports across the value added segment and was seeking increase in BCD across yarn and fabric, hence disappointed with this partial measure,” Jain said.
However, silk exporters expressed unhappiness over the doubling of customs duty on silk fabric.
“This (raising customs duty from 10 to 20 per cent) is going to hamper the silk garment exports which are already suffering,” Indian Silk Export Promotion Council Chairman Satish Gupta told
Coimbatore, Feb 1 The textile industry in the region today hailed the budget presented by Finance Minister Arun Jaitley.
Tirupur Exporters Association president Raja M Shanmugham welcomed the announcement of allocation of Rs 7,148 crore for Textile Sector of which Rs 2,300 crore has been allotted to Amended Technology Upgradation Fund Scheme and Rs 2,164 Crore for Remission of State Levies.
In a statement, he also welcomed the extension of corporate tax at 25 per cent to the companies turnover up to Rs 250 crore in the financial year 2016-17 which is beneficial particularly to the medium enterprises.
He lauded the announcement on launching of flagship National Health Protection Scheme to cover over 10 crore poor and vulnerable families providing coverage up to 5 lakh rupees per family per year for secondary and tertiary care hospitalisation and added this will be beneficial to the employees in Tirupur cluster also.
In a separate statement, Southern India Mills Association chairman P Nataraj also welcomed the increased allocation of Rs 7,148 crores.
Extending 12 per cent EPF employer’s contribution for the first three years of employment and also the fixed term employment for all the sectors of the industry would encourage job creation in the textile industry, he pointed out.
Textile industry, which has been consistently seeking help from government for its MSMEs, has conveyed mixed feelings on the announcements made by the finance minister Arun Jaitley in his budget speech in Lok Sabha.
“Overall it is a balanced budget. Several measures have been announced which will benefit the MSME sector and since 99% of the textile industry fall under the MSME sector this is good news,” said Confederation of Indian Textile Industry, Chairman, Sanjay Jain.
The good news
The FM announced a comprehensive package of Rs. 7148 crore for the textile industry in his budget presentation. This has cheered the industry which has been struggling with a backlog of ROSL (rebate on state levies) on exports.
The increase in allocation from Rs 6000 crore to Rs 7148 crore is a big plus. We will have to see the break-up of this allocation, but presuming it is in line with last year’s percentage break-up, it will make more money available for ROSL which has a big backlog. This will consequently help export of madeups and apparels,” said Jain.
The two big announcements made by the government pertaining to the MSME sector: extension of reduced corporate rate tax of 25% for companies with a turnover of up to Rs 250 crore and the promise to “soon announce measures to effectively address NPAs and stressed accounts for MSMEs,” will have a far reaching impact on the textile industry.
The government has also included the textile sector in its fixed term employment system which was earlier made available only for the madeups and apparel segments.
The bad news
To comply with the government’s vision to double farmers’ income by 2022, the finance minister announced the formula for minimum support price will now be applicable to all crops.
“In our party’s manifesto it has been stated that the farmers should realize at least 50% more than the cost of their produce. In other words, one and half times of the cost of their production. We have decided to implement this resolution as a principle for all the crops. I am pleased to announce that as per pre-determined principle, government has decided to keep MSP for the all unannounced crops of kharif at least at one and half times of their production cost. I am confident that this historic decision will prove an important step towards doubling the income of our farmers,” said Jaitley in his speech.
While the move is a welcome initiative for the cotton farmers, it may end up increasing the burden of the MSMEs dealing with cotton fabric. “The biggest highlight of budget is the announcement of MSP for cotton. We are still working out the figures, but this move will definitely result in a high inflation in cotton and though the farmers will gain but the rest of India will have to pay a higher price for clothing,” said Jain.
The move will also end up making the domestic cotton uncompetitive vis-a-vis international prices, added Jain. He said that the textile industry, comprised mainly of MSMEs should not be made to carry the burden of increased cotton rates.
“Our contention has been that the MSP burden should not be transferred to the rest of the chain but that the farmers should be given a direct subsidy. The government could get into a similar trap which had Chinese government in a tangle five years back when they tried to sell their cotton for much above the natural prices and though they moved to direct subsidy two years back, the industry is still saddled with unsold stock,” warned Jain.
The industry has been asking the government for increase in import duty and export incentives to correct the imbalance caused by the introduction of GST.
The foreign trade data released by the Ministry of Commerce and Industry for the month of December 2017 revealed a 3% decline in CAGR in textiles and apparel exports compared to the corresponding period December 2016. The exports of Textiles and Apparel stood at $ 2996 million during December 2017 as against $ 3075 million in December 2016. However, the cumulative export has slightly improved by 2% CAGR as the exports stood at $ 26,136 million in April-Dec 2017 in comparison to $ 25,721 million .
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The imports on the other hand saw an increase during the same period imports of textiles during December 2017 stood at US$ 165.34 in comparison to US$ 137.24 in December 2016, registering a rise of 20.48 per cent.
The FM did not announce an increase of 10% in import duty but only on silk fabric the industry is getting dumped with imports from China. We have been demanding increase in the basic custom duty across the chain – yarn and fabric – and it is a big disappointment for the industry. The whole industry is being hit by imports post GST, but now we will have to live with it,” said Jain signing off.
Falling cotton prices attracted some buying on Thursday but the market mostly remained dull. Overall undertone was weak and outlook uncertain.
The last three day’s general lethargy came to an end as renewed buying at the lower level was noted. Falling cotton prices attracted some spinners who eagerly replenished their stocks.
However, the cotton yarn market continues to be sluggish as the value-added sector is keenly observing international markets where a weak US dollar against other major currencies continues to depress commodity prices. Meanwhile, Pakistan Cotton Ginners Association (PCGA) Chairman Haji Mohammad Akram appreciated the Plant Protection Department’s move to stop entry of cotton through land routes as this will disallow contaminated cotton to enter the country. He also urged the department to strictly monitor cotton being imported through sea route.
He was highly critical of the government’s decision to remove tax and duties on import of cotton. “This is damaging growers and ginners’ interest as they still hold substantial stocks of cotton,” he said.
The world leading cotton markets also witnessed some revival with New York cotton managing to partially recover from recent losses. The Chinese and Indian markets also recovered. The Karachi Cotton Association (KCA) spot rates were steady at overnight level. The following deals were reported to have changed hands on ready counter: 6,598 bales, Daharki, at Rs7,000; 600 bales, Saleh Pat, at Rs6,600; 418 bales, Kotri, at Rs5,800; 920 bales, Mirpurkhas, at Rs5,100; and 1,000 bales, Yazman, at Rs7,300.
The Central Board of Excise and Customs will be renamed as Central Board of Indirect Taxes and Customs as the roll out of GST has subsumed indirect taxes, Finance Minister Arun Jaitley said today.
“With the roll out of GST, I propose to change the name of Central Board of Excise and Customs [CBEC] to Central Board of Indirect Taxes and Customs [CBIC],” the minister said while reading out the budget speech in Parliament.
He said necessary changes in the law for effecting the name change are proposed in the Finance Bill.
This is the government’s first budget after the roll out of the Goods and Service Tax in July 2017.
Excise duties to a large extent and service tax have been subsumed in GST, along with corresponding duties on imports.
New Delhi, Feb 1 (KNN) The flow of Chinese yarn and finished fabric through the Bangladesh route is giving a difficult time to the textile industries at home, comprising primarily of the Micro, Small and Medium Enterprises (MSMEs), Punjab Pradesh Beopar Mandal said.
Punjab Pradesh Beopar Mandal president PL Seth in a press interview raised that China is exploiting and entering the market at cheap price by routing its material through Bangladesh. “Since Bangladesh is exempted from paying any duty under the SAARC agreement, Chinese yarn and finished fabric is able to enter our markets through Bangladesh”, Seth said. Along with the local textile industry, local dress material industry as well as printing industry is at stake due to the unfavourable competition, he added. Industrial areas of Ludhiana in Punjab as well as Bhilwara in Rajasthan houses a number of textile units making different kinds of fabrics including suiting, shirting, blazer and blankets. With the market condition moving from bad to worse, these units as well as the large share of population that finds employment in these units are nearing a vulnerable stage, Seth said.
According to the Budget 2018-19, customs duty on silk fabrics has been raised from 10 per cent to 20 per cent. Silk exporters, however, said the move would hit shipments of silk garments from India.
Finance Minister Arun Jaitley today proposed doubling of customs duty on silk fabrics to 20 per cent to provide “adequate protection to domestic industry”. According to the Budget 2018-19, customs duty on silk fabrics has been raised from 10 per cent to 20 per cent. Silk exporters, however, said the move would hit shipments of silk garments from India. “This (hike) is going to hamper silk garment exports, which are already suffering,” Indian Silk Export Promotion Council Chairman Satish Gupta told PTI.
“The majority of silk fabrics are imported from China. We are uncompetitive already and this will make things worse. We have been pleading with the government to lower the duty to 5 per cent,” Gupta said. “In 2016-17, the export of silk garments from India was to the tune of USD 160 million against approximately USD 200 million in 2015-16. The duty impact is making our garments expensive in the international market,” T S Chadha Executive Director, the Indian Silk Export Promotion Council said.
Meanwhile, the Confederation of Indian Textile Industry welcomed it by saying the imports after GST rollout were negatively impacting the industry. The hike in customs duty will encourage the domestic industry and push the Make in India programme further, it added.