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Seek exclusion from tariff elimination/reduction for several items due to competition from China, other nations
India has got a much-needed breather with the deferring of the conclusion of the Regional Comprehensive Economic Partnership (RCEP) pact, but at least three Central Ministries are still not convinced about the usefulness of the agreement.
“We have more convincing to do within the government. The Ministries of Steel, Heavy Industry and Textiles continue to be apprehensive as they feel their sectors are not ready to face competition from China and some others,” a government official said.
Trade Ministers from the 16 RCEP countries, which includes India, China, the 10-member ASEAN block, Japan, South Korea, Australia and New Zealand, decided in Singapore on Tuesday to give up the year-end deadline for a ‘substantial package’ and instead focus on concluding the trade deal by 2019.
The RCEP, which includes goods, services, investments, e-commerce, government procurement, once completed could be the largest free trade bloc in the world covering about 3.5 billion people, 30 per cent of the world’s Gross Domestic Product and 40 per cent of world trade.
Seek exclusion
In the inter-ministerial consultations conducted by the Commerce Ministry, the Heavy Industry, Textiles and Steel Ministries have continued to seek exclusion of items pertaining to their respective sectors from tariff elimination/reduction obligation at the RCEP.
“The Steel Ministry, for instance, is insisting on excluding the entire range of finished steel products from the pact,” the official said.
Highlighting the position of the domestic steel industry on the RCEP negotiations, Abhyuday Jindal, Managing Director, Jindal Stainless, said, “We strongly oppose inclusion of stainless steel flat products in the RCEP agreement. The move will open flood gates of Chinese imports into India through zero duty access making operations for domestic producers non-viable.”
“A case in point is the existing FTA of India with Korea and Japan. Though the FTAs were envisaged to promote trade between the two countries, much of the trade post-FTA has been one-sided and India has substantial trade deficit with both Korea and Japan,” Jindal said.
Similarly, the Heavy Industry Ministry has apprehensions about the effect of RCEP on the automobile industry and manufacturers of machinery.
The Textiles Ministry, too, wants a large number of items to be insulated from the RCEP pact as it fears competition from China and ASEAN nations such as Vietnam and Philippines, the official said.
These Ministries are especially worried as there is pressure on India to take on commitments for eliminating tariffs on more than 90 per cent of items for most RCEP partners while allowing slightly lower commitments for countries such as China, which pose a huge challenge to the Indian industry.
“One has to understand that the list of items on which no reduction commitments would be taken will be very small and include the super-sensitive items which would mostly be agricultural products,” the official added.
The Commerce Ministry has been trying to drive home the point that all sectors will gain tariff-free access to the entire RCEP region and exports would grow. “If India is not part of the RCEP agreement, Indian exports will face tariffs in the region whereas all other countries that are part of the grouping wouldn’t and the competitiveness of Indian products would take a serious hit,” the official said.
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Prime Minister Narendra Modi on Wednesday joined leaders from nations to discuss the Regional Comprehensive Economic Partnership (RCEP) pact for its early conclusion by 2019.
At the leaders summit of the RCEP nations in Singapore, he reaffirmed India’s commitment to a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement. However, India has crucial differences on tariff reduction, market access, and services trade norms, such as the free movement of trained professionals with other nations.
So, Modi stressed upon India’s latest position — that of a request for more time to decide on tariff rates, especially with the upcoming elections in 2019 — a senior trade diplomat said.
The ambitious pact is proposed between 10 Asean economies and six others — New Zealand, Australia, China, India, Japan and South Korea — with which the group has free-trade agreements (FTAs). So far, 24 rounds of talks have concluded, apart from six minister-level meets.
However, India kept its focus on services trade. “We need to make similar efforts to make progress in services negotiations as they constitute more than 50 per cent of the GDP of most of the RCEP countries. In future, services are going to play a very important role,” Modi said.
Nations, however, reeled in the possibility of a deal concluding by 2019 by announcing the talks are on their last leg. “We welcomed the conclusion of seven Chapters to date, namely the Chapters on Economic and Technical Cooperation, Small and Medium Enterprises, Customs Procedures and Trade Facilitation, Government Procurement, Institutional Provisions, Sanitary and Phytosanitary Measures, and Standards, Technical Regulations and Conformity Assessment Procedures. Of this, five were concluded in this year,” the statement said on Wednesday.
At a meet of the RCEP trade ministers, attended by Commerce and Industry Minister Suresh Prabhu two days ago, the nations decided to expand talks on the basis of the ‘package of year-end deliverables’. This document had been adopted two months ago to decide on the broad contours of the mega-regional deal.
“There was intense pressure for this by the Asean bloc, with support from China, which is increasingly wary of the trade potential with the US under the volatile Trump regime,” the diplomat added.
Despite a slowing of the pace at which solar power projects are being built owing to tariffs plunging to levels unviable for the developers, the country has crossed a milestone on the renewable energy front.
Despite a slowing of the pace at which solar power projects are being built owing to tariffs plunging to levels unviable for the developers, the country has crossed a milestone on the renewable energy front. Renewable-power units (solar and wind) have over the last few years been raising their share in India’s electricity output; in April-October 2018, this share touched the 10% threshold.
The share of renewables in total installed power capacity is also on a rise — from 14% in FY15, this has risen to the current level of over 20%.
Under the United Nations Frame Work Convention on Climate Change ratified in Paris in 2015, India has an obligation to increase the share of non-fossil-based power in total installled capacity to 40% by 2030. The government has set a target to achieve 175 gigawatts (GW) of renewable energy capacity by 2022 – 100 GW from solar, 60 GW from wind, 10 GW from biomass/bagasse and 5 GW from small hydro projects.
Between FY15-FY18, electricity generated by renewable sources increased at a whopping compound annual growth rate of 18.2%. To put this in perspective, the CAGR of conventional power production in the same period was only 4.8%.
Not only was solar capacity addition in 2017 more than that of coal, solar capacity added in the year (8,040 MW) was more than twice the net addition in the coal-based power sector (4,004 MW). While solar capacity showed an annual increase of 95% in 2017, high-emitting generating capacities added in the year was 75% lower than in the previous year. Until 2017, the thermal capacity addition was keeping a scorching pace – 91,731 MW capacity was added in the segment against the original target of 72,340 MW during FY13-17.
Experts have attributed the growth in renewable energy to the country’s global commitments to cut carbon footprint, falling solar rates (it is another matter the decline has dented the developers’ confidence after a certain threshold) and unlocking of potential energy demand through ‘24X7’ power schemes.
Solar power tariffs have fallen from an exorbitant Rs 17/unit in 2009 to just Rs 2.44/unit, mainly on the back of declining module prices, improvement in technology and increased competition in the sector. The lowest tariff for wind power currently stands `Rs 2.43/unit.
However, a certain segment of the industry is concerned about the viability of such low rates as project costs are seen to be going up with the recently imposed import duties on solar modules. On the other hand, if the tariffs start going up, states may become reluctant to buy solar power unless it is still cheaper after paying the mandatory fixed cost to thermal units under the power purchase agreements.
To aid domestic manufacturing, the government has levied a 25% safeguard duty on import of solar cells — the basic ingredient needed to manufacture solar panels — for a year ending July 19, 2019. The duty would be 20% for the next six months till January 29, 2020, and 15% in the subsequent six months.
Discoms these days don’t resort to load shedding and try to ensure power supply at all times. Rural electrification under the Saubhagya scheme has also led to increase in demand. Satyanarayan Goel, CEO & MD, IEX, tells ET Now.
Last quarter saw a strong volume growth for discoms. What was the growth driver?
The Q2 volume growth was driven mainly by the increase in demand across the country. Demand increased in states like Gujarat, Maharashtra, Bihar, West Bengal, Telangana, Tamil Nadu and Jammu & Kashmir. These states were active on the exchange platform for purchase of power. In fact, the same trend is continuing in Q3 also.
Spot prices also surged to a nine-year high. What caused the spikes and how did it benefit your business?
The reason for price increase in September and early October was we had early withdrawal of monsoon in September and because of that, hydro generation went down. Wind generation was also lower in September and the problem was aggravated by the shortage of coal in September-October. Because of that, the prices on the exchange platform went up. We had a significant increase in buy volumes and a similar rise in sell volumes. Today we have 25,000 MW of generation capacity.
We are not able to generate power mainly because of non-availability of coal. If coal is available, I am sure the rate on the exchange platform will be in the range of Rs 3-3.25. In September, the prices increased to about Rs 4.50-4.60 because of the high demand. As far as IEX is concerned, our transaction fees is not dependent on the price of power. It is based on the volume of power. Our revenue is dependent on the volumes transacted on the exchange platform. We do not get any benefit out of increase in the price. In fact, the lower the price, better it is for us.
Higher demand by discoms played a very big role in pushing up purchase bids on IEX. Is this demand trend likely to sustain?
Yes, that increase in demand is going to remain in the future also. Earlier distribution companies used to resort to load shedding but now that is the last thing which discoms are trying. They try to ensure supply of power and rural electrification under the Saubhagya scheme has led to increase in demand. With election in five states and the general election next year, the demand increase is going to continue.
CERC had recently passed an order that pricing changes by IEX need approval. What are your views on rates and their forward trajectory?
One of the stakeholders said CERC should review and regulate the transaction fees.
CERC has said that the present transaction fees will remain but any variation in the future shall be with regulatory approval.
Earlier, exchanges were free to vary their transaction fees. Now it will be done with regulatory approval. As far as the present fee structure is concerned, that remains. There is no change in that
Global oil prices fell by about a quarter in 40 days to $65 a barrel on Wednesday, promising to reduce India’s import bill and inflation. It is also likely to cool local fuel prices that crested several peaks and rob the Opposition of a key political plank against the Narendra Modi government ahead of a series of crucial state polls.
It has been a dramatic shift of sentiment in just about a month with traders switching from predicting $100 per barrel oil to fearing another supply glut amid dimming demand prospects.
US President Donald Trump’s insistence on lower oil prices, his Iran sanctions and a USChina trade war seem to have helped temper oil prices in recent times. A relentless rise in crude oil price that took it above $86 a barrel on October 3 was fuelled by fears that US sanctions on Iran may not allow many waivers, leaving Saudi and other producers struggling to fill the gap after significant Iran supply goes out of the market.
But Trump surprised many by liberally distributing waivers that allowed India and seven other countries to continue to import from Tehran. This, along with a surge in crude output put at three biggest producers—US, Russia, and China—set the stage for a sharp fall in prices. The US is now the largest producer of crude oil.
A protracted US-China trade war is also seen as negative for oil demand. Car sales in China as well as India have slowed this year, hurting fuel demand. Trump’s pressure on Saudis to avoid production cuts has further pushed the price slump. It is unclear how soon the Organization of Petroleum Exporting Countries (OPEC) and allies led by Russia would act to check the price slump and stop an oil glut from building. Saudi has said production cut of about 1million barrels a day from October levels is needed to deal with current imbalance.
Saudi Arabia will never let a glut build again in future, Saudi energy minister Khalid alFalih had said at an international conference in New Delhi in April. For India, lower oil prices mean lower import bill, less pressure on rupee, narrowing current account deficit lower subsidy payout, higher public resources for other welfare projects, lower risk of inflation and increased room for RBI to cut interest rate. If current price trends were to continue,India’s oil import bill in 2018-19 would be lower than .`8,81,000 crore projected by the oil ministry based on an assumed crude price of $77.88 per barrel and an exchange rate of 72.22 per dollar.
Dollar rise in oil price alters the country’s import bill by Rs 6,158 crore. Variation in exchange rate by one rupee changes oil import by Rs 6,639 crore.
Local prices of petrol and diesel, published daily, factor in both international fuel rates as well as currency movements for the trailing fortnight. Petrol and diesel prices have fallen by Rs 5.4 and Rs 3.5 per litre, respectively since October 17 when the current fuel price decline trend started. The dramatic fall in international rates in the last few days will further bring down local fuel rates.
In Delhi, petrol was at Rs 77.4 and diesel Rs 72.19 per litre on Wednesday. Record fuel prices just about a month ago had given Opposition the opportunity to tap into public anger against the Modi government, which was forced to cut duties to placate consumers.
Having incentivised job creation, the government is thinking of ways to encourage hiring of women and keeping them employed during their maternity period.
This follows instances of employers trying to cut costs by letting go female workers claiming maternity benefits after the leave period was increased to 26 weeks from 12 weeks.
The labour ministry proposes to reimburse employers the salaries paid for seven of the additional 14 weeks of maternity leave for female employees in the Rs 15,000 salary bracket who have been EPFO subscribers for 12 months, a senior government official told ET. This would cost the government Rs 400 crore annually.
The policy will start on a pilot basis in New Delhi and Maharashtra and scaled up across India later.
“Much on the lines of Pradhan Mantri Rojgar Protsahan Yojana, the labour ministry now plans to give fiscal incentives to employers to retain female workers availing 26 weeks of maternity leave,” the official told ET on condition of anonymity. The plan is for employers to bear half the salary payable for the additional 14 weeks of leave provided under the amended Maternity Benefit (Amendment) Act, 2017, effective since April 1, 2017.
According to the official, there have been several representations before the labour ministry on how the extended maternity leave has become a deterrent for female employees who are asked to quit or are retrenched on flimsy grounds before they go on maternity leave.
Labour ministry Santosh Kumar Gangwar chaired a meeting on Wednesday on incentives to help employers bear the extra financial burden and a policy in this regard is expected to be finalised soon.
The Maternity Benefit Act, 1961, protects the employment of women during their maternity leave and entitles them to benefits including full pay. The act is applicable to all establishments employing 10 or more people such as factories, mines, plantations, shops and other entities, as may be notified by the Central Government.
To be eligible for maternity benefits, awoman must have worked in an establishment for at least 80 days in the past 12 months. Payment during the leave period is based on the average daily wage for the period of actual absence.
According to a recent report by staffing company TeamLease Services, the enhanced maternity benefits will significantly hamper the entry of women into the workforce as employers are apprehensive about overheads such as maternity leave reimbursements and the cost of establishing post-maternity support infrastructure. Besides, the probability of employees availing of the benefit and not returning is a major concern.
WPI rises to 4-month high of 5.28% in October, up from 5.13% in Sept
The wholesale price index (WPI)-based inflation rate rose to a four-month high of 5.28 per cent in October, up from 5.13 per cent in September.
Earlier, data showed that CPI fell to a one-year low of 3.31 per cent in October from 3.7 per cent in the previous month.
With the Reserve Bank of India (RBI) generally tracking CPI inflation, economists said the monetary policy committee may not change the policy rate in next month’s meeting.
“Despite the change in the monetary policy stance to calibrated tightening, the Monetary Policy Committee (MPC) appears likely to maintain a status quo on the repo rate in the December 2018 policy review, following the decline in the October 2018 headline CPI inflation, the deep correction in crude oil prices, and the pullback in the value of rupee,” Aditi Nayar, principal economist at Icra, said.
The difference between the WPI and CPI inflation rates was mainly because of the composition of the two indices. Food items account for more than 45 per cent in CPI, while its weight is just over 14 per cent in WPI.
The rise in inflation was also caused by increase in inflation in manufactured items. Manufactured items have a weight of 64 per cent in WPI. “Rise in inflation is driven in parts by costlier fuel but more significantly, by rise in prices of manufactured products as well. Manufactured items have registered a 4.49% price gain YoY and indicate slow and steady growth in underlying demand conditions in the economy,” said Rajni Thakur, economist, RBL Bank.
The labour intensive textile sector needs to be encouraged for job creation, said Andhra Pradesh Industries Minister N Amarnath Reddy.
Speaking at the the Textile 4.0 conference organised by the Confederation of Indian Industry (CII) and AP Spinning Mills Association, he emphasized on the need for digital transformation in textile industry.
He stressed the importance for it to adopt artificial intelligence in order to compete with the global market.
The government has announced nine sector-specific policies aimed at promoting the textile industry, he added.
“The government has put in place single window clearance, which ensures time-bound delivery of services to the citizens,” said Reddy.
He further added that work for all the memorandum of understandings inked during the Partnership Summit at Visakhapatnam are underway as per their schedule.
Commenting over the industrial corridors passing through the state, he said “The two corridors will give Andhra Pradesh a great opportunity for industrial growth. A corporation for encouragement of Micro, Small and Medium Enterprises (MSMEs) has also been set up in the State, Reddy stated.
The third edition of Bangladesh International Garment and Textile Machinery Expo (BIGTEX) is set to kick off on Thursday at International Convention City Bashundhara (ICCB) in the capital.
RedCarpet365 Limited is hosting the four-day exposition targeting the entire apparel industry.
The expo will have concurrent exhibitions as Bangladesh International Print, Pack and Signage Expo, Bangladesh International Fabric and Yarn Expo, Bangladesh International Dyes and Chemical Expo.
These exhibitions will play an important role by showcasing latest machineries, technologies, dyes, chemicals, yarns, fabrics and will provide an opportunity to experts, engineers and technicians to have a practical knowledge of the recent technological advancements available, without going abroad, said organizers on Wednesday.
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) is the associate partner of the exhibition while Well Group is the co-partner.
Paperleaf, Foursource, Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) and Bangladesh Indenting Agents Association (BIAA) are also supporting the expo.
Commerce Minister Tofail Ahmed is expected to open the expo at 11:00 am as the chief guest.
Honorary Consul General of Greece to Bangladesh and senior vice-president of BGMEA Faruque Hassan, first vice-president of BKMEA Mansoor Ahmed, President of BGAPMEA Md Abdul Kader Khan, President of BIAA Muhammad Ayub, Chairman and CEO of Well Group Syed Nurul Islam.
Chairman (Export & Market Development Committee), Bangladesh Paper Mills Association and DMD, Bashundhara Group Md Mustafizur Rahman and Head of Business, Paper Leaf Hasan Murad Chowdhury will also attend the inaugural session.
The Indian Cotton Federation (ICF) has estimated cotton crop for 2018-19 in the country to be 373 lakh bales of 170 kg a bale.
In a press release, the Federation said production in the north zone was expected to be 61 lakh bales (Punjab, Haryana, and Rajasthan), the central zone, 200 lakh bales (Gujarat, Maharasthra, and Madhya Pradesh), and the south zone 107 lakh bales. Production from the entire country was expected to be 373 lakh bales and imports might be 18 lakh bales. The provisional estimate for consumption was 320 lakh bales.
Federation president J. Thulasidharan said the Cotton Advisory Board that announced the cotton crop situation had not met for a long time. Without an official crop estimate, there were uncertainties about the cotton crop situation. There were also reports of a lower crop. The uncertainties were leading to hardships for cotton trade and the textile mills.
According to a study by the Federation, the average crop size in the last 12 years in the country is 377 lakh bales. The average of the worst year is 348 lakh bales. For the cotton year 2018-19, it is said that close to five lakh packets of cotton seeds are sold. Except for a few pockets in Karnataka, Maharashtra, and Gujarat, all the cotton growing areas have received sufficient rain. So, the cotton production this year should be higher, it said.
