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Based on the healthy market arrival trend of cotton so far, the Cotton Association of India has maintained the crop size for the 2017-18 season at 375 lakh bales (of 170 kg each) in its latest estimates. This is despite the fact that reports of pest infestation mainly the pink bollworm affecting the crop in Gujarat, Maharashtra, Telangana and Karnataka among others. However, CAI expects a decline in targeted exports of the fibre crop at around 55 lakh bales, down from earlier projection of 63 lakh bales on the recent firming trend in cotton prices.
“Since cotton rates have gone up in India by 10 per cent in the last one month, the earlier set target of cotton export of 63 lakh bales looks difficult now, hence cotton export figures have been reduced and revised from the earlier 63 lakh bales to 55 lakh bales,” Atul S Ganatra, President, CAI, said.
Higher prices
Further, as the cotton prices have moved up in the country, the parity to import the fibre crop has increased. As a result, the trade body sees an increase in imports and has revised the import figures from 17 lakh bales to 20 lakh bales this season. Market arrivals of cotton in the first three months of the 2017-18 marketing season starting October are higher by around 43 per cent over corresponding last year.
Arrivals rise
Arrivals would have crossed 148 lakh bales by December 31 this year as against 108 lakh bales, based on the data gathered from each State. The higher arrivals are despite the fact that major growing States including Maharashtra and Telangana reporting pink bollworm infestation. CAI has announced cotton crop size of 375 lakh bales which looks achievable given the pace of arrivals this season, Ganatra said. CAI’s estimate is marginally lower than the Cotton Advisory Board’s recent estimate of 377 lakh bales for the 2017-18 season.
Relief for spinners
Meanwhile, ICRA in a recent report said that domestic spinners were likely to witness a gradual recovery in performance from Q4 FY2018 onwards, after facing multiple headwinds over past several quarters which resulted in their profitability touching six-year lows in the second and third quarters of current fiscal. “The improvement in performance of domestic spinners is likely to be aided by a downward bias in cotton prices amid healthy cotton crop and an upward bias in yarn realisations due to demand restoration. While there has been an uptick in cotton prices in the recent weeks, ICRA believes the same to be an aberration in light of slower-than-usual arrivals in the leading cotton producing state of Gujarat owing to elections and concerns emanating from reports of pest attacks,” said Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, ICRA.ICRA believes that the crop quantity and quality is unlikely to be impacted considerably because of the aforesaid concerns and the arrivals are likely to pick up in Q4 FY2018.
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The government on Friday extended the last date for filing of final detailed sales return for the first four months by 10 days under the goods and services tax (GST). The extension of the deadline to January 10 comes as a relief to taxpayers struggling with technical issues related to the GST Network portal.
According to a government notification, businesses with turnover of more than Rs 1.5 crore has to file GSTR-1 for July-October by January 10. For small taxpayers with annual turnover up to Rs 1.5 crore, too, the date for filing these returns for the first three months has been extended to January 10.
“Extension comes as a relief for the industry as functionality for filing GSTR-1 for August to October came in second half of the current month only,” said Pratik Jain of PwC India. There were also system-related issues in a few cases with respect to data upload, saving and generation of one-time password. “It also means that tax and finance professionals will not have to spend their New Year eve in office.”
Atul Gupta, senior director, Deloitte India, said the GSTN portal had become exceedingly slow and a large number of taxpayers were struggling to upload returns over the past two days. “Evidently, the government has to work and make the GSTN portal glitch-free and robust to handle the load. Undoubtedly, the time is running out for the government to fix the GST,” he said.
Gupta added that a significant reason for lack of buoyancy in GST revenues was that tax non-compliance was on the rise in the absence of any significant self-regulating deterrence mechanism, GSTR 2 returns for purchases were still not required to be filed.
Garment exporters have been demanding that the duty reimbursement to them be retained at the pre-GST (Goods and Services Tax) drawback rate of 7.5 per cent, amid declining outbound shipments. India’s apparel exports declined 39 per cent in value terms in October.
2018 may turn out to be a challenging year for India’s textile and garment industry, with exporters still reeling under the impact of GST and outward shipments likely to miss the USD 45 billion target for 2017-18.
Garment exporters have been demanding that the duty reimbursement to them be retained at the pre-GST (Goods and Services Tax) drawback rate of 7.5 per cent, amid declining outbound shipments. India’s apparel exports declined 39 per cent in value terms in October.
However, India’s cotton production could touch 37.7 million bales in the year that began on October 1, up from 34.5 million bales produced in 2016/17.
The production of import substitute bivoltine silk in the country is expected to reach around 6,200 million tonnes (MT) in 2017-18 as compared to 5,266 MT a year ago, registering an increase of 19 per cent, according to the Textile Ministry.
Meanwhile, 2017 turned out to be a mixed bag for the textiles sector. While initiatives were unveiled for power loom units and weavers, the much-awaited new National Textiles Policy is yet to see the light of the day.
Towards the end of the year, a Scheme for Capacity Building in Textile Sector to boost skill development and job creation was launched with an outlay of Rs 1,300 crore. 10 lakh people are expected to be skilled and certified in various segments of Textile Sector through the scheme, out of which 1 lakh will be in traditional sectors. The year also witnessed the first mega international trade event for the textile sector, which was inaugurated by Prime Minister Narendra Modi in Gandhinagar, Gujarat, on 30 June.
The event recorded participation from more than 100 countries and a total of 65 MoUs with an estimated value of over Rs 11,000 crore were signed during the exhibition. India Handmade Bazaar, an online portal to provide direct market access facility to artisans and weavers, was launched in January.
In November, the Textiles Ministry notified post-GST rates under the scheme for Remission of State Levies (RoSL) on exports of readymade garments & made-ups. For garments, the rates range between 1.25 per cent and 1.70 per cent and for Made-ups, they range between 1.40 per cent and 2.20 per cent, with the rates effective from October.
The government also enhanced the rates under Merchandise Exports from India Scheme (MEIS) on readymade garments and made-ups from 2 per cent to 4 per cent. The rates will ve applicable between November 1, 2017 and June 30, 2018.
A comprehensive national policy covering all segments of the textiles sector is the need of the hour, to give a push to exports from the sector, which have remained stagnant for the past four fiscal years, mainly because of less demand in major markets such as the US, EU and China, and stiff competition from countries like Vietnam and Bangladesh which enjoy an edge over India.
Goods and Service Tax and reduction in duty drawback have proved a double shock for the exporters of ready-made garments. The exports from the city have reduced by nearly 40 per cent as compared to last year.
Exporters are blaming sharp reduction in duty drawback from 7.7 per cent to 2 per cent and for made-ups the duty drawback earlier was 7.4 per cent which has also come down to 2 per cent as a major reason behind the fall in exports. Exporters demand that keeping in view the present scenario government should have extended the transitional provision for duty drawback and rebate of state levies (ROSL) till the start of next financial year.
Delay in the GST refunds remains the major concern for the exporters. “Serious working capital problems are being caused due to delay in the GST refunds. Shipment has been done but the exporter is yet to receive the refunds which are causing a problem,” said Vinay Kansal, a small garment exporter. Satish Verma, who is also an exporter from the city, said, government should reconsider the rates of duty drawback and should be reverted back to the previous rates if the government wants the export to flourish.
“On one side, the GST was imposed in readymade garments, and to make the matter worse, the government had decreased the rates of duty drawback rates. In the present scenario, we are unable to compete with other countries. Increase in export is possible only when the government increases the duty drawback rates,” he said.
In 2016, the Union Government had announced a special package to boost export of garments and made-ups and drawback rates were enhanced under this package. “With the reduction in drawback rates, these benefits have been pulled off. Drawback rates should be worked upon again for the benefit of the industry,” said Arun Thapar, another garment manufacturer.
On the whole, higher acreage came under cotton cultivation as the past two years had seen cotton prices steadily rising, albeit on account of lower output
Cotton prices in India have been trending lower in recent months. Indeed, this is a concern for cotton growers, but spinners are finding the going good after a long-drawn struggle endured over many quarters. There are several reasons that support a forecast that cotton prices are likely to remain low for a while. Foremost is the 9% increase in cotton output to 37.7 million bales expected during the current cotton year. One bale is 170kg. Some northern states are likely to see a bumper crop, while southern states’ output was hurt by pest attacks and untimely winter rains.
On the whole, higher acreage came under cotton cultivation as the past two years had seen cotton prices steadily rising, albeit on account of lower output. Besides, the poor quality of the output this time may keep a tight lid on prices. Also, global cotton production is on an upswing. After a partial recovery in calendar year 2017 from a 13-year low in 2016, global output is estimated to pick up, growing by a healthy 11-13% in 2018. Therefore, both domestic and global conditions are supporting a downtrend in cotton prices.
Meanwhile, China’s subdued import of cotton, following a knee-jerk policy change designed to support the domestic industry, had upset the price cycle in international markets. China is among the leading consumers of cotton and cotton yarn. Any improved momentum in imports by China may support a recovery in global cotton prices. For now, that seems unlikely. Back home too, Sankar-6 grade cotton is selling at Rs107 per kg, far lower than the high of Rs130-140 per kg touched in August.
With news of higher output following the harvest in October, cotton prices are trending lower. The moot question is whether any policy intervention will shore up prices given the importance of the farmers’ vote in the forthcoming general elections.
Certainly, low cotton prices bring succour for the spinning industry, which has posted weak sales growth and profit margins for the last four quarters. In a report, credit rating agency Icra Ltd traces the reasons for pressure in spinning mills: “While in the quarter ended September 2016, the volumes were affected because of a sharp decline in exports to China, the note ban impact affected volumes in the following quarter. After a narrow window of demand recovery thereafter with conclusion of Chinese cotton auctions, demand pressures reverted from March 2017 onwards.”
And of course, the vagaries of the goods and services tax because of a multitude of stages in the textile production chain, adversely effected production and demand for yarn in the last two quarters. Icra’s sample of 13 spinning mills showed a weak trend in volumes and pressure on contributing margins in the recent past, partly fuelled by erratic cotton prices. The aggregate operating profits of Icra’s sample continued to remain 6-12% lower than healthy levels seen in fiscal 2013 and fiscal 2014, though 3% higher than in fiscal 2016. No wonder then that yarn mills will cheer the drop in cotton prices. Eventually, however, currency movements and demand will remain the key determinants of profitability of yarn mills, especially exporters.
Assocham on Tuesday urged the government to provide interest equalisation of three per cent in respect of yarn exports in the budget for 2018-19, with a view to boost yarn exports and ensure that domestic product can compete in global markets
As part of its pre-budget recommendations on indirect taxes submitted to the Centre, the industry lobby also requested that two per cent of the benefits of the Merchandise Exports from India Scheme (MEIS) be extended to the spinning sector as the recent spike in raw material and other input costs have made the industry’s survival difficult.
On the Technology Upgradation Fund Scheme, Assocham requested that sufficient provision be made in the Union Budget 2018-19 to take care of old left out cases and the current dues
“While this scheme has been operating since 1999 and has been prevalent over the period with various amendments and is currently valid up to March 2022, during last 3-4 years there have been problems in its implementation,” the Assocham pre-budget memorandum on indirect taxes pointed out.
The chamber urged the government to reduce the hank yarn obligation by half from the current level of 40 per cent.
Assocham sought abolition of customs duty on import of wool fibre, stating: “The apparel grade wool of fine micron (25 micron and finer) and other animal hair are not available indigenously in our country as such the woollen industry is dependent on imports.” The industry chamber requested the Centre to reduce the Goods and Services Tax (GST) on man-made fibre from 18 per cent to 12 per cent so that it is fully set-off at the yarn stage.
Seeking exemption from payment of GST on export of goods, the industry chamber said under the present system, an exporter has to pay IGST on export of goods, which is refunded to him on submission of shipping bills which involves blockage of working capital for a long time.
Allocation of a budget of Rs 1,200 crore for fiscal 2017-18, a gamut of incentive and subsidy schemes to boost the handloom and powerloom sectors, initiating work to set up the Kakatiya Mega Textile Park in Warangal district and efforts to woo weavers who migrated to other states marked the year in the textiles sector of Telangana state in south India. Dipesh Satapathy discusses the key developments.
Telangana was earlier part of undivided Andhra Pradesh state. There are 16,879 working handlooms and 49,112 powerlooms in the state at present. About Rs 373 crore was earmarked for the handloom sector and Rs 827 crore for powerlooms and their modernization in the budget. In August, the state announced a string of incentives, including capital subsidy, for the next five years for new and existing enterprises to boost the textile sector. Part of the Telangana Textile and Apparel Incentive Scheme 2017, the sops aim to attract investment and generate job opportunities.
A capital subsidy of 25 per cent for conventional textile units and 35 per cent to technical ones manufacturing medical textiles, geotextiles, agrotextiles and protective clothing was announced. In government textile parks, the state will take complete responsibility for providing a common effluent treatment plant for use by individual industrial units, the circular said.
Sops to facilitate return of weavers from Telangana who migrated earlier to other states were also announced. More than 23,000 weavers from the state are said to have returned home following government initiatives in the last three and a half years. In November, the government launched a revised Rs 100-crore ‘yard subsidy’ scheme in cotton-rich Warangal to benefit nearly 35,000 weavers. The 20 per cent subsidy on purchase of cotton, wool and silk yarns, dyes and chemicals by weavers and their cooperative societies was doubled to 40 per cent. Additionally, beneficiaries can avail the central government’s 10 per cent subsidy.
A host of other measures, including a Rs 10.5-crore loan waiver, setting up of handloom and powerloom corporations, and administrative sanction for a handlooom park in Gadwal city, were announced as well. The loan waiver will benefit about 2,500 handloom weavers. Each weaver will receive a waiver of up to a lakh rupees.
Handlooms and textiles minister KT Rama Rao asked officials in April to formulate a handloom directory containing details of the weavers so that policies could be framed to directly offer subsidy benefits to them.
Rama Rao also sought setting up of a separate corporation for wide marketing and increase in sales of handloom items. Geo-tagging and Aadhaar-linking of all the 16,776 handlooms functioning in the state under 5,505 weavers’ societies was completed to implement welfare schemes. The officials of the handlooms department also carried out a study of the Cooptex of Tamil Nadu to work on the same model in Telangana.
In June, the government placed an order for one crore saris worth Rs 200 crore with powerloom weavers in Rajanna district’s Sricilla town, which has been in the news for high suicide rates due to unemployment. The saris were distributed to women living below the poverty line during a festival. The state government also placed orders for bedsheets and blankets for hospitals with powerloom weavers there.In November, the government decided that orders for producing fabric for school uniforms under the Rajiv Vidya Mission and Bathukamma sarees and other materials will be placed only if powerloom weavers upgrade their looms to produce value-added fabric. Out of a total 50,000 powerlooms in the state, Sircilla town hosts more than 30,000. The government also undertook upgradation of powerlooms in Sircilla.
State chief minister K Chandrasekhara Rao on October 22 laid the foundation stone of the Kakatiya Mega Textile Park, an integrated textile cluster on 1,200 acres near Shayampet in Warangal. This is the first industrial park project to reach this stage in three years after the state was formed. The government plans to invest Rs 1,000 crore in the project featuring common effluent treatment, zero-liquid discharge facilities and readymade sheds. With an estimated 27,000 direct and 50,000 indirect employment potential from this park, there is a plan to expand it to 2,000 acres.
Rao said over a dozen firms have come forward to set up their manufacturing bases at the park with a cumulative investment of over Rs 3,900 crore. The project aims to bring back local textile workers who had migrated to Surat in Gujarat, Bhivandi in Haryana and Sholapur in Maharashtra after the Azam Jahi Textile Mill in Warangal closed.
A visiting Korea Federation of Textile Industries (KFTI) delegation in August had expressed satisfaction over the location and infrastructure of the park. In April, a new training and garment production centre was launched with 40 Juki sewing machines at the textile park near Sircilla to provide employment to women. The number of machines will gradually be increased to 150. The government has plans to set up an apparel park at Sircilla by investing Rs 30 crore.
Amazon India signed an agreement in August with the state department of handloom and textiles to educate and train weavers and artisans to directly sell their products to the firm’s customers online. This will boost sale of popular handloom products from Pochampally, Warangal, Gadwal, Narayanpet and Siddipet.
Cotton was sowed on a record 47.72 lakh acres in the state this year. However, cotton production is feared to have come down drastically because of pink bollworm pest, unseasonal rains and inferior quality seeds. Pink bollworm is estimated to have eaten up 40 per cent of the crop this year. The state’s agriculture and marketing departments estimate a fall in production from 3.30 crore quintals estimated earlier to 2 crore quintals.
Incidents of distressed cotton farmers committing suicide were reported in the state in November-December.
The state also directed all district collectors in December to take stringent action against sale and supply of unapproved herbicide tolerant cotton variety developed by Monsanto and directed them to immediately destroy the produce. The state is concerned over widespread cultivation of this genetically-engineered cotton seed by farmers.
Cotton farmers suffering huge loss due to pink bollworm attack in the erstwhile Adilabad district have been left in the lurch with the government not taking measures to ensure compensation from the seed companies or insurance firms.The farmers sowed seeds in the month of June and July, which germinated in one go following heavy shower. As a result, farmers expected bumper crop yield this year. However, their hopes soon doomed after pink bollworm attacked the crops during the flowering stage in August.
Many of the farmers suffered crop loss. Geddam Thukaram of Paddi K village reaped 14 quintal of yield from his seven acres of land. He suffered loss as this year’s yield was much less the usual one due to pink bollworm attack. In a similar vein, the crop yield for K Devdas just 25 quintal when compared to last year’s 70 quintal. “ I have stopped cultivating cotton and have switched to green grams,” said a disappointed Devdas, who incurred heavy loss during the financial year.
What seems to be daunting task for the debt-ridden farmers is the repayment of loans. Many of them have taken the extreme step of committing suicide. According to agriculture officials, the crop yield has gone down by 2-3 quintal due to pink bollworm attack. It is also learnt that the cotton arriving the market yards of Adilabad, Bhainsa and Asifabad districts are actually from Maharashtra.
The data by marketing officials revealed that private traders purchased 14,55,019 quintals of cotton. In this regard, 1,59,852 quintal of cotton was purchased below the support price of Rs 4,320 per quintal. Meanwhile, 3,10,223 quintal of cotton were purchased in between the support price of Rs 4,171 to Rs 4,320 per quintal Also, spurious seeds menace added to the woes of the farmers.
Cotton farmers affected by the pink bollworm during the kharif season have been left in the lurch, with the government not taking the initiative to ensure that they get compensation from seed companies or insurance firms.
Cotton crop sowed in 10 lakh acres has been affected by the pink bollworm pest attack.
The government is yet to conduct even a panchanama of crop loss so far, which is essential for the farmers to claim compensation. In contrast, the Maharashtra government had recently directed seed companies and insurance firms to pay compensation to the affected farmers. It has roped in teams to inspect the crops damaged by bollworm. Based on their report, the government sought compensation of up to Rs 38,000 per acre to farmers from the Centre, seed companies and insurance firms. No such effort is seen in the state despite farmers suffering huge losses and reports of distressed farmers committing suicide were coming in from the districts almost every day. The TS government is more focussed on convincing farmers to destroy the standing crop affected by bollworm, for which the agriculture department has taken up a campaign in all districts.
Agriculture commissioner C. Parthasarathi has written to collectors and agricultural officers asking them to convince farmers to destroy the standing crop so as to control its spread in the ongoing rabi and next kharif seasons. “Farmers should destroy the affected crop after the third picking, which is taken up in the third week of December, and completely destroy the crop by the end of the month. The extended life of the affected crop will not only damage the crop in ongoing rabi season but also sp-read it to the next kh-arif season,” he noted.
Farmers’ associations are demanding that the Centre and and the state government ensure payment of compensation from Monsanto for crop losses. The Telangana Rythu Sangham has demanded the government initiate action against Monsanto, holding it responsible for the spread of third generation BT cotton seeds. Farmers are terming Roundup Ready Flex or RRF herbicide-tolerant cotton-technology as BG-III. Monsanto India has denied these allegations and held seeds sellers responsible for crop loss.
Thanks to innovative initiatives by State government, over 23,000 weavers have returned in last three and half years.
Thirty eight-year-old Vanga Sudarshan from Sircilla spent nearly 20 years amid powerlooms, and around 17 years of his career, in Bhiwandi. He was one of those numerous weavers from Sircilla who went to Bhiwandi, Surat and other textile hubs in search of a livelihood. Despite his longing to return home, he could not dare to as it would put his family in financial jeopardy. But four years ago, he changed his mind and returned home.
“When separate Telangana State seemed inevitable, we had a hope that good days are ahead for weavers in the State. And we don’t regret it,” says Sudarshan who is an expert in yarn warping. Telangana has a strong 1.04 lakh weaver force, including around 82,000 weavers in the cooperative societies fold. The textile sector, especially in Telangana region, was in neglect in undivided Andhra Pradesh, compelling local workforce to migrate to textile hubs like Surat, Bhiwandi and other textile hubs for livelihood.
Weavers from Telangana have been in huge demand in these textile hubs for their craftsmanship.
Soon after the State’s formation, the Telangana government focused on restraining migration of weavers and promoting reverse migration. More than 23,000 weavers are said to have returned home following innovative initiatives by the State government in the last three and half years. At present, there are 16,879 working handlooms and 49,112 powerlooms in the State.
Income doubles
What’s more? The annual income of even local weavers has almost doubled due to proactive government schemes like Bathukamma sarees, bedsheets and other furnishings for hospitals as well as dresses for children studying in welfare hostels. “In powerlooms, weavers are paid based on their work everyday. About four years ago, we had a monthly income of Rs 4,000-Rs 5,000, against Rs 11,000-Rs 13,000 paid in places like Surat and Bhiwandi. But now our monthly wages have increased to Rs 7,000-Rs 9,000 even for private orders. However, our wages hover around Rs 15,000 whenever the government order is placed,” explained Uradi Raju, another weaver who returned to Sircilla from Bhiwandi a couple of years ago. At present, weavers working in Bhiwandi and Surat earn around Rs 17,000 per month.
While powerlooms are powered with work orders from the government, there is a lot left to be done for handlooms in the State. Weavers who rely on handlooms are awaiting subsidised loans to improve their home-run handlooms and are expressing happiness as their monthly income also increased considerably. “With government promising subsidised yarn and loans from banks, we are hoping to increase our capacity as it would mean more work orders and income,” said K Ramachandram who operates a couple of handlooms from his house.
Profits for first time
Mandala Sathyam, general secretary of Sircilla polysters association, said powerloom owners are witnessing profits for first time in a decade due to the State government initiatives especially government work orders. He said that for Bathukamma sarees and other government orders, weavers were working to their might to deliver goods on time and earning better income. The situation is no different in other textile hubs like Pochampally, Siddipet and Warangal where the industry is on the path of recovery. To resolve problems faced by weavers and also improve their socio-economic development, the State government is implementing several initiatives including a huge budgetary allocation of Rs 1,270 crore, introduction of a thrift fund scheme, wage compensation linked input subsidy scheme, setting up a mega Textile Park in Warangal besides another textile park at Siricilla and a Rs 15 crore loan waiver programme. The State government is also pushing upgradation of powerlooms besides ensuring welfare of weavers through implementation of insurance schemes.
