citi-news letter...workforce, and world class institutions like universities and research labs, and...
TRANSCRIPT
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29th May
2020
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State-specific solutions needed for discoms’ problems:
PM Modi
Smt. Nirmala Sitharaman chairs 22nd Meeting of the
Financial Stability and Development Council (FSDC)
Shri Piyush Goyal calls upon the Exporters to be more
competitive and provide quality products to the world;
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2 CITI-NEWS LETTER
-------------------------------------------------------------------------------------- State-specific solutions needed for discoms’ problems: PM Modi
Smt. Nirmala Sitharaman chairs 22nd Meeting of the Financial Stability and Development Council (FSDC)
Shri Piyush Goyal calls upon the Exporters to be more competitive and provide quality products to the world;
Goyal expects better exports performance in May, June
Govt working on National Logistics Policy: Commerce Ministry official
FDI in India jumps 13% to record $49.98 billion in 2019-20
Indian clothing manufactures demand tax on Bangladeshi RMG imports
Need to look at building economy with local skills: Suresh Prabhu
Allow personal protection gear exports immediately’
How the ₹10,000-crore PPE industry popped up in two months
Banks free to do due diligence on guaranteed MSME loans
Surat textile traders included in Rs 3L cr MSME credit scheme
Cash crunch: Telangana extends deferment of 50% salary to May
After 41 yrs, Centre set to redefine ‘migrant workers’
Assam's Commerce Minister calls upon top global companies to invest in the state
IEX introduces real-time trading, will help renewable energy companies
India pitches as alternative to MNCs rethinking sourcing plans
How you can revive your business in a post-Covid world
IIT Alumni Council to set up mega lab in Mumbai with testing capacity of 10 mn per month
Skilling India: Going global with digital
Vardhman Textiles board approves amalgamation of two subsidiaries
As luxuries slip in list of priorities, fashion industry ponders bleak future post lockdown
----------------------------------------------------------------------------- European Commission Adopts Circular Economy Action Plan
Industrial Parks In Xinjiang Supplying Global Retailers Prompt Human Rights Concerns
Pakistan: Govt focusing on attracting FDI, transfer of technology in SEZs: Razak Dawood
Sri Lanka facing worst financial crisis due to COVID-19 induced economic curbs: Minister
IMC releases survey of retail buyer perspectives
-------------------- --- ---------------------------------------------
NATIONAL
---------------------
GLOBAL
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3 CITI-NEWS LETTER
NATIONAL:
State-specific solutions needed for discoms’ problems: PM Modi
(Source: Financial Express, May 29, 2020)
Prime Minister Narendra Modi said the Union power ministry should try and put in place
state-specific strategies to improve their performance.
Prime Minister Narendra Modi said instead of looking for a ‘one-size-fits-all’ solution for
the precarious financial position of electricity discoms, the Union power ministry should
try and put in place state-specific strategies to improve their performance.
Modi reviewed the actions taken by the power and renewable energy ministry on
Wednesday evening, where the revised tariff policy and the Electricity (Amendment) Bill
2020 were also discussed. The PM pointed out that “the problems in the power sector,
especially of the electricity distribution (discom) segment, vary across regions and states”.
The development comes soon after government unveiled the draft amendments to the
Electricity Act, which is seen to appropriate the authority of the states in decisions related
to power supply. The latest amendment proposes states to determine power tariffs
without any subsidy, aligning with the Union government’s principle that subsidies to the
needy should only be passed on through the direct benefit transfer mechanism. Many
states have opposed such impositions. The new amendment proposal also links the
reduction in open-access surcharges and cross-subsidies with the trajectory provided in
the national tariff policy, which till now, has been a prerogative of the states.
In a letter to the PM earlier this month, Tamil Nadu chief minister Edappadi K
Palaniswamy had pointed out that the proposed amendment Bill seeks to take away the
power of the state government in deciding the constitution of the state electricity
regulatory commission. “This would unnecessarily dilute the authority of the (state)
electricity regulatory commissions and needs to be deleted,” Palaniswamy said. The Rs
90,000-crore loan package for discoms to battle the coronavirus crisis is also contingent
on the states agreeing to implement the Centre-mandated measures such as putting in
place a mechanism to release electricity subsidies in advance and enabling digital
payment of electricity bills. The new push to reform discoms follow the fragmentary
success of the Ujwal Discom Assurance Yojana (UDAY), with most states failing to meet
the operational targets under the scheme.
The UDAY scheme could have had even lesser efficacy than claimed with latest audited
data finding that the combined losses of discoms stood at Rs 33,365 crore in FY18, more
than double the level reported earlier by the states. The PM has advised the power
ministry to ensure that discoms publish their performance parameters periodically.
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Smt. Nirmala Sitharaman chairs 22nd Meeting of the Financial Stability and
Development Council (FSDC)
(Source: Press Information Bureau, May 28, 2020)
Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman chaired the
22nd Meeting of the Financial Stability and Development Council (FSDC) here today.
The meeting was attended by Minister of State for Finance & Corporate Affairs Shri
Anurag Thakur, Shri Shaktikanta Das, Governor, Reserve Bank of India; Shri Ajay
Bhushan Pandey, Finance Secretary/Secretary, Department of Revenue; Shri Tarun
Bajaj, Secretary, Department of Economic Affairs; Shri Debasish Panda, Secretary,
Department of Financial Services; Shri Ajay Prakash Sawhney, Secretary, Ministry of
Electronics and Information Technology; Shri Injeti Srinivas, Secretary, Ministry of
Corporate Affairs; Dr. Krishnamurthy V. Subramanian, Chief Economic Adviser; Shri
Ajay Tyagi, Chairperson, Securities and Exchange Board of India (SEBI); Shri Subhash
Chandra Khuntia, Chairperson, Insurance Regulatory and Development Authority of
India (IRDAI); Shri Supratim Bandyopadhyay, Chairperson, Pension Fund Regulatory
and Development Authority (PFRDA); and Dr. M. S. Sahoo, Chairperson, Insolvency and
Bankruptcy Board of India (IBBI) and other senior officers of the Government of India
and Financial Sector Regulators. The meeting reviewed the current global and domestic
macro-economic situation, financial stability and vulnerabilities issues, major issues
likely to be faced by banks and other financial institutions as also regulatory and policy
responses, Liquidity / Solvency of NBFCs/HFCs/MFIs and other related issues. Besides,
market volatility, domestic resource mobilisation and capital flows issues were also
discussed by the Council. The Council noted that the COVID-19 Pandemic crisis poses a
serious threat to the stability of the global financial system as the ultimate impact of the
crisis and the timing of recovery, is uncertain at this point of time. While, decisive
monetary and fiscal policy actions aimed at containing the fallout from the pandemic,
have stabilised investor sentiment in the short-run, there is a need to keep a continuous
vigil by Government and all regulators on the financial conditions that could expose
financial vulnerabilities in the medium and long-term. The efforts of the Government and
regulators are focused on avoiding a prolonged period of dislocation in financial markets.
The Council took note of the initiatives taken by the Government and the regulators in
the recent months to help revive the economy. Government and the RBI have announced
various fiscal and monetary measures to pre-emptively limit the economic damage and
would continue to address the liquidity and capital requirements of the financial
institutions. The Council also reviewed the action taken by members on the decision taken
by FSDC earlier.
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5 CITI-NEWS LETTER
Shri Piyush Goyal calls upon the Exporters to be more competitive and
provide quality products to the world;
(Source: Press Information Bureau, May 28, 2020)
Shri Piyush Goyal, Union Minister for Commerce & Industry and Railways, today,
through Video Conference, participated in the Digital Summit on Exports organized by
the Confederation of Indian Industry (CII). EXIM Bank of India was the Institutional
Partner for the Summit. Addressing the Summit, Shri Goyalsaid that the future of growth
lay with industry and the private sector, with the government having a lesser role to play.
The minister identified three important ways to increase India’s exports: reviving
manufacturing, diversifying the exports basket, and finding newer and more accepting
markets. He emphasised that the diversification of exports, in addition to consolidating
current areas of strength, is necessary for our economy to grow. He stated that India has
a huge opportunity to promote indigenous production in auto component sector,
furniture, air conditioners, and others. He said that MeitY is promoting electronics
production, in pharma we are encouraging API manufacturing, and in the agri export
sector the opportunity is huge. He said that in the IT related service, the world recognizes
the Indian expertise and prowess, and hence we have asked the NASSCOM to target for
$500 billion export in the sector in next five years.
AatmaNirbhar Bharat, he said, is not just about greater self-reliance, but also engaging
with the world from a position of strength. He said that India should be seen as a
dependable partner and reliable friend in the world market, particularly when the global
supply chains are undergoing rejig. Talking about the Prime Minister’s vision to make
India self-reliant, Shri Goyal said that we should talk from the position of strength, be
competitive, and provide quality products to the world. There should be killer instinct in
us to succeed. No crisis can stop our march, if there is willingness to take on the challenges
head-on. Shri Goyal congratulated CII on completing 125 years and the launch of the
Taskforce on Enhancing Exports through integration into the Global Value Chains
(GVCs). He committed to working closely with the Taskforce and take action where
necessary for the benefit of industry, and the country.He assured the exporting
community that the Government, whether the union or states, are there to provide full
support and are willing to work in partnership. He said that the country has skilled
workforce, and world class institutions like Universities and research labs, and let us work
for the well-being of 130 crore people of India.
Mr. Chandrajit Banerjee, Director General, CII, said that we must carry out all reforms
necessary to overhaul our exports and this is the right time to roll them out. Trade
logistics, compliance with quality standards, seamless functioning of GVCs, and a robust
strategy to leverage FTAs would be key, he said.
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6 CITI-NEWS LETTER
Goyal expects better exports performance in May, June
(Source: OutlookIndia, May 28, 2020)
The performance of the country''s exports is expected to be better in May and June as
compared to the steep fall recorded in April, when the shipments contracted to an all-time
high of 60.28 per cent, Commerce and Industry Minister Piyush Goyal said on Thursday.
He said that while April was quite a "washout with 60 per cent fall, my sense is that in
May, it will grow significantly and the reduction will be around 30-35 per cent. We have
to wait for the numbers," Goyal said while addressing CII''s Export Summit organised
through video-conferencing.
In June, he said, exports will either be at par with June 2019 or at most 10 per cent down.
Going forward, the three factors that would drive the economy would be the revival of
manufacturing, diversification of export basket and focussing on newer and "more
accepting" markets, Goyal said.
Goyal added that three main things -- reviving manufacturing, diversifying export basket,
focusing on newer and accepting markets -- will drive the economy going forward.
Further, he said Indian industries, entrepreneurs and start-ups should see what new
markets have opened up domestically for them and work on those.
"Our agriculture export potential is huge. Rice, including Basmati, animal husbandry
products and organic products, among many others, we have an opportunity to work
together as partners and expand India''''s footprint," he said adding that diversification
along with consolidation will help grow product basket and expan India''''s presence
horizontally across the world.
He said building upon the domestic demands, with surplus going to export, will push
India to newer heights.
The minister emphasised that the diversification of exports, in addition to consolidating
current areas of strength, is necessary for the Indian economy to grow.
The ministry, he said, is working on identifying several sectors that holds potential for the
domestic industry.
He added that the sectors include auto components, furniture, air conditioners (ACs), set-
top boxes, pharma, organic products, agri-chemicals, textiles, toys and lithium-ion
batteries.
"Why we should be importing auto components. That needs to be changed. Why we
should import USD 2 billion worth of furniture. Why we are importing ACs and
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7 CITI-NEWS LETTER
components like compressors... We are looking at promoting APIs (active pharmaceutical
ingredients) in India," Goyal said.
The ministry has asked Nasscom to look at strategy for USD 500-billion IT services
exports in the next five years, he said.
Contracting for the second straight month, India''s exports shrank by a record 60.28 per
cent in April to USD 10.36 billion, mainly on account of the coronavirus lockdown.
Imports also plunged by 58.65 per cent to USD 17.12 billion in April, leaving a trade deficit
of USD 6.76 billion as against USD 15.33 billion in April 2019.
Earlier, Director General of Foreign Trade Amit Yadav said exports to China have grown
and imports have reduced in May.
He also said there is a need to address hidden cost associated with exports and ensure
that no taxes are added to outbound shipments.
"We have misaligned our export priorities, where 70 per cent of India''s exports are in raw
materials that is only 30 per cent of global product demand. Only 30 per cent of our
exports are in electronics which make 70 per cent of global demand. India''s share in this
is 0.7 per cent," he said.
P Harish, additional secretary, Ministry of External Affairs, said that the Indian industry
should focus on areas like standards and quality of products.
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Govt working on National Logistics Policy: Commerce Ministry official
(Source: Economic Times, May 28, 2020)
The government is working on National Logistics Policy, which aims to promote seamless
movement of goods across the country, a senior Commerce Ministry official said on
Thursday. Special Secretary in the logistics division of the ministry, Pawan Agarwal, said
the policy will look at several areas such as process re-engineering, digitisation, and focus
on multimodal transport.
It is also looking at exim trade and improving logistics in core sectors such as coal,
fertiliser, cement and steel. "We are working on the policy....The policy attempts to look
at many of the issues in a wholistic manner," Agarwal said at CII's digital summit on
exports. He said there is a huge opportunity for India to do process re-engineering or
streamline processes, and logistics is one area where a lot of processes can be digitised
which can hugely enhance efficiency.
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8 CITI-NEWS LETTER
"The country does not have large number of professional logistic service providers. Lot
more attention is required in the area of modern warehouses, where things can be
automated for better efficiency in loading and unloading," he said.
On February 1, the government, in the Budget, had announced that it will soon release the
National Logistics Policy.
The move assumes significance as high logistics cost impact competitiveness of domestic
goods in international market. Effective implementation of the policy would help provide
an impetus to trade, enhance export competitiveness, and improve India's ranking in the
Logistics Performance Index. India's logistics sector is highly defragmented and the
government aims to reduce the logistics cost from the present 14 per cent of GDP (Gross
Domestic Product) to less than 10 per cent by 2022. According to a ministry statement,
the sector is very complex with more than 20 government agencies, 40 partnering
government agencies, 37 export promotion councils, 500 certifications, and 10,000
commodities. The policy will improve India's trade competitiveness, and performance in
global rankings, and pave the way for India to become a logistics hub, it had said.
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FDI in India jumps 13% to record $49.98 billion in 2019-20
(Source: Economic Times, May 29, 2020)
Foreign direct investment into India rose 13% to a record $49.97 billion in FY20 from
$44.36 billion a year earlier, official data released on Thursday showed. FDI inflows were
$13.2 billion in the quarter ended March. Singapore remained the top source of FDI,
accounting for $14.67 billion, followed by Mauritius at $8.24 billion, according to the data
released by the Department for Promotion of Industry and Internal Trade. India’s FDI
inflows had dipped 1% in FY19. Services, computer software and hardware, trading,
telecommunications, and hotel & tourism were the top five sectors for FDI.
Services garnered FDI worth $7.85 billion while investments in computer software and
hardware were $7.67 billion, and in trading were $4.57 billion. Telecommunications drew
FDI worth $4.44 billion in FY20, and hotel & tourism attracted $2.93 billion of foreign
inflows. January saw the highest inflow of $5.57 billion and February the least at $3.36
billion.
Among states, Maharashtra garnered the highest
share of FDI at 30% with investments clocking
$7.26 billion. Karnataka and Delhi followed with
18% and 17% share, respectively. While FDI
through FIPB route/RBI’s Automatic
Route/Acquisition Route rose 13% on year, total
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9 CITI-NEWS LETTER
FDI that also includes equity capital of unincorporated bodies, reinvested earnings and
other capital was up 18% on year to $73.45 billion, more than double from $36.04 billion
in 2013-14.
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Indian clothing manufactures demand tax on Bangladeshi RMG imports
(Source: Refayet Ullah Mirdha, The Daily Star, May 28, 2020)
Clothing manufacturers in India have asked the government to impose more duty on
import of clothing items, especially from Bangladesh, to save their domestic industry.
Rakesh Biyani, president of the Clothing Manufacturers Association of India (CMAI), said
in a letter to Indian Textile Minister Smriti Zubin Irani on May 22 that the country's
domestic clothing industry is under threat because of duty-free import from different
countries including Bangladesh.
Due to the duty-free trade benefit, Bangladeshi garments now account for 34 percent of
the total imported garments despite having 12.50 percent countervailing and provincial
duty.
Between the fiscal years 2016-17 and 2019-2020, garment import from Bangladesh to
India registered 192 percent growth, Biyani mentioned in the CMAI letter.
The Daily Star has obtained a copy of the letter.
Bangladesh has been enjoying duty-free trade benefit to Indian markets from 2011 under
the South Asian Free Trade Area (SAFTA) on export of all goods including apparel
products, except 25 alcoholic and beverage items.
THE RISE IN BANGLADESHI EXPORTS
Bangladesh's share of the imported garments market in India rose 34 percent in the fiscal
2019-20 from 26 percent in the fiscal 2017-18, the letter said.
It was 33 percent last year.
Recently, garment exports from Bangladesh began increasing due to the stimulus
packages, higher demand of Bangladeshi garments and for operations of foreign retailers
and brands in Indian markets, according to industry insiders.
Global retail giants like H&M and Walmart have opened outlets in India and started
sourcing from Bangladesh, causing a spike in exports.
Moreover, the demand for Bangladeshi apparel items has been rising among the Indian
middle-income consumers because of competitive prices.
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10 CITI-NEWS LETTER
The shuttering of a horde of small and medium factories all over India for their failure to
maintain strict compliance requirements and pay higher wages over the last two years
also played a part in the surge in shipments from Bangladesh, insiders said.
Furthermore, the Bangladesh government has been paying four percent cash incentive to
garment exporters since 2009 for increasing garment export to non- traditional markets
including India.
As a result, garment exports to such markets has since risen to nearly $6 billion from few
hundred million dollars in 2008. Bangladesh considers all countries as non-traditional
ones except the EU, the US and Canada.
"You are aware that CMAI has for long been drawing the government's attention to the
dangers posed by the duty-free imports of garments from Bangladesh, and with it the
back-door entry of Chinese fabrics into India -- and its consequent impact on the micro
small and medium enterprises…," Biyani said in the letter.
"The significant rate of growth of these imports is well documented, and needs no
repetition, except to state that the surge continues unabated..." he also said.
DRAMATIC CIRCUMSTANCES
The CMAI president also said the government has in several times pointed out the various
treaties signed with Bangladesh and other SAFTA countries, and that it would be difficult,
if not impossible, to dilute the agreements.
"However, we would like to urge you to consider the dramatically changed circumstances
prevailing today, in the aftermath of the Covid-19 disaster," Biyani said.
Based on a recent study done by CMAI, it is estimated that the Indian textile industry will
see more than 40 percent drop in domestic demand of apparel due to the lockdown as a
result of Covid-19, leading to possible downsizing of operations, closure of units and job
losses.
In this crisis, it is important to think of innovative ideas and policies to support the
industry, the letter said.
Some media reports have appeared suggesting that the Indian government is considering
levying an additional Covid-19 Import Duty on certain products.
"We believe that this is an excellent move by the Government, and we urge textiles
ministry to extend such an Import Duty on imports of garments and fabrics from all
countries, including those with whom we have free trade agreement or zero duty
agreements," Biyani added.
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11 CITI-NEWS LETTER
This will enable the government to collect approximately $100 – $150 million for its fight
against Covid-19 (depending on the quantum of Duty imposed), the CMAI president said
in the letter.
"CMAI suggests that such a measure may be undertaken only for a limited period of time
of 12 months, after which we can go back to our current agreements in force," Biyani
added.
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Need to look at building economy with local skills: Suresh Prabhu
(Source: Economic Times, May 28, 2020)
The country needs to go back to the basics and look at building an economy based on local
skills and naturally available resources, Rajya Sabha MP and former Union minister
Suresh Prabhu said on Thursday as he emphasised the importance of Atma Nirbhar
Bharat. The five pillars of Atma Nirbhar Bharat (Self-reliant India) are economy,
infrastructure, system, vibrant demography and demand. Speaking at a webinar
organised by the Institute of Cost Accountants of India, Prabhu said there is a need to
work in a way that people's needs are adequately taken care of and demand of the world
is also catered to.
Noting that each district has unique traditional characteristics, he said that if a proper
study and documentation are done to make the districts self sufficient, then it would have
a transformative effect on rural India. "In ancient times, India ws a large economy and its
products were sought after. It didn't produce steel, cement or automobiles at that time
but it produced things based on local skills. We again need to go back to the basics,"
Prabhu said. Prabhu is also India's Sherpa for G20 nations.
Speaking at the webinar, BJP National General Secretary Ram Madhav said Prime
Minister Narendra Modi gave a categorical call for Atma Nirbhar Bharat amid the COVID-
19 pandemic and that the government's motto has been self reliance for the last six years.
He said India has managed the COVID-19 crisis well compared to many other countries
and attributed it to three factors. Prime minister who has taken right decisions at the right
time, an efficient administrative machinery and the 1.3 billion people of the country who
have shown great unity and discipline in handling the situation, he noted. Talking about
post COVID-19 world, Madhav called upon people all over the country to show greater
unity.
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12 CITI-NEWS LETTER
Allow personal protection gear exports immediately’
(Source: M Soundariya Preetha, The Hindu, May 28, 2020)
They can replace China products, says Loyal Textiles’ chief technology officer
In the last two months, the textile and clothing industry has proven its capabilities in
medical textiles with domestic production of personal protection equipment and masks
taking off in a big way. The industry is all set to venture into the global market,as a
significant player in this segment and wants to be seen as a supplier of high quality
products, says Devadas Dhamodharaswamy, chief technology officer of Loyal
Textile Mills, which has come out with branded masks and PPEs, Excerpts:
What is behind the sudden surge in local production of masks and coveralls?
In February this year, recognising the threat of COVID-19 and the possibility of a severe
spread, the Ministry of Textiles called upon textile units industries to step in and
manufacture PPE kits and masks in India.
It estimated that the country may need millions of units to fight the virus. This was the
first initiative which helped the Indian industry realise the domestic need and the
manufacturers saw an opportunity. When the lockdown was announced, commercial and
industrial activities came to a stand-still and the regular local orders dried up for textile
units. So, they decided to get into masks and PPEs. The Centre set the ball rolling by
floating a tender for 20 million PPE sets, through the aggregator HLL Lifecare Limited.
The garment units were qualified to take part in the tender if they met just one parameter
- Synthetic Blood Penetration Resistance (SBPR) test - for the coveralls. The rates offered
were also attractive.
Does India have standards for these products ?
India has adopted BIS Standards for both masks and PPEs. However, except for the
bacterial filtration efficiency for masks and SBPR for the PPE fabrics and seam sealing,
which have been tested during the past two months, all other parameters for masks and
PPEs under the BIS Standards are not being tested, implemented or regulated now. That
is mainly because of the immediate need for these products in huge quantities. But some
of the manufacturers, such as Loyal Textile Mills, are serious about meeting the global
standards for all parameters.
Can they sustain output?
Most of the small-scale textile units that started producing PPEs and masks just to survive
a tough situation are likely to go back to production of regular products when the
lockdown is lifted. Now, masks and PPEs are included under Medical Devices Rules and
in the coming days, all the manufacturers will be necessitated to go through stringent
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13 CITI-NEWS LETTER
standards checks. This may reduce the number of manufacturers in this segment. Only
those with expertise and commitment to technical garments will sustain.
What is the market potential for masks and PPEs?
There is a huge demand in domestic and export markets. World over, there is awareness
on the need for these products to stay safe from the spread of COVID-19. Several countries
do not want to buy Chinese products as they fear poor quality. The government has
brought in Medical Devices Rules to ensure that Indian manufacturers achieve global
standards and maintain consistency in quality. Based on WHO modelling, an estimated
89 million medical masks are needed every month globally. The WHO has estimated that
manufacturers of masks and PPEs have to ramp up capacities 40% to 50%, which India
has achieved already. The global demand for non-medical masks is expected to cross
almost three billion a month, excluding China. China can make 14.8 million masks a day,
and half of that will be used for local needs. Recognising this potential, the Centre opened
up exports of non-medical masks.
Over 12 million PPE kits were made in India in the last two to three months and another
15 million are in the pipeline. But, WHO has been able to deliver less than a million of
PPE kits to 47 affected countries so far and the supplies are rapidly depleting. It is
estimated that to treat one COVID-19 patient, an average of 80 PPE kits are needed.
Globally, 5.5 million patients in 213 countries are to be treated and the numbers are
growing every day. So, the demand is for over five billion sets. China can meet about 60%
of the demand. Thus, the market is huge for Indian manufacturers to tap.
Will the Indian products meet international standards? If yes, what
percentage?
Currently, it is estimated that only about 15 % of the Indian products will be able to meet
the international standards. The PPE sets made by Loyal Textile Mills have been bench-
marked against top MNC products and top Indian products by Tata Motors and have been
rated among the top 10-15 % of the Global Brands.
Is the industry talking to the government on ways to meet global standards?
Yes. The ICMED 9000 and ISO 13485 Standards ensure that the products meet Indian
and global demands. The government has given 18 months time to manufacturers to apply
for these standards. voluntarily. The textile and garment industry associations are talking
to the Ministry of Textiles and the Centre about enhancing the testing parameters and
fabric specifications so that Indian products meet the global standards. The Government
is also talking to the industry to handhold the manufacturers and help them meet
international standards to export in the future. It should regulate manufacturing of PPEs
in India so that only high quality products are allowed to be marketed. The government
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14 CITI-NEWS LETTER
Ishould also allow export of PPEs with immediate effect. Indian PPE products are poised
to take the world stage and replace Chinese products as global importers are knocking on
India’s doors.
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How the ₹10,000-crore PPE industry popped up in two months
(Source: M Ramesh, The Hindu Business Line, May 28, 2020)
Thanks to the Covid-19 pandemic, a new market, estimated to be worth at least ₹10,000
crore, has popped up from nowhere.
Starting from practically nothing only two months ago, India has now become the world’s
second-largest supplier of medical personal protective equipment (PPE). These are
products like goggles, face-shields, masks, gloves, coveralls and gowns, head and shoe
covers.
In 60-odd days, the industry has grown 56 times, according to a recent report by Invest
India, a company set up by the government to facilitate investments. Over 600 companies
in India are certified to produce PPE. These include textile biggies such as Arvind, JCT
Mills, The Trident Group, Welspun and Shahi Exports. India today manufactures 4.5 lakh
pieces of PPE a day, and now the country is well-positioned to seize a share of the global
market, which will be $60 billion by 2025.
Prompt action
How did the industry gather itself so quickly? Many give credit to the swiftness with which
the government acted.
Harish Ahuja, Chairman and Managing Director of Shahi Exports, recalls getting a call
from the Textiles Secretary in early April. Noting that Shahi Exports’ 58 plants in the
country have been lying shut due to the Covid-19 pandemic, the Secretary asked Ahuja if
he could take up the manufacture of coveralls — protective gowns, made of special, non-
woven fabric.
Shahi Exports swung into action. Though only five of its 58 plants needed to be pressed
into service and only 750 of its 1.2 lakh employees were used for the purpose, the company
now makes 20,000 coveralls a day. It has so far supplied close to nine lakh pieces to HLL
Lifecare of Kerala, the Central government’s agency for medical procurement.
The story is the same across the industry. A nudge from the government, an appeal for
helping the country in the time of crisis and a new business opportunity when none else
existed, seem to have done the trick. “The textile industry working closely with the
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15 CITI-NEWS LETTER
Government of India created an entire industry from scratch,” Kulin Lalbhai, Executive
Director, Arvind Ltd, told BusinessLine. Arvind makes 15,000 coveralls a day from its
plants in Bengaluru, Ahmedabad and Ranchi.
Making the shift
As is always the case, there were challenges. Since before Covid-19 came, the PPE industry
in India was very small, and all the raw material used to be imported from China. But
when the pandemic broke out and imports were not possible, the industry had to quickly
develop a domestic supply chain. “We have been able to work with our suppliers to shift
a large part of the supply chain to India,” Lalbhai said.
Ahuja notes that today all the raw materials, with the sole exception of sealing tapes, are
available in India, which puts the country at an advantage over the principle competitors,
Vietnam and Cambodia. Of course, it helped that the industry already had the equipment.
“Fortunately, we had all the machines needed to produce the coveralls,” Ahuja
told BusinessLine. Shahi Exports, which is among the top textiles and garments exporters
in the country, was also making rain-proof clothing. Likewise, Arvind was also into
technical textiles — for which there was a big push in the recent Budget. The company
used to make protective clothing for oil and gas, medical and automotive industries. Thus,
to ramp up medical PPE was but one step.
Growing market
The Defence Research and Development Organization lists over 275 companies certified
to make medical covralls (the DRDO has been in the forefront for developing counter-
Covid-19 products and been licensing them for free to the industry). Ninety-five
manufacturers are supplying coveralls to HLL Lifecare. Most of them are not as big as
Arvind or Shahi. Many such as Grassroot Markmen of Delhi started fresh into this
business. Grassroot, which has just begun production, says it will soon manufacture
3,000 coveralls a day. Today, India has an inventory of 15.96 lakh PPE kits (of all kinds)
and another 2.22 crore kits are being manufactured against firm orders by the industry,
according to the Invest India report. Bengaluru has become a major PPE hub, where half
the production happens. The rest of it is spread across the country — Tiruppur,
Coimbatore, Chennai, Ahmedabad, Vadodara, Ludhiana, Bhiwandi, Kolkata, Noida and
Gurugram. What happens after the market is saturated? All the manufacturers
that Business Line spoke to are confident of exporting. “Once we have enough for
ourselves,” says Lalbhai, “there will be ample opportunities to export.” Likewise, Ashok
Naik of Grassroot Markmen sees “huge potential in exports.” The $60-billion market, in
which there are just a handful of players, is a veritable blue ocean.
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16 CITI-NEWS LETTER
Banks free to do due diligence on guaranteed MSME loans
(Source: Financial Express, May 29, 2020)
Banks and shadow lenders have been given the flexibility to do their own due diligence and
restrict advances below the stipulated limit on sound business principles.
While the government has pledged full guarantee for up to 20% additional, collateral-free
working capital loans under the Rs 3-lakh-crore Emergency Credit Line Guarantee
Scheme (ECLGS) for MSMEs, banks and shadow lenders have been given the flexibility
to do their own due diligence and restrict advances below the stipulated limit on sound
business principles.
This leaves the scope for some lenders to exploit the situation, unless the implementation
of the scheme is monitored well by the government, according to a senior MSME industry
executive.
No new MSME borrower will be eligible for the guaranteed loan under this scheme, which
is part of the Rs 21-lakh-crore package recently announced by the government to tide over
the Covid-19 impact.
A set of frequently asked questions (FAQ) released by state-run National Credit
Guarantee Trustee Company, which will provide guarantee, says: “Under ECLGS, banks/
NBFCs are to offer loans up to 20%. Actual loan extended can, therefore, be less than
20%.” While the bank/ NBFC is expected to be liberal in sanctioning such loans, it is also
expected to evaluate credit proposals by using prudent banking judgement and use
business discretion/due diligence in selecting commercially-viable proposals and conduct
the account(s) of the borrowers with normal banking prudence,” said the FAQ.
The government has earmarked a corpus of Rs 41,600 crore over the current and the next
three financial years to implement this scheme.
Borrowers with up to Rs 25-crore outstanding as of February 29 and Rs 100-crore annual
turnover will be eligible. Such loans will have four-year tenure with a moratorium of 12
months on repayment of the principal amount. The interest rate will be capped at 9.25%
a year for banks and financial institutions and 14% for non-financial banking companies.
The scheme can be tapped until October 31, or until the Rs 3-lakh-crore limit is exhausted,
whichever is earlier. As many as 45 lakh units can resume business activity and safeguard
jobs, the government recently announced.
The scheme also aims at supporting stressed MSME borrowers who are not in default. So,
borrowers with standard accounts (with timely repayment), SMA-0 (with overdue of up
to 30 days) and SMA-1 (with overdues of up to 60 days) can also take advantage of this
scheme.
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17 CITI-NEWS LETTER
Interested borrowers under the Mudra scheme, which supports budding entrepreneurs
from vulnerable sections of the society, will also be covered under the guaranteed
emergency credit line.
The reliefs come at a critical juncture for MSMEs. In a recent report (before the
announcement of the Rs 21-lakh-crore package), Kotak Institutional Equities said only
7% of SMEs surveyed thought they would be able to survive for more than three months
if their business remained closed. While about 97% of the firms surveyed have paid their
employees salary for March, as many as 34% of the SMEs say they won’t be able to pay
April and May salaries (in the absence of government intervention).
Home
Surat textile traders included in Rs 3L cr MSME credit scheme
(Source: Times Of India, May 29, 2020)
Textile traders in Surat, country’s largest man-made fabric (MMF) wholesale market, are
hoping to cope with the liquidity crisis, with the central government including them under
the Rs 3 lakh crore MSME credit package. Industry sources said that following the
representation by the Confederation of All India Traders (CAIT), the central government
has decided to include the traders under the automatic loan facility. However, only the
existing borrowers of the banks will be able to take benefit of the scheme. It was a long
pending demand of the textile traders to include them in the MSME category to get the
benefits of the government schemes. According to the traders, they are merchant-
manufacturers as they purchase grey fabric from weavers and get it processed from the
textile mills on job work. Manoj Agarwal, president of Federation of Surat Textile Traders’
Association (FOSTTA) told TOI, “There has been zero business in the textile markets for
over two months. Payments to the tune of over Rs 5,000 crore is stuck in the pipeline.
Traders do not have liquidity to operate the business smoothly.” Agarwal added, “It is a
timely decision taken by the central government to include traders in the MSME credit
package. Barring small traders, other big traders having bank loan facilities could easily
avail the benefit of the automatic loans. Traders who are non-borrowers could also be
included in the scheme. FOSTTA office-bearers said that over the past 60 days, the losses
in the textile sector has piled up to Rs 15,000 crore, which includes textile processors,
traders and powerloom weavers. Devkishan Manghani, chairman of Southern Gujarat
Chamber of Commerce and Industry’s (SGCCI) textile committee told TOI, “The
government must remove the rule of borrowers and non-borrowers and make the
automatic loans available to all the traders. The borrowing limits should be fixed for each
trader depending on the annual turnover. Majority of the traders in Surat’s textile market
are non-borrowers and they depend on the private financers for doing business.
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18 CITI-NEWS LETTER
Cash crunch: Telangana extends deferment of 50% salary to May
(Source: BV Mahalakshmi, Financial Express, May 28, 2020)
Odisha says March order not reversed yet; despite liquidity support by the Centre, many
states continue salary deferments
Many state governments are continuing to defer salary payments to find the requisite
liquidity to spend on steps to control Covid-19 pandemic and alleviate people’s hardships.
With the lockdown burning a big hole in its revenue, the Telangana government on
Thursday announced that it will withhold 50% of expenditure on salaries and pensions
for the third straight month of May, a move that would give it temporary liquidity boost
of around Rs 4,200 crore over the three month period. Telangana’s monthly salaries-
pension bill is around Rs 2,800 crore.
A senior official from the Odisha government told FE on Thursday that on order issued
by the state in end-March, deferring 50-70% of salaries for certain categories of officers
and legislators, would continue to be in effect till reversed. Andhra Pradesh and Rajasthan
deferred part of salaries for March payable in April and April payable in May, while Kerala
deferred salary by 20% for five months (April onwards).
In Telangana, the salary deferment will be 75% for public representatives (ministers,
MLAs/MPs etc), 60% for all-India service officers, 50% for state government employees.
Pensioners will receive 75% of their entitlement now and the balance at a later date.
Telangana’s move, announced by state chief minister K Chandrasekhar Rao indicates that
the several steps taken by the Centre to boost cash position of states like hike in borrowing
limit and prompt transfers of tax revenues haven’t been enough to dissuade some states
from resorting to steps like salary deferments.
Telangana’s overall revenue in April dropped to just Rs 3,100 crore (including Rs 982
crore received from the Centre as tax pool share), against monthly average of around Rs
12,000 crore, estimated for FY21. “The state’s revenue generation has nosedived and this,
coupled with the Centre’s reluctance to come to the rescue of the state, has resulted in the
treasury reaching near empty levels,” Rao said after a review meeting on the state’s
economic position.
The chief minister also expressed disappointment at the Centre’s decision not to
reschedule the loan repayments by the state. The state government’s annual debt
servicing spending is to the tune of Rs 37,400 crore. With this (the Centre not agreeing to
reschedule repayments), the state has no option but to pay the instalments in time, in
these difficult times,” Rao added.
The conditions imposed by the Centre while raising the borrowing limit for the states to
5% of the respective gross state domestic product from 3% is also proving to be a
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19 CITI-NEWS LETTER
stumbling block for some states. “Though there was an increase in the Fiscal
Responsibility and Budget Management Act (FRBM) limits by the Centre, there were
conditions imposed by it and hence (much of) the additional loans might not be raised,”
Rao said.
According to the finance department officials, the state government had relaxed lockdown
guidelines to increase the revenues, but the income did not increase substantially.
“Income from transport, registration and other departments was also not much either,’’
officials pointed out. It is learnt that the state government is working out on a revival plan
for generating more revenues and it is likely to be announced during the first week of
June.
Incidentally, the state government’s plan to raise additional funds, to the tune of Rs
20,000 crore after the borrowing limits were raised by the Centre, also fell flat. “Though
there was an increase in the Fiscal Responsibility and Budget Management Act (FRBM)
limits by the Centre, there were conditions imposed by the Central government and hence
additional loans could not be raised. If salaries of the employees and pensions were paid,
the expenditure would be more than Rs 3,000 crore. The entire treasury will be empty.
Henceforth, no payment can be made nor any work can be undertaken,’’ the chief minister
said.
“The state’s revenues hit a new low during the lockdown with April collections being just
17% of monthly average, Telangana finance minister T Harish Rao said. The government
gets Rs 10,800 crore a month on account of GST, excise, stamps and registration, mining,
and others in normal times.
Further, the monthly financial assistance of Rs 1,500, which was announced during the
lockdown for the poorer sections, will also be stopped from June. As the economy is
opened with trade activities starting from Thursday, they can find livelihood options, Rao
added.
Telangana, which had a fiscal deficit of 3.1% in FY19, was aiming to bring it down to 2.26%
in FY20RE. For FY21, the deficit is pegged at 3% (BE). The state budget estimated a
revenue surplus of Rs 4,482 crore (or 0.41% of (GSDP) in FY21. Its revenue receipt were
estimated to be Rs 1,10,973 crore in FY20RE or an average Rs 9,248 crore/month.
The monthly revenue receipts are projected to be Rs 11,934 crore in FY21BE. Telangana’s
debt to GSDP was 21.3% in FY18, was pegged to be 16.7% in FY19RE and 17% in FY20BE.
(With inputs from Prasanta Sahu in New Delhi)
Home
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20 CITI-NEWS LETTER
After 41 yrs, Centre set to redefine ‘migrant workers’
(Source: Sidhartha, Times of India, May 28, 2020)
Learning from the ongoing migrant crisis, the government is set to redefine “migrant
workers” after 41 years and plans to register them to enable access to social security and
health benefits under the Employees’ State Insurance Corporation. The new measures,
which follow large-scale migration of lakhs of workers- both in the informal and formal
economy during the lockdown, are proposed under an updated Code on Social Security
which the labour ministry will shortly take to the Union Cabinet. The Centre is planning
to enact a law on this by the end of the year. Labour minister Santosh Gangwar confirmed
that the legal framework was being strengthened and some of the provisions in the
proposed Code, cleared by the standing committee of Parliament headed by BJD MP
Bhartruhari Mahtab, may undergo further changes.
The steps are seen to be crucial as the current
legal framework is inadequate, something
that was exposed by the exodus of migrants,
with absence of any kind of record of
employment which prompted a serious
rethink in the government. The Inter-State
Migrant Workmen Act, 1979 applies to
establishments with five or more inter-state
migrant workers and to contractors involved
in their hiring. “This will mean that most
migrant workers today will be outside the
law's ambit,” said an official. The proposed
legal framework will apply to individual
migrant workers who earn up to a specified
amount with even domestic helps included in
its framework. While the ceiling wage will be
defined through an executive order, the law will provide for it. These workers will enjoy
benefit of portability of benefits across the country and be entitled to be given the fare to
go home once every year, sources told TOI. A key element of the plan is to allot
unorganised sector workers an Unorganised Worker Identification Number (U-WIN),
which was prescribed through a law in 2008 but has not made much headway. The Centre
is now looking to make it attractive for workers to register by throwing in social security
benefits, such as pension and healthcare, while also asking them to specify if they are
migrant. Through this exercise, an Aadhaar-linked national database is proposed to be
created, which can be accessed by the Centre and states, the latter playing a crucial role
in the creation of the record. While a pension scheme for unorganised sector workers is
already in place, officials said a key element will be to allow them to enrol for ESIC on
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21 CITI-NEWS LETTER
payment of a nominal fee, a benefit which may also be extended to those working in
hazardous units and plantations. In any case, the scope of the ESIC is being expanded so
that healthcare facilities are available to beneficiaries across districts.
Home
Assam's Commerce Minister calls upon top global companies to invest in the
state
(Source: Bikash Singh, Economic Times, May 28, 2020)
Industries and Commerce Minister Chandra Mohan Patowary interacted with top global
companies operating across United States and India and called upon the industries to
invest in the Assam and instructed the officials to fast track all investment proposals and
assured of customised support with a dedicated team of officers for each company The
webinar was facilitated by US-India Business Council (USIBC) and assisted by Invest
India. The companies included representatives from General Electric (GE), Hydrocarbon
Dynamic (HCD), Pfizer, P&G, John Deere, Mastercard, eBay and Walmart. The Minister
called upon the industries to invest in Assam and instructed the officials to fast track all
investment proposals and assured of customised support with a dedicated team of officers
for each company.
Patowary underlined the proactive steps taken not only in the health sector to control
COVID-19 pandemic, but also in putting the economy back on track by allowing all its
industries to resume work albeit with social distancing and other precautions.
Highlighting the advantages of Assam, Minister Patowary said, ‘The strategic geographic
location backed by a strong connectivity network makes Assam the ideal staging point for
doing business with BBN and ASEAN bloc countries. This opens up $ 800 million market
for the industrialists who want to manufacture in Assam for export to the rest of the global
market through the ports of Myanmar and Bangladesh. Initiatives like Act East Policy
Affairs Department and Assam Skill Development Mission have helped to develop better
commercial linkages with the South East Asian countries’, added Patowary. Interacting
with Pfizer, Minister Patowary invited the company to set up a plant in Assam as it already
has a strong pharmaceutical base for companies like Sun Pharma, Ajanta Pharma, Hetero
Healthcare, with export potentialities to Myanmar, Bangladesh and Bhutan. The Minister
asked John Deere – manufacturing company in agriculture sector – to explore in agri-
entrepreneurship and agrimechanization for employment in the rural areas.
He also asked companies like Mastercard, Walmart and e-bay to come forward and
support the MSMEs, particularly the rural artisans, handloom and textile entrepreneurs
and training in digital payments etc. He asked Hydrocarbon Dynamic (HCD) and GE to
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22 CITI-NEWS LETTER
work with the State Government in sector like hydrocarbon and power respectively. Dr.
KK Dwivedi, Commissioner and Secretary, Industries and Commerce Department,
presented Assam’s advantages in terms of robust connectivity, natural resources, skilled
workforce, favourable policies like NEIDS and the state’s own Industrial and Investment
Policy, ease of business, industrial corridor etc. Ambika Sharma, Managing Director,
India, USIBC said, ‘Assam is the fulcrum of India’s Act East Policy and gateway to South
East Asia, making it crucial for global companies as they re-work business models,
strategies and diversify supply chains. We thank the state leadership and look forward to
working with them as strategic partners to promote business, investment and
strengthening the policy environment.
Home
IEX introduces real-time trading, will help renewable energy companies
(Source: M Ramesh, The Hindu Business Line, May 26, 2020)
The Indian Energy Exchange (IEX) will allow real-time trading of electricity from June 1,
a move that will facilitate better use of renewable energy.
Under the ‘real time market’ (RTM) product, auctions will be held 48 times a day. Every
half an hour, auctions IEX “will run a market for 1 hour and 15 minutes” in which
generators and purchasers of electricity will engage. Electricity producers who may see
generation more than their committed demand, will offer to sell the surplus energy in the
market. In the absence of this opportunity, they would have to back down generation.
Likewise, buyers of electricity will offer to purchase. This is particularly useful to
electricity distribution companies who may suddenly be faced with a shortage of supply
because of, say, a turbine failure at a power plant.
IEX will take 15 minutes to clear the bids and will then hand over the results to the
National Load Dispatch Centre—which (along with State Load Dispatch Centres) routes
electricity from various supply sources to consumption points. NLDC would take another
15 minutes to effect delivery of electricity, Rajesh Mediratta, Director, IEX, told Business
Line today.
The RTM therefore makes way for better utilization of renewable energy—particularly
wind—which is more prone to fluctuations in generation. Ever since renewable energy
entered the market the need for a market close to real time was being felt, Mediratta said.
The idea was mooted by the Central Electricity Regulatory Commission (CERC) some
time back, he said.
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23 CITI-NEWS LETTER
“RTM will offer the distribution utilities immense flexibility to meet their dynamically
varying schedule with delivery of power within an hour of closure of bid session,” says a
press release of IEX issued today. “With better planning, the utilities would be able to save
on excess penalties currently paid under deviations framework as well as effectively
integrate renewable energy. The market will also enable the system operators to enhance
overall grid security and discipline,” it says.
Giving an example of how the real time market would come in handy, Mediratta said that
suppose the electricity utility of Tamil Nadu, Tangedco, had contracted to supply 3,000
MW of electricity, but perhaps because of winds not blowing and the wind turbines not
generating enough, it found it was short of 500 MW—it could purchase the power from
the market.
To IEX, a listed company, the RTM is another product to make money.
Derivatives
Meanwhile, it is reliably learnt that the dispute between the stock market regulator, SEBI
and the electricity regulator, CERC, over who should have the jurisdiction for oversight
when derivative products are introduced in the electricity markets, now debated in the
Supreme Court, is nearing resolution. The final hearing would have happened now but
the Covid-19 pandemic has delayed it.
In anticipation of a resolution, IEX is gearing itself up for introducing derivatives in the
market – there will be trading in futures and options in electricity, just as in stocks and
commodities.
Home
India pitches as alternative to MNCs rethinking sourcing plans
(Source: Outlook India, May 28, 2020)
India is pitching itself as an alternative Business Continuity Plan destination as
multinationals rethink their sourcing plans and re-organize supply chains.
Invest India and JLL have prepared a report, "Great Places for Manufacturing in India-
World Class Destinations for MultiNationals" as India moves to attract foreign
investments in manufacturing with the buzz around reorientation of global supply chains.
The report says that India stands at the pedestal of a new growth curve of rapid
industrialisation. In the COVID-19 pandemic scenario, India has projected a more
resilient and diversified economy to fight the crisis and projected as a major attractive
destination.
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24 CITI-NEWS LETTER
"As multinationals rethink their sourcing plans and re-organize supply chains, India is
one of the most viable locations for Business Continuity Plans (BCP)," the report said.
India, on account of its large domestic market and low cost production base, is well-
positioned to host new investments in a range of sectors, the report said. It has listed
sectors like textiles and apparels, electronics and consumer appliances, pharmaceuticals,
medical devices, automobiles and components, capital goods, electrical machinery,
footwear and leather products, chemicals and and petrochemicals, food Processing,
plastic products, telecom equipment.
Among India''s distinct advantages, Invest India has listed the recent reduction of
corporate taxes for setting up of new industries. It is also host to Global In-house Centres
(GICs) and Global Centre of Excellence (GCoEs) for several manufacturing companies
that provide for more robust ecosystem and R&D.
GICs in India now number about 1,100, employing more than 800,000 individuals and
generating approximately $23 billion in revenue.
India has a very large domestic market - as big as 18 per cent of world population along
with prospects of a manufacturing export hub to the rest on 82 per cent.
Deepak Bagla MD and CEO, Invest India wrote in the report that as businesses worldwide
gear up for the "new normal" post COVID-19, India has been steadfastly and proactively
cementing its position as a resilient economy with swift action-oriented decision-making.
"It has emerged as a forerunner for business continuity plans, with its inventory of low
risk and asset light models like ready-built industrial infrastructure and build-to suit
offering higher capex savings, new tax incentives offering increased profitability, and a
domestic market comprising 18 per cent of world population," Bagla said.
Bagla said that in the coming months as both central and state governments gear up to
stimulate the economy and improve their attractiveness for investments across sectors.
Most states have created single window mechanisms to grant permissions within
stipulated time and have set service level agreements to grant permissions within 30 days,
with provisions for deemed approval in cases of deviation. Information about industrial
parks with plot-level details is being provided through GIS platforms.
Bagla said that dedicated relationship managers are being appointed to hand-hold
investors through the entire project lifecycle. India has one of the most attractive
corporate income tax rates for manufacturing and services investments. A special window
for manufacturing investments is open till March 31, 2023 with an attractive corporate
income tax rate of 17.16 per cent, lowest among BRICS. Government of India has signed
300 Advance Pricing Agreements with MNCs to give them assurance on tax structure.
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25 CITI-NEWS LETTER
India in the last five years accounted for over half of the FDI received by India since the
liberalization era of early 90s, propelling India to top 3 greenfield FDI destinations.
Poised to become the world''s third-largest consumer market within the next decade,
India can safely be categorized as a growth engine for the foreseeable future, Bagla said.
Great Places for Manufacturing in India is the latest information kit, wherein facts,
figures, and investor activity have been captured for various industrial ecosystems that
exist in India.
This is the first in the planned series, which shall be subsequently expanded to include
other established and emerging industrial clusters of India.
Thematic collations of clusters such as industrial hubs in coastal economic areas, hubs in
north-eastern states and hubs for high-priority sectors are going to be included in future
editions.
This series is an effort to provide deeper clarity and insights to investors on doing business
in India, and address common investor queries on understanding various capabilities,
players, and strengths of the Indian manufacturing landscape.
Home
How you can revive your business in a post-Covid world
(Source: Suresh Mony/ Narayani Ramachandran, The Hindu Business Line, May 28, 2020)
Companies must use sound financial acumen and defensive strategies to turn around their
enterprises
The Covid-19 crisis and consequent lockdown across the country, for over 60 days now,
have led to a severe decline in business demand and revenues and profits of both big
corporates and those in the unorganised sector. Micro, small and medium enterprises
(MSME), automobile & ancillaries, construction materials, travel & tourism, real estate,
logistics and hospitality have all taken a beating.
The only sectors that have bucked the trend in market capitalisation are FMCG, which
has declined by only 1.64 per cent, and pharmaceuticals, which has grown by 0.47 per
cent. Vulnerable sectors such as realty, travel, hospitality, leather and textiles as well as
MSMEs need to act now to be able to arrest the imminent decline in financial health.
The ongoing pandemic has thrown up multiple challenges to businesses on the four pillars
of financial health, namely profitability, which is the ability to generate a surplus and earn
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26 CITI-NEWS LETTER
reasonable returns on investment; long-term solvency reflected by positive net worth or
owned assets being higher than external liabilities; technical solvency or the ability to
meet current cash requirements; and continuity of operations ie the ability to sustain
revenues.
Improving profitability
With profitability being a function of revenues, operating and financial costs and
investments, the burden of improvement falls on augmenting revenues, minimising costs
and carefully managing assets.
Augmenting revenues: In recent years, with the development of e-commerce
platforms, the B2B2C model has become popular. E-commerce companies/websites, by
expanding their consumer reach and establishing their brand, are in a position to sell to
the end consumer as well as engage in the wholesale and distribution business. They
become ideal partners to companies, be it restaurants or engineering goods
manufacturers, who have the production capacity but not the consumer reach to augment
revenues.
The social distancing norms may henceforward promote e-selling through B2B2C as
opposed to personal selling, and could be particularly attractive for MSMEs.
Co-opetition is another workable solution, wherein competitors mutually agree to
cooperate with each other by transparently sharing information and refraining from
discount sales to liquidate inventory. Some textile companies have already formed a
syndicate to prevent cut-throat pricing and ensure threshold sales and reasonable price
realisation.
Minimising operational costs: When a firm’s sales are 60-80 per cent of break-even
level, cost-cutting is the accepted operating turnaround strategy to trim the visible fat.
There are opportunities to minimise the cost of raw-material inputs, evidenced by the
commodity price index decline of about 10 per cent from 76.69 in October 2019 to 68.53
in March 2020. It is an opportune time for companies to move over to ‘strategic sourcing’
and enter into long-term agreements with fewer vendors, leading to a win-win situation
for both suppliers and customers.
Companies should leverage on spends, information and relationships and adopt the ‘total
cost of acquisition’ approach for long-term benefits. Further, companies should graduate
to an ‘extended enterprise’ that entails e-integrating with suppliers and the trading
community, to reduce transaction costs. For this, a peer-to-peer (P2P) networking
approach ensures that the fixed operating costs of technology are shared by the
participating companies.
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27 CITI-NEWS LETTER
Finally, this may be the right time to identify and focus on core competencies and
outsource non-critical items/services. Outsourcing contracts should, however, be flexible
and include portfolio contracts, wherein the buyer has the right to switch between the
long-term, spot and options contract, depending on the market supply-demand
dynamics.
Many companies have initiated pay cuts at the senior level to reduce their fixed costs and
have stopped incentive payments to control variable costs. The steep decrease in crude oil
prices to around $10 per barrel offers opportunities to companies who consume refined
petroleum products such as furnace oil and diesel.
Reducing financial costs: Cash liquidation of excessive inventories and thereafter
graduating to a ‘just-in-time’ (JIT) approach will be beneficial in the long term. Interest
rates in India have declined by 0.25 per cent, which will marginally reduce the financial
costs. Despite technological advances and pathbreaking legislation like GST, the cash
economy is still rampant in India and a shift from the manual accounting systems to
digital mode is warranted to minimise transaction costs.
Improving solvency
To ensure long-term solvency, balance-sheets should be made asset-light by outsourcing
noncore/noncritical activities and availing soft loans under the Government of India’s
₹3-lakh-crore credit guarantee scheme, concurrently retiring expensive term loans.
Technical solvency can be achieved by liquidating inventories and realising receivables
through factoring with banks.
Ensuring sustainability of operations
Operational sustainability can be achieved by closely monitoring the number of
parameters that influence liquidity, profitability and stability of the business.
The key metrics for monitoring include net margin; inventory turnover; working
capital cash cycle; and debt service coverage ratio (DSCR). These ratios reflect the ability
to generate cash profits, the velocity of turning over inventory and sales, and the cash
cushion available to meet debt obligations. Sectors that have a long operating cycle, like
steel and aluminium, need to relook their value chain and supply parameters and, if need
be, appoint supply-chain intermediaries.
Leveraged companies are vulnerable — for instance, hospitality, FMCG, ports, auto
ancillaries and telecom companies that have a debt equity ratio greater than 1 and low
DSCR ranging from 2-3, would — with declining revenues — suffer a liquidity crunch,
rendering debt servicing difficult.
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28 CITI-NEWS LETTER
Operating leverage (OL), that captures the sensitivity of profit change with respect to
revenues, is a control lever for CFOs. For instance, a company’s OL based on ₹100-lakh
revenues, ₹40-lakh variable costs and ₹50-lakh fixed costs, is 6 — the contribution of
₹60 lakh divided by earnings before interest and tax (EBIT) of ₹10 lakh. A revenue
increase by 20 per cent translates to higher EBIT of 120 per cent and vice versa.
Thus, a positive EBIT of ₹10 lakh soars to ₹22 lakh during normal times, and crash-
lands to ₹2 lakh loss during a Covid-like scenario. Hence, it is vitally important for
vulnerable companies to examine their cost structure and convert items of fixed costs to
semi-variable costs.
This is where re-engineering techniques like zero base budgeting, that looks at revenues
and expenses on a de novo basis; and value stream mapping, that identifies value-adding
activities and eliminates non value-adding activities, thereby reducing fixed costs, are
essential.
Conclusion
The pandemic has been labelled the 10th Black Swan economic event and is expected to
result in major shifts in people’s socio-economic habits, which will adversely impact the
fundamentals of businesses such as travel and tourism, necessitating drastic changes in
their business models. Other businesses and industries that are reeling under the
onslaught of the lockdown need to handle the shocks with sound financial acumen and
the kind of defensive strategies discussed above to turn around from the crisis that has
engulfed them and restore their financial health.
(Suresh Mony is Director, and Narayani Ramachandran is Associate Professor
(Finance), at NMIMS, Bangalore.)
Home
IIT Alumni Council to set up mega lab in Mumbai with testing capacity of 10
mn per month
(Source: Abhijit Ahaskar, Live Mint, May 28, 2020)
To set up the labs, the IIT Alumni Council has consulted several domain experts from
virology, RTPCR machine manufacturing, test kits, pooling algorithms, Artificial
Intelligence (AI), robotics and microfluidics.
IIT Alumni Council will set up a massive genetic testing lab, MegaLab, in Mumbai for
covid-19 and other infectious diseases. It will have a capacity of 10 million RT-PCR tests
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29 CITI-NEWS LETTER
per month. The IIT body will start identifying partners to run these labs through a global
competition.
To set up the labs, the council has consulted several domain experts from virology, RTPCR
machine manufacturing, test kits, pooling algorithms, Artificial Intelligence (AI), robotics
and microfluidics.
“MegaLab will be based on the end-to-end Kodoy indigenous technology stack and will
have adequate capacity for testing the entire population of Mumbai for infectious
diseases, once a month," Ravi Sharma, President, IIT Alumni Council said in a press
statement.
RT-PCR test is a real-time reverse transcription polymerase chain reaction (rRT-PCR)
test for the qualitative detection of nucleic acid from SARS-CoV-2 in upper and lower
respiratory specimens collected from people showing symptoms of covid-19. The Kodoy
Stack is an end-to-end technology stack for molecular diagnostic laboratory. It can be a
large central laboratory where millions of tests can be performed every month, a point of
care location such as a clinic with few daily test requirements or a moving vehicle such as
a test bus. The stack relies on self extraction of samples by a patient and uses a RTqPCR
machine and test kit.
Following the announcement on March 25, the IIT Alumni council formed a covid-19
taskforce with K Vijay Raghavan as chairman and 20 IIT Directors as its members. The
taskforce later branched out to form multiple working groups with more than 1,000 IIT
alumni across the world to find and create solutions to control the disease.
IIT Alumni Council has been instrumental in setting up digital X-Ray systems at Poddar
Hospital in Mumbai to successfully detect covid-19 using AI. They also teamed up with
NSCI to set up India's first covid-19 test bus in Mumbai. After the cases started to increase
in India and the lockdown was declared, various IITs and alumni bodies came forward
with their low cost innovations to protect caregivers, spray disinfectants or to make
ventilators accessible to more patients.In April students at IIT (Indian School of Mines)
Dhanbad used 3d printing to create multiple channel adaptor which would allow a
ventilator to be used for up to 4 patients simultaneously. A IIT Delhi alumni start-up
Vehant technologies has developed a camera that can detect face masks, distance between
people and body temperature and alert authorities in case of a violation. Another start-up
Muse Wearables, which was incubated at IIT-Madras, has created an equipment to apply
nanoparticles-based antimicrobial agents on textiles to kill the virus on contact. The
coating can withstand 60 wash cycles and can be used to make face masks, personal
protective equipment (PPE) and bags free from infection.
Home
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30 CITI-NEWS LETTER
Skilling India: Going global with digital
(Source: Financial Express, May 28, 2020)
Tribal affairs ministry, Facebook India partner for digital skilling of tribal youth across
India
Digital literacy has gained importance in view of challenges posed by Covid19 pandemic,
said the minister for tribal affairs, Arjun Munda, as he announced a partnership with
Facebook through GOAL (Going Online As Leaders) programme. The programme intends
to upskill and tribal youths to harness the full potential of digital platforms and tools to
learn new ways of doing business, explore and connect with domestic and international
markets.
GOAL (Going Online As Leaders) programme is an initiative of Facebook designed to
provide mentorship to tribal youth through digital mode. In this programme, 5,000
scheduled tribe youth (to be called as ‘Mentees’) will get an opportunity to get training by
experts from different disciplines and fields (to be called as ‘Mentors’). There will be one
mentor for two mentees. The programme aims to enable Scheduled Tribe youth in
remote areas to use digital platforms for sharing their aspirations, dreams and talent
with their mentors. The digitally enabled programme envisages to act as a catalyst to
explore hidden talents of the tribal youth, who will be trained to play an important role in
the all-round upliftment of their society. Facebook had run the project on pilot basis from
February 2019 to October 2019 in five states with 100 mentees and 25 mentors which
received enthusiastic response. Based on its success, Facebook approached the tribal
affairs ministry for a joint initiative under affirmative action and help Facebook in
selection of mentees, design curriculum and various activities under the programme.
The Mentees and Mentors have to register on portal (goal.tribal.gov.in), which will be
open till July 14, 2020. Ministry of electronics and IT has been requested to associate
CSCs (Common Service Centres) in facilitating ST youth who do not have smartphones,
for registration with portal.
The mentees and mentors will be selected based on their inputs in such a way that it
represents tribal youth from varied professions and has representation from urban and
rural areas across India. The programme will focus on three core areas – digital literacy,
life skills and leadership and entrepreneurship, and on sectors such as agriculture, art and
culture, handicrafts and textiles, health, nutrition, among others. The selected mentees
will be provided smartphones and internet access (for one year) by Facebook along with
exposure to various external forums that will allow them to showcase their skills.
Home
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31 CITI-NEWS LETTER
Vardhman Textiles board approves amalgamation of two subsidiaries
(Source: India Infoline News Service, May 28, 2020)
The Vardhman Textiles board has approved amalgamation of VMT Spinning and
Vardhman Nisshinbo Garments within its ambit. The merger deal is subject to the NCLT
approval. VMT is a wholly-owned subsidiary of Vardhman Nisshinbo Garments.
The amalgamation of the companies mentioned in Vardhman Textiles is seen to provide
substantial impetus to growth, enable synergies, reduce operational costs, increase
operational efficiencies and enable optimal utilization of various resources as a result of
pooling of financial, managerial and technical resources.
The scheme will also involve respective shareholders and creditors to become part of
Vardhman Textiles. However, there will be no change in the shareholding pattern of
Vardhman Nisshinbo.
VMT Spinning is engaged in the business of manufacturing cotton and blended yarn.
While Vardhman Nisshinbo operates in the business of manufacturing and sale of
garments (mainly shirts).
Post announcement, Vardhman Textiles share price ended at Rs639.60 per piece on BSE,
up 2.12%.
Home
As luxuries slip in list of priorities, fashion industry ponders bleak future
post lockdown
(Source: Shubha Dubey, Outlook India, May 28, 2020)
Walking the runway to success till just a few months ago, the Indian fashion industry is
now reevaluating its future with insiders saying the COVID-19 pandemic and lockdown
have set the clock back at least a decade.
As the lockdown continues and incomes shrivel, elaborate trousseaus, designer gowns
and bespoke suits running into several lakhs of rupees have plunged in the list of priorities
of the industry’s trend-conscious clients.
It is difficult to predict consumer behaviour even after the restrictions are lifted but many
designers believe the focus will be on simpler aesthetics and on maintaining the artisans
and craftspersons who are the backbone of their business.
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32 CITI-NEWS LETTER
“The fashion industry has never been affected in such a definitive way around the world.
We’ve had times when there has been a recession in different countries at different times
but the whole world shutting down together is unprecedented,” veteran couturier Ritu
Kumar told PTI. While it’s too early to visualise what the future holds, she believes
the pandemic will “set back the clock by one or two decades in the way we think about
clothing and fashion”. “It’ll put a crunch on turnovers and cash across
the fashion industry. It’s difficult to predict what will happen after the lockdown is lifted…
will customers immediately buy because they’ve been deprived of shopping for so long, or
will customer behaviour change since the scare of the virus will prevail for some time,”
she added.
She said luxury goods are likely to be the last to really get back into the flow of
things. "As for the heavy craftsmanship, two things may happen - one is that maybe
people will start appreciating the craftsman’s work and try and buy more of handloom
and handcrafted designs, which are more classical and not fast fashion…
“On the other hand, the bridal market in itself will always be there, but I think it is going
to scale down to a large extent... the craftsmanship will still be there but at a smaller level,”
she added. Fashion designers said they are utilising lockdown days to plan the way
forward for secure business continuity in the second half of 2020 while taking care of the
well-being of their employees and artisans, who have been without work with production
and export shutdowns. While there are no separate figures for the fashion industry,
the Confederation of Indian Textile Industry (CITI) estimates that the textile and clothing
industry in India employs over 105 million people and also earn around $40 billion forex,
apart from substantial revenue under GST and other taxes.
Rahul Mehta, president of the Clothing Manufacturers Association of India (CMAI),
added that India’s apparel market is estimated to be around Rs 6.5 lakh crore. This
includes all sectors starting from high-end fashion labels to moderately priced ready-to-
wear brands.
Designers are facing a double whammy and looking at huge monetary losses, said Sunil
Sethi, chairperson of the Fashion Design Council of India (FDCI).
"They have to bear losses like most other industries and also need to take care of the
mental, physical and financial well-being of the people involved in the process of
converting their designs into a garment.
“The business has gone down to a great extent. For those in the export business, even if
they have an order, there is no shipping as factories are shut. If the goods are ready, then
the airlines are shut. They can’t send it out. Their stores aren''t in operation. So what has
happened is it (lockdown) has led to cancellation of a lot of orders and huge monetary
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33 CITI-NEWS LETTER
losses,” he told PTI. It really takes a village and hours of labour to create an eye-
catching ensemble.
Designer Payal Khandwala said nothing is more important than the safety and security of
the artisans, weavers, tailors and team members, the backbone of their brands.
"Our current preoccupation is how to retain all our employees, artisans and labour. To
make sure they are supported economically in spite of retail grinding to a halt. This is
stressful now but it will be unsustainable if it continues much longer, whether you are a
big business or small.”
Going forward, it will be important for the fashion industry to reevaluate its pace, its
purpose, the fashion calendar and trends.
“For us, the focus is, how do we best reach out to our audience in a time where people
might still be nervous about travel? The key will be to reassure our clients that it is done
in a safe and timely fashion, without compromising on the personalised experience of
shopping," she added.
Anavila Misra, best known for her handwoven linen saris, agreed.
It is also important to assure the work force that they are very much needed even after the
lockdown, and follow a protocol for customer safety, she said.
“Tailors are calling us and asking if they can return to work. Though we have credited
their salaries, they still have this uncertainty in their mind. We are assuring them that
their jobs are not at risk,” Anavila told PTI.
Designer duo Falguni Shane Peacock believes the only way to revive the industry is by
keeping the customers as top priorities.
“Right from understanding their choices in the post-COVID times to taking absolute
measures in ensuring their safety, the industry has to keep their best in mind. That said,
it is also hoping for a better future and working tirelessly to achieve is something we
should all strive for collectively,” the duo said in a mail.
For Shantanu & Nikhil, the call of action in a post-lockdown world would be a digital step-
up, including both social media and transactional value based methodology.
“During these unprecedented times of crisis, we are focusing our energies to re-think as a
start-up company with a fresh take on design,” said Nikhil Mehra, the creative half of the
team.
The couturier added that customisation will be more bespoke and private, with limited
access, and all safety plus sanitisation measures will be followed during the interactions.
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34 CITI-NEWS LETTER
“Austerity and minimalism would be the key driving design tools… And foremost, post
lockdown, we will be strictly implementing and observing all precautionary measures
during our operations and consumer interactions at our stores,” he said.
Fashion weeks are also set to change, at least for the immediate future. Sethi predicts
that future fashion weeks will become less fancy affairs. That is the only way to implement
social distancing and designers will have to function in accordance with a B2B model,
which involves trading between two business entities and not directly with the
buyer. “We need to restrain fashion weeks but they still need to have quality and
aesthetic sense. We will still spend money to see that the right design sense goes out. We
go with maybe lesser budgets, and skip the unnecessary hoopla that goes along
with fashion weeks. But the B2B business and business of having
meaningful fashion weeks for a buyer will definitely continue,” he said.
Home
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35 CITI-NEWS LETTER
GLOBAL
European Commission Adopts Circular Economy Action Plan
(Source: IISD, May 28, 2020)
The European Commission has adopted a plan focusing on the design and production for
a circular economy, ensuring that resources used stay in the EU economy for as long as
possible. The plan aims to reduce the EU’s consumption footprint, double its circular
material use rate, and contribute to economic decarbonization by reducing the EU’s
carbon and material footprint.
The Circular Economy Action Plan for a Cleaner and More Competitive Europe, which is
central to the European Green Deal, seeks to ensure that the economy is fit for a green
future and strengthen competitiveness while protecting the environment. It introduces
legislative and non-legislative measures and target areas where action at the EU level
brings added value.
More specifically, the Circular Economy Action Plan details measures to:
make sustainable products the norm in the EU, including, for example, the
restriction of single-use products and ensuring that products on the EU market are
designed to last longer, are easier to reuse, repair, and recycle, and incorporate
recycled material as much as possible;
empower consumers through access to reliable information about products at the
point of sale, including on their life span;
focus on sectors that use the most resources and have the potential for high
circularity, including electronics and information and communications technology
(ICT), batteries and vehicles, packaging, plastics, textiles, construction and
buildings, and food; and
ensure less waste by transforming it into high-quality secondary resources and
implementing actions to minimize EU waste exports and tackle illegal shipments.
Applying ambitious circular economy measures in Europe can increase the EU’s gross
domestic product (GDP) by an additional 0.5% by 2030, creating around 700,000 new
jobs, according to a European Commission press release.
The Action Plan includes measures to mobilize private financing in support of the circular
economy through EU financial instruments, such as InvestEU. It also proposes the launch
of a global circular economy alliance to explore starting a discussion on a possible
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36 CITI-NEWS LETTER
international agreement on natural resource management. [Questions and Answers on
the Action Plan] [New Circular Economy Action Plan Factsheet]
Home
Industrial Parks In Xinjiang Supplying Global Retailers Prompt Human
Rights Concerns
(Source: Edmund Xu and Samuel Rubenfeld, Kharon Brief, May 28, 2020)
A Xinjiang-based textile company is one of many apparel manufacturing firms supplying
materials to global retailers while operating from industrial parks that have raised
concerns about potential human rights violations through their surveillance and re-
education programs.
Aksu Huafu Textiles Co. will be added to the Entity List for engaging in human rights
violations and abuses in Xinjiang, an autonomous region of China home to a wide array
of ethnic groups, including Uighur Muslims, the U.S. Commerce Department’s Bureau of
Industry of Security (BIS) said Friday.
The U.S. didn’t specify the company’s conduct in its statement, but said it was one of the
parties complicit in abuses committed as part of China’s campaign of repression against
Uighurs, ethnic Kazakhs and other Muslim groups in Xinjiang.
Aksu Huafu Textiles’ parent company, Chinese manufacturer Huafu Fashion Co., has
been investing in Xinjiang since 2006 and now has an annual output of 189,000 tons of
yarn, according to its website. In 2018 in Xinjiang, Huafu Fashion opened the world’s
largest textile mill for melange yarn, a type of blended yarn involving two or more mixed
colors, knitting- and fashion-trade media outlets reported.
The U.S. move against Aksu Huafu Textiles comes amid rising tensions between the U.S.
and China over multiple issues, including Beijing’s treatment of the Uighur population.
The U.S. Congress has passed legislation that would impose sanctions on Chinese officials
for human rights abuses against Uighurs; President Donald Trump hasn’t committed yet
to signing the legislation, saying Tuesday it was being reviewed at the White House.
China’s foreign ministry on Monday accused the U.S. of interfering with China’s domestic
affairs in violation of “basic international norms,” and expressed “strong dissatisfaction”
and “firm opposition” to the U.S. move against companies operating in Xinjiang, saying
the government operations there are “counter-terrorism measures.”
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37 CITI-NEWS LETTER
Huafu Fashion said Monday in a statement posted to the Shenzhen Stock Exchange that
the listing by BIS won’t affect the company’s day-to-day operations. The “listing is an
irresponsible action with no consideration of the facts" the company added.
The BIS listing restricts U.S. exports to the company by imposing a license requirement.
Alongside Aksu Huafu Textiles, BIS listed a Xinjiang public security institute and seven
companies involved in China’s surveillance effort in Xinjiang. In a separate action on
Friday, BIS also announced the impending addition of 24 companies to the Entity List
for their involvement in supporting Chinese military end-use procurement; several of the
companies condemned the action over the weekend in statements cited in a report from
the South China Morning Post. The BIS listings go into effect once published in the
Federal Register.
Beijing has engaged in a mass surveillance effort in Xinjiang, aided in part by U.S.
technology, Kharon reported in April. BIS added multiple firms to the Entity List in
October 2019 for enabling the surveillance. Among the other seven companies added
Friday for their roles in surveillance were NetPosa and its subsidiary SenseNets, which
has a database containing the location and personal data of Uighurs that was discovered
by a Dutch researcher. Netposa said in a statement on Saturday that the listing would not
have a substantial impact on its day-to-day activities, and that the company does not
conduct any business with the U.S.
China has detained Uighurs at “vocational education and training centers“
(VETCs) before placing them at factories largely concentrated in consumer goods and
textile manufacturing. At the centers, detainees spend their days learning Mandarin,
Chinese law and vocational skills, according to media reports. Beijing has said the VETCs
are voluntary, that the “students” are treated well and can leave when they please. In
December, a top Xinjiang security official said those detained in the VETCs had
“graduated,” though observers were skeptical.
Chinese authorities have held at least 800,000, and potentially up to 2 million, people
since April 2017 at the VETCs and other facilities, according to U.S. government
assessments and human-rights groups. The VETCs serve as a foundation of a system of
forced labor in Xinjiang, leaked Chinese government documents show.
Factories located in detention facilities or industrial parks connected to government re-
education efforts, as well as companies engaging in “vocational training” as part of the
“Xinjiang Aid” poverty alleviation program, are red flags indicative of Uighur forced labor,
according to a report issued in March by the U.S. Congressional-Executive Commission
on China.
Citing U.S. government and non-profit experts, a joint statement from apparel trade
groups in March said the conditions in Xinjiang and the treatment of minority workers
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38 CITI-NEWS LETTER
“present profound challenges to the integrity of the global supply chain.” The statement
urged the U.S. government to engage a multi-stakeholder working group to assess the
problem and find workable solutions.
“Accepting the status quo is not an option,” the statement said. “While we are taking
action, our industry cannot solve this alone.”
Aksu Huafu Textiles is one of several subsidiaries of publicly traded apparel
conglomerates that operate in the same industrial park, called Aksu Textiles Industrial
City, in Aksu, Xinjiang.
The park is billed as a “transformational model to improve the quality of vocational
training,” according to a 2016 Xinjiang government article. Aksu Textiles Industrial City
in 2019 was on track to produce more than RMB 10 billion (USD 1.4 billion) worth of
goods, according to a recent textiles industry report.
Local residents who are “recruited” as workers in the industrial park must undergo
Mandarin training programs, as well as vocational skills training to “improve their overall
character,” the government article said. The training center also took steps to improve the
effectiveness of vocational training, including strengthening “regular training
inspections” and “recording trainees’ information in a management system,” according to
the government article.
Huafu Fashion trades on the Shenzhen Stock Exchange and received RMB 652 million in
government subsidies in 2019, much of it coming from local agencies in Xinjiang, the
company disclosed in its annual report. The company’s founder and chairman, Sun
Weiting, is also the legal representative of the Huafu Textiles Vocational Training School
located in the industrial park, corporate records show. The vocational training school was
founded in 2013 to train locals in textile skills, and it was the first such school to receive
approval from the Aksu government, local media reported at the time.
A December 2017 press release on Huafu Fashion’s website showed an image of 600 new
workers in Aksu, assembled in neat rows and wearing military camouflage while singing
the national anthem under propaganda banners. Aksu Huafu Fashion “energetically
works with the government to absorb surplus labor and organize teachers to provide
training to gradually turn farmers into industrial workers,” the press release said.
With officials hovering nearby, a Huafu worker in Aksu told a reporter from The Wall
Street Journal in May 2019 that she had been in a “training center,” and that “before I
used to have extremist thoughts, but now they’re all gone.” The worker was then taken by
officials into a room in an adjacent restaurant, and returned to say: “They say it’s secret.
Even speaking of it is not allowed.” Huafu told WSJ its labor-management system
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39 CITI-NEWS LETTER
complies with international regulations, and that its training program is mandatory for
all workers, regardless of ethnicity or religion.
Yarn made by Aksu Huafu Textiles in Xinjiang goes to factories elsewhere in China, as
well as Bangladesh and Cambodia, appearing in the supply chains of several companies,
the WSJ report said. Hong Kong clothing brand Esprit admitted to using cotton from a
Huafu mill in Aksu and committed to stop sourcing from that location, according to
statements to the BBC. Retailer H&M told the BBC that their probe into Aksu Huafu
Textiles showed “no evidence of forced labor.”
Another company based at the industrial park, Aksu Lianfa Textile Co., Ltd., directly
exports to the U.S., available trade data show, although it is unclear who the U.S.
importers were.
Aksu Lianfa Textile is a subsidiary of publicly traded conglomerate Jiangsu Lianfa Textile
Co., Ltd., which earned more than USD 160 million in revenue from the U.S. and
European markets in 2019, financial disclosures show. Jiangsu Lianfa has supplied
Individualized Shirt Company, one of the largest U.S. custom shirt makers, with
thousands of kilograms of cotton fabric in the past few years, according to trade records.
Jiangsu Lianfa said in its 2018 annual report that it does not engage in any poverty
alleviation efforts, despite winning a national poverty alleviation award that same year, a
Center for Strategic International Studies report found.
And Chinese apparel conglomerate Youngor Group, one of China’s largest apparel
companies, also has two Aksu-based subsidiaries that are located in the industrial park.
One of the subsidiaries boasted ties with leading fashion brands in Europe and the U.S.
in a now-removed post on its website. Youngor Group also signed a deal in 2007 to bring
the Hart Schaffner Marx brand, a leading U.S. men’s suit maker, to China. One of
Youngor’s Aksu-based subsidiaries held a “deradicalization” session for 240 workers in
May 2017 at the request of the industrial park’s management, a WSJ report said. Workers
were told not to pray in public or own books with ethnic or religious content, and that the
company would tighten oversight on the workers’ internet usage.
Youngor Group has been involved in other suspect labor practices. The manager of a
Youngor subsidiary in Hunchun, China, near the border of North Korea, said the company
employed more than 3,000 North Korean laborers due to their “low cost and superior
quality,” according to an interview he gave for an October 2018 report from Charhar
Institute, a Chinese think tank. United Nations sanctions that came into effect late last
year prohibit the hiring of North Korean workers.
Other factories based in industrial parks with ties to government-run vocational training
and re-education programs also produce goods for companies located in the U.S. or sell
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40 CITI-NEWS LETTER
their products there, according to media reports, corporate records and other publicly
available information reviewed by Kharon.
The Beijing Industrial Zone in Xinjiang’s Lop County was the site of a widely circulated
image posted by Xinjiang’s Ministry of Justice in April 2017 that shows Uighur detainees
listening to a “deradicalization speech,” according to an investigation by Uighur-
American journalist Shohret Hoshur.
Among the companies registered at the Beijing Industrial Zone in Lop County include two
manufacturers of hair products and accessories that recently shipped goods to U.S. firms,
according to shipping records.
One of the firms, Lop County Meixin Hair Products Co., Ltd., shipped over 1,000
kilograms of wigs and mannequin heads to U.S. firms in Los Angeles and Miami, with the
most recent shipments arriving in February 2020, trade records show.
The other company, Hetian Haolin Hair Accessories, in the past year shipped more than
150,000 kilograms of wigs to two U.S. firms directly from its Beijing Industrial Zone
address, trade records show. One of the U.S. firms markets its hair products on Amazon.
‘Double the Time and Effort’
At least two Chinese clothing manufacturers have maintained relationships with a
vocational high school in Yengisar County, in southwest Xinjiang, according to local
media reports. Both firms are owned by vendors to global retailers.
Yengisar Vocational High School has partnered with a local clothing manufacturer,
Xinjiang Xirong Clothing Co., Ltd., to supply student labor under an “internship”
program, according to August 2019 Chinese media reporting. The internship program has
been ongoing since at least March 2017, when local media reported on a group of 300
Yengisar Vocational High School students being sent to Xinjiang Xirong Clothing for
more than five months of training.
A company manager told a Chinese reporter that the company’s Xinjiang workers take
“double the time and effort to train” primarily because of language difficulties but that the
company persists as part of their participation in the government’s “Xinjiang Aid” policy.
Xinjiang Xirong Clothing, an apparel manufacturer, is a wholly owned subsidiary of
Qingdao-based Jifa Group, a supplier for Japan-based Fast Retailing Co., Ltd, which owns
the popular Uniqlo clothing brand sold globally.
One student at the company said during an interview with local media that she was “using
her work break to study the curriculum of her national language (Chinese) courses.”
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41 CITI-NEWS LETTER
Testimonies from detainees of Xinjiang’s vocational training centers indicate that forced
enrollment in Chinese language courses are a common aspect of the centers’
curriculum, an assertion backed up by a 2018 provincial government regulation that
called for language education as one of the methods to counteract “extremist ideology”
and to psychologically and behaviorally “correct” vocational center students.
Though there is no direct evidence that Yengisar Vocational High School is a vocational
training center, local authorities have been transforming vocational schools into
internment compounds, according to evidence cited in a November 2019 report by Adrian
Zenz in the peer-reviewed Journal of Political Risk.
Jifa Group’s import and export subsidiary in Qingdao, China, has regularly supplied
Uniqlo units in the U.S. and Canada with thousands of kilograms of clothing since at least
2017, trade records show.
None of the goods in these shipments can definitively be sourced to Jifa’s operations in
Xinjiang, however. Uniqlo was one of 83 brands named in a recent report by the
Australian Strategic Policy Institute (ASPI) as benefiting from Uighur labor outside
Xinjiang. The company said, in response to that report, that none of its products were
made in the region.
Even if Jifa Group did not export goods made in its Xinjiang subsidiary abroad, the
company benefited directly from Uighur labor by working with Yengisar Vocational High
School in Xinjiang as part of the government-supported “Xinjiang Aid” program,
according to Chinese media reporting. Twenty-eight Uighur women arrived in March
2019 at Jifa Group’s headquarters in Qingdao to attend three months of hair-products
technology training, according to a Chinese media report.
Chinese companies can engage in the Xinjiang Aid program by hiring Uighur workers for
their factories outside of Xinjiang through labor transfer schemes, the ASPI report noted.
Yengisar Vocational High School is also working with Kashgar Zhongxin Glove Co., Ltd.,
a company located in the same industrial park as Xinjiang Xirong Clothing, to set up a
“glove manufacturing management degree,” according to August 2019 media reports.
Zhongxing Glove’s parent company, Shandong Jianhua Zhongxing Glove Co., Ltd., has
made at least 12 shipments of more than 12,000 kilograms of ski gloves to Walmart since
2017, with the most recent shipment in August 2019. Shandong Jianhua also shipped
20,000 kg of ski gloves last year to Bioworld Merchandising, which markets Harry Potter,
Star Wars, and DC Comics-branded products on Amazon. Zhongxing Glove recently
removed from its website reference to its Xinjiang-based factory as one of only two
factories run by the company.
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42 CITI-NEWS LETTER
Pakistan: Govt focusing on attracting FDI, transfer of technology in SEZs:
Razak Dawood
(Source: The Nation, May 28, 2020)
Prime Minister’s adviser on Commerce and Investment Abdul Razak Dawood has said
that Pakistan had attained huge space in global rice market for exporting local rice in
potential markets of Middle East, North America and African regions to achieve the target
of increasing the agricultural exports.
He said the government intended to take the exports to the highest level ever and for that
purpose it was taking different measures to reclaim traditional markets besides accessing
new ones.
Talking to the APP here, he informed that rice delegation from Maxico would hopefully
arrives to Pakistan in June to appraise various rice exporters for giving them permission
for exporting rice to Maxico.
The adviser said the all members of Rice Exports Association Pakistan (REAP) should
prepare themselves for this opportunity from visiting delegation of Maxico so that
maximum members get order approval in their market.
He said that during past few years, local rice export to Maxico had been held up for some
time and after this “I hope that our rice will be able to enter in Mexican market.”
Razak Dawood said that rice was the largest agro-export commodity in the country’s
export basket with a total volume of over $2 billion, which would be increased to $5 billion
in the next five years.
He demanded the local rice exporters to introduce new varieties of rice to enhance
production and quality by investing in research and development.
Replying to a question, he said that even in current critical situation, the country’s exports
increased in food, including meat, poultry, fruits and vegetable, cigarettes especially in
Middle Eastern Market as compare to same period of previous year.
Replying to another question, he stressed the need for making preparations to exploit the
economic and trade opportunities expected in the wake of post COVID-19 pandemic.
“We perceive and expect more opportunities to promote bilateral trade and strengthen
linkage with potential markets including Central European Union, China, Asian States,
Middle East and African region besides promoting regional trade in post pandemic
environment,” he said.
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43 CITI-NEWS LETTER
He said the pandemic would bring a paradigm shift, hence create great opportunities
adding the coronavirus had changed the world and now the business processes would be
completely different.
“Such difficult period always brings out new opportunities, new products, and new ways
of thinking,” he opined.
Razak Dawood said the government was equally focusing on all sectors of economy
including textile, non-textile, and agriculture and engineering sectors to build export
potential of the country in coming months.
Talking about the external trade situation during the past three months, he said the
situation of exports was not good as those had declined in April 2020 by around 54 per
cent as compared to the same month of last year and the reason obviously behind the
decline was the spread of coronavirus across the world.
Replying to another question, he informed that in last 10 months (July-April) of current
fiscal year 2019-20, the overall exports were declined by four percent as compared to the
corresponding period of last year.
He said the exports increased by 13 percent in February, however, started reducing from
March which had decline the exports by 6.5 per cent as compared to the last year.
However, he said even during the current lockdown situation, in the beginning of COVID-
19 pandemic, Pakistan exported textile and non-textile products while the country’s food
exports increased especially in the Middle Eastern market.
Likewise, exports in steel articles also increased in the last three months in the critical
situation.
Razak Dawood said the government was prioritizing to promote ‘Made in Pakistan’ policy
to boost local production and reduce dependence on import and enhance exports.
While the adviser emphasized the need for exploiting the huge opportunities of increasing
exports in the health and safety products like personal protective equipments (PPE)
including protective masks, gloves, sanitizers, clothing, helmets, goggles and other
garments or equipment designed for protection from COVID -19.
He said a summary in that regard had already been forwarded to the cabinet, while the
ministry was also negotiating the future strategy for increasing the exports to help export-
led economic growth. “We should conclude our all strategy and start manufacturing in
different sectors to achieve our exports targets,” he added.
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44 CITI-NEWS LETTER
Sri Lanka facing worst financial crisis due to COVID-19 induced economic
curbs: Minister
(Source: Outlook India, May 28, 2020)
Sri Lanka is facing the worst financial crisis in the country’s history due to the economic
curbs imposed after the coronavirus outbreak that has killed 10 people and infected 1,453
others, a senior minister said on Thursday.
“We are facing the worst foreign exchange crisis in history. The government decision to
curb imports imposed since the COVID-19 pandemic was based on reality,” Bandula
Gunawardena, who is the minister for Information and Communication and the
government’s spokesperson, said.
The statement by the minister came as Sri Lanka early this month said it is yet to receive
any monetary foreign assistance in its fight against the coronavirus pandemic despite
signing an agreement with the World Bank for USD 127 million assistance.
Sri Lanka in April restricted imports of non essential goods in its bid to save foreign
currency reserves.
“Due to COVID-19 many of our exports are down. About 5 billion dollars of exports come
from textiles. Tourism revenue is also down. Remittances are also down,” Gunawardena
said.
He said if the government allowed outward flows of money through imports the local
rupee would further fall.
The rupee hit a record lowest of 190 plus against the US dollar due to the pandemic.
“If it goes to 250 to 350 (to the dollar) we will not be able to live in this country. There will
be a cost of living which no one will be able to bear,” Gunawardena said.
He said the import controls are needed to keep the rupee afloat, promote import
substitution and domestic agriculture.
“It is done on the need to stop imports flowing in freely and the need to build a domestic
economy,” Gunawardena said.
With economic woes in sight, Sri Lanka opted to seek help from India through currency
swap arrangements.
Sri Lanka had already secured a 400 million dollar swap from India through the SAARC
arrangement.
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45 CITI-NEWS LETTER
This week President Gotabaya Rajapaksa spoke to Indian Prime Minister Narendra Modi
over the phone and asked India to provide a special USD 1.1 billion currency swap facility
to boost the country''s draining foreign exchange reserves in view of the economic
slowdown due to the coronavirus pandemic. To boost the tourism sector, which is among
the main sources of revenue for the island nation, Sri Lanka is mulling the idea of opening
its airports from August 1.
Tourism accounts for about five per cent of the economy, with Britain, India and China
the main markets.
The number of international tourist arrivals in Sri Lanka declined in March 2020 by 70.8
per cent in comparison to a year ago as the tourism industry has been hit hard by the
coronavirus outbreak. The tourism sector of Sri Lanka has been in bad shape since last
year when the country was jolted by the Easter Sunday attacks, which killed over 250
people including Indians. Till Thursday, Sri Lanka has reported 10 deaths and 1,453
infections of the coronavirus.
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IMC releases survey of retail buyer perspectives
(Source: Vicky Jarrett, Home Textiles Today, May 28, 2020)
A new survey of the gift, home furnishings and apparel industries commissioned by
International Market Centers reveals that — while the COVID-19 crisis has significantly
impacted all retail sales across the United States — store owners and operators are looking
toward re-opening and recovery and expressing a near-term need for new product. Survey
respondents also indicated their intention to attend physical markets, provided
reasonable safety protocols are implemented. Meanwhile, the survey shows that digital
tools will likely play an important role during the recovery period.
“We are thankful to our retail and design communities for participating in this survey and
sharing details about their businesses, attitudes and preferences so we can better plan for
the future,” said Bob Maricich, IMC CEO. “We have used this data to inform our decisions
about timing and format for our markets and hope that this information can help the
entire industry begin the process of recovery.” Conducted for IMC by Stax Inc., a global
strategy consulting firm, the survey offered four key takeaways:
1. Impact of COVID-19 on retail buyers
As of April 30, approximately 70% of retailers reported that they temporarily
closed a majority or all of their stores. While online sales have shown resilience
across all segments, furniture retailers have been most effective at recouping lost
in-store sales via online channels.
Some 80% of retailers have implemented at least one cost-reduction measure
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46 CITI-NEWS LETTER
and/or deployed at least one promotion. Additionally, 70% to 80% of respondents
have applied for government funding.
2 .Retail buyer outlook
About half of retailers expect to require inventory within the first four weeks after they
reopen, with all respondents indicating that they plan to buy within 18 weeks.
Sixty-four percent of retailers expect sourcing to focus on core and best-selling products
from vendors with whom they have a pre-existing relationship.
3. Markets and mitigants
Forty-three percent of respondents are expected to attend a market this summer.
Retailers are likely to be more comfortable attending market activities over time
and with appropriate safety measures.
Thoms not planning to attend markets cite concerns about the coronavirus, limited
travel budgets and business closures.
4. Role of in-person markets and digital marketplaces
The responses to the survey made it clear that physical markets are critical for
retailers across all product categories. Digital tools, however, will likely play an
important role as a complement to in-person markets, as roughly half of retailers
leverage them for sourcing or purchasing product today with that number expected
to increase post-recovery.
About the survey: In April 2020, Stax sent surveys to more than 180,000 retailers and
designers who have attended markets in Atlanta, High Point and Las Vegas in the past
two years. A subsequent survey was sent out to more than 6,000 IMC tenants and
exhibitors. In response to the survey, IMC has updated its summer market dates and
formats, and it has shifted at-market programming to digital channels. IMC also has
introduced new health and safety protocols for its campuses in Atlanta, High Point and
Las Vegas.
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