CITI-NEWS LETTER · In a letter to Prime Minister Narendra Modi, Apparel Export Promotion Council...
Transcript of CITI-NEWS LETTER · In a letter to Prime Minister Narendra Modi, Apparel Export Promotion Council...
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04th April
2020
Apparel exporters seek relief package, say millions could go jobless
Centre considering exporters’ demand to allow limited manufacturing
with 50% workforce
GST ease amid Covid 19: E-way bill validity extended, 10% ITC deferred
CBIC allows traders to import, export goods without furnishing bonds
Coimbatore, Tiruppur units get into protective gear production
Cotton and Yarn Futures
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2 CITI-NEWS LETTER
-------------------------------------------------------------------------------------- Apparel exporters seek relief package, say millions could go jobless
Centre considering exporters’ demand to allow limited manufacturing with 50% workforce
GST ease amid Covid 19: E-way bill validity extended, 10% ITC deferred
CBIC allows traders to import, export goods without furnishing bonds
Coimbatore, Tiruppur units get into protective gear production
Trade unions seek labour minister's intervention to stop retrenchment of workers, salary cuts
Economic Policy: India’s biggest challenge in time of Coronavirus
India, China trade declines by 12.4 per cent in first two months of this year amid coronovirus outbreak
If the Textile Industry Is to Recover From the Lockdown, It Needs Quick Government Help
Only consumer goods may see green shoots amid coronavirus pandemic
Relief measures announced by govt, RBI not enough, says India Inc
B’luru lockdown: Garment workers face uncertainty, factory owners unwilling to pay wages
Banks: Sector Credit Trends - Slowdown, more in store - HDFC Securities
'India may post lowest growth in post-reform period in FY21'
Aditya Birla Group donates ₹400 crore to PM-CARES Fund for covid-19 relief
Welspun swings into action to combat COVID-19
----------------------------------------------------------------------------- Bangladesh will extend Tk 50bn coronavirus relief package to exporters as bank credit
Primark and Matalan among retailers allegedly cancelling £2.4bn orders in ‘catastrophic’ move for Bangladesh
Germany’s Biggest Department Store Files for Insolvency, Victim of COVID-19 Collapse
H&M Group releases Sustainability Performance report 2019
Pakistan: Govt Offers Rs 100 Billion To Uplift Industry: Dawood
UKFT campaigns to support small companies amid COVID-19
MIT Develops Cheap, Open Source Ventilator for Coronavirus Treatment
Pakistan: Exports dip in March amid global slowdown
US Decontamination Wipe could Help Coronavirus clean-Up
Cotton supply chain at a virtual standstill
------------------ --------------------------------------------------
NATIONAL
---------------------
GLOBAL
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NATIONAL:
Apparel exporters seek relief package, say millions could go jobless
(Source: Subhayan Chakraborty, Business Standard, April 04, 2020)
Write to PM, saying foreign order cancellations would affect 12.9 million workers
As factories shut down, workers leave and global demand plummets, apparel exporters
have sounded the alarm, warning that millions of people could go jobless soon if a relief
package isn't announced soon.
Even as the industrial cycle has ground to a halt
during the 21-day lockdown, the industry has
been hit hard by foreign orders from major clients
in the US and Europe being cancelled. Also, a
sudden lack of labour has crippled the sector
because of a mass exodus of workers from
industrial units to the hinterland.
According to industry estimates, about 70 per
cent of the apparel units are in the micro, small,
and medium sector. Labour costs form the single-
largest component of product costs at a typical
25-30 per cent, as opposed to the norm of 7-8 per
cent for overall domestic industry.
In a letter to Prime Minister Narendra Modi, Apparel Export Promotion Council (AEPC)
Chairman A Sakthivel said the industry employing 12.9 million workers would die a slow
death unless the government immediately announced an economic package for apparels.
“Apparel industry is a seasonal industry and the products are similar to a ‘perishable
commodity’ as they are a tailor-made, design-specific, fashion-specific export and any
cancellation this year may be redundant and have little or no salvage value next year,”
said Sakthivel.
n a similar letter to PM, Confederation of Indian Textiles Industry Chairman T Rajkumar
suggested that all raw materials, dyes and chemicals, intermediaries, spares, and
accessories be exempted from anti-dumping duty and basic Customs duty.
AEPC has pleaded that most of the sector are operating under extremely competitive
margins in the range of 3-4 per cent, and are completely dependent on export benefits
granted by the government. Given the disruptions in imports, the Council has requested
for the extension of validity period of unutilised entitled value under export promotion
schemes by six months. It also asked for the extension of the validity period of Advance
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Authorisation to two years from the existing one year along with the period for fulfilment
of export obligations being increased to 3 years from the existing 18 months.
Global challenges
Exporters have pointed to detailed, industry specific measures taken by other
governments as necessary cues for India to adopt immediately. “India's main rival in
textile exports, Bangladesh, is funding salaries of workers for three months by extending
loan at 2 per cent payable over two years. India needs to at least do this. The government
needs to help out labour and industry both as flow of funds from either the banks or the
customers have stopped,” said S K Jain, managing director of garment major TT.
According to the World Trade Organization, China, the European Union, Bangladesh, and
Vietnam unshakably remained the world’s top four largest exporters in 2018. Altogether,
these top four accounted for 72.3 per cent of world market shares. Next-door Bangladesh's
export of apparel more than trebled between 2008 and 2018. Even before the Covid-19
crisis began, demand from key importers and particularly, the UAE, had gone down
drastically, say exporters. The trend started in late-2018 with many new manufacturing
units coming up in free market zones in the UAE, which prefers to source raw materials
from India as opposed to finished goods.
Slow policy
Ever since the Covid-19 struck India, the government has announced a single new
measure for the sector as a whole, the extending of the Rebate of State and Central Taxes
and Levies scheme. In place since March, 2019, it provides benefits to exporters in the
form of duty credit scrips similar to existing schemes. But, it does so while rebating all
embedded state and central taxes on paid inputs. This includes VAT on petrol, mandi tax,
electricity duty, and stamp duty on all export documents, among others.
Home
Centre considering exporters’ demand to allow limited manufacturing with
50% workforce
(Source: Amiti Sen, the Hindu Business Line, April 03, 2020)
May be impossible to regain loss of global market share post lockdown, exporters tell
government
The Centre is considering a demand made by exporters to allow units to work with 50 per
cent of their workforce amid the lockdown. Exporters are concerned that a complete halt
in production for the entire period could lead to the permanent loss of some markets.
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“The Commerce Ministry, Home Ministry and Finance Ministry are examining the
request and a decision is likely soon,” a government official told BusinessLine. “The
Centre also has to take a call on the level of supervision under which manufacturing can
be allowed, as exporters are not in favour of too many inspections.”
Home Secretary Ajay Bhalla recently held a video conference with the Chief Secretaries of
all States to discuss allowing limited production in manufacturing units in the lockdown
period. While Punjab and Haryana have already allowed factories to function, some
manufacturers complain that there are way too many conditions with regard to
environment, health and labour, and related inspections, hampering operations.
“All exporters are willing to adhere to the safety norms prescribed by the government,
such as ensuring adequate distancing and maintaining hygiene. But if we go back to the
‘Inspector Raj’ regime, it will make things difficult,” said a person with a garments factory
in Ludhiana.
Limited manufacturing
Exporters from various sectors have been asking Commerce Minister Piyush Goyal to
ensure that they are allowed to continue with production even if it is not at full capacity.
In a meeting that Goyal held with exporters across sectors earlier this week through video
conference, the latter proposed that all manufacturing companies in exports be allowed
to operate, with 50 per cent of the manpower, maintaining sanitation, safety and social
distancing norms. Otherwise, the loss in exports will result in market loss, which will be
extremely difficult to recover, they said.
“Our loss will be China’s gain, which is using all means to gain greater market access with
increased export rebate VAT,” pointed out the Federation of Indian Export Organisations
(FIEO) in its presentation. The FIEO has also written to the Home Ministry, proposing
that exporting units be allowed to function in all States.
With the number of Covid-19 cases crossing 2,000 in India, with over 50 deaths, there is
little certainty on what the situation will be on April 14, when the lockdown period ends,
leaving exporters even more anxious about their operations.
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GST ease amid Covid 19: E-way bill validity extended, 10% ITC deferred
(Source: Gulveen Aulakh, Economic Times, April 04, 2020)
The government extended the validity of e-way bills till April 30, that were set to expire
between March 20 and April 15, giving a big relief to industry grappling with issues of
supplies and goods stuck in transit amid the nationwide lockdown due to Covid 19.
“Where an e-way bill has been generated and its period of validity expires during the
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period 20th day of March, 2020 to 15th day of April, 2020, the validity period of such
eway bill shall be deemed to have been extended till the 30th day of April, 2020,” the
finance ministry said in a notification Friday.
The finance ministry has also deferred the application of 10% restriction for availing input
tax credit for February, to August, 2020 and rolling over the cumulative applicability to
the month of September, 2020, giving the industry a seven-month window that will ease
out cash flows, experts said. “Government has gone all out in of support the industry by
deferring the application of 10% credit restriction… This step from government would
ease out the cash flows of the entire community of over 12 million taxpayers,” said Rajat
Mohan, senior partner at AMRG Associates. The extensions were given via a notification
on Friday, which also brought into effect several indirect tax compliance relaxations that
were announced by the government earlier this week.
Home
CBIC allows traders to import, export goods without furnishing bonds
(Source: Gulveen Aulakh, Economic Times, April 03, 2020)
The Central Board of Indirect Taxes and Customs (CBIC) has allowed traders to submit
an undertaking instead of furnishing bonds – required by customs for assessment and
clearing of goods – in order to prevent delays or disruption in exports or imports caused
by Covid 19 pandemic. The decision was taken after field formations flagged the
unavailability of notarised stamp papers for furnishing the bonds that was being faced by
importers, exporters and their authorised custom brokers, during the lockdown period.
The Board will review the order after April 14, when the nationwide lockdown ends. “In
light of unprecedented situation caused due to Covid 19 pandemic, Board has decided to
take certain measures for a temporary period, with a view to expedite customs clearance
of goods and for maintaining balance between customs control and facilitation of
legitimate trade,” CBIC said in a notice Friday, giving relaxation of furnishing bonds till
April 30. “In the period up to April 30, customs field formations may accept requests for
submission of an undertaking from the importer/ exporter in lieu of a bond,” it added.
The relaxation applies to central and state PSUs, manufacturers or actual users,
importers, authorised economic operators, status holders and all importers availing
warehousing facilities. There will be certain conditions, including one that the trader gives
a commitment to furnish the bonds, latest by July 5, 2020. Traders will have to submit
the undertaking, the contents of which will have to be the same as the bond.
The relaxation may also be given to traders who ask for it, on a case to case basis, the
Board added.
Home
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Coimbatore, Tiruppur units get into protective gear production
(Source: The Hindu, April 03, 2020)
Some of the industries in Tiruppur and Coimbatore, with manufacturing facilities, are
getting into production of personal protection gear, either the complete set or in
individual products.
In Tiruppur, three companies have gone into manufacture of masks and some are doing
coveralls. According to Raja Shanmugham, president of Tiruppur Exporters Association,
there are a lot of enquiries for masks and coveralls as Tiruppur is a textile hub. “But we
need fabric sealing facility for coveralls. Even in the case of masks, so far, we only use
dust-preventive masks. We need to use sterilised non-woven fabric for the masks used by
healthcare sector as a precaution against COVID-19. Availability of the fabric meeting the
approved standards is not much. Many are asking for the masks. But we cannot shift to it
easily. We can only stitch masks. We cannot do the moulded ones,” he says.
According to the General Manager of Coimbatore District Industries Centre,
Karthigaivasan Kachirayar, two companies make coveralls that meet the government
standards and one is making coveralls that the healthcare workers can use. One
manufacturer is contemplating production of the entire Personal Protective Equipment
kit. “We have provided the technical details to the manufacturer,” he said.
For masks, three units were already making three-ply masks and two more have got into
it. One person has got into face cover. Apart from these, two companies produce
ventilators for larger brands.
One manufacturer is getting into it and has done three prototypes. One more company
has started producing. “There is higher movement of ventilators from here,” he said.
A lot of textile manufacturers in States such as Punjab had switched over to protective
gear recently. Coimbatore was a major textile centre and the government was talking to
the manufacturers to encourage them to get into this segment, he said.
Home
Trade unions seek labour minister's intervention to stop retrenchment of
workers, salary cuts
(Source: Yogima Seth Sharma, Economic Times, April 02, 2020)
Ten central trade unions have jointly written to labour minister Santosh Kumar Gangwar
seeking his intervention at the ground level to stop retrenchment of workers and rampant
salary cuts. “Advisory by the government, both the labour ministry and home ministry, is
not at all working at ground level to prevent loss of employment and earnings and also
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eviction from local residence in the process of lock down,” the unions said in a joint
statement. According to the statement, workers across the country are complaining of
forced unpaid leave, including from the National Capital Region. despite repeated
advisories from the government.
The 10 central trade unions include the INTUC, AITUC, HMS, CITU, AIUTUC, TUCC,
SEWA, AICCTU, LPF and UTUC. The trade union, had in their letter to PM on March 26,
demanded strong statutory enforceable measures to arrest and put a ban on the ongoing
spree of retrenchments, wage cut, forced unpaid leave being perpetrated by the employers
on the workers, particularly contract, casual, temporary and fixed term workers in various
establishments. Raising the distress of migrant workers, Unions have urged the
government to act urgently to rescue them with necessary transport facilities and ensure
they are provided with food, shelter, water and required health services, in line with the
directions issued by the government.
In view of the ever-growing scale and spread of the problems of these workers particularly
migrant workers, we request you to ask the counterparts in ministry of labour in
respective states to communicate and coordinate with all the trade unions in their states
including formation of trade union committees and issuing valid passes to office bearers
of trade unions for addressing the above mentioned issues including their participation
in relief work, it said in a statement.
Home
Economic Policy: India’s biggest challenge in time of Coronavirus
(Source: Nirvikar Singh, Financial Express, April 04, 2020)
Despite the health impacts of the corona-crisis, the biggest challenge for India will be in
terms of economic policy.
Since the nationwide lockdown on March 24, various branches of the Indian government
have issued dozens of notifications to clarify the scope of the lockdown, develop the health
system’s response, and support the real economy and the financial system. These are
illustrations of the strength of the Indian ruling elite. It remains to be seen how well these
pieces of paper and digital documents translate into effective action. In the United States,
projections of the death toll from the pandemic are drawing comparisons with that
country’s past wars. The nature of the societal response that is needed has also used war
as an analogy for the effort to overcome the virus. Independent India has not faced a crisis
like this in its seven plus decades, with large-scale war and famine being legacies of the
colonial period. Independent India faces its biggest challenge ever.
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9 CITI-NEWS LETTER
Everyone recognises that the healthcare system will be the first line of defence against the
pandemic, and that India’s resources are lacking. Even advanced countries like the US
and Italy have been seeing their healthcare systems come under enormous strains. India
will need a range of equipment for those on the frontlines, and will have to go beyond
domestic production to get what it needs. It remains to be seen whether the bureaucracy
can be flexible enough to search globally for what is needed. This will apply to healthcare
professionals as well as supplies and equipment, and may require domestic reallocations
as well as looking abroad. Eleven “Empowered Groups” have been constituted, covering
different dimensions of the needed responses. How well they work will have to be seen.
Again, the US provides an example of weakness and failure at the federal level, in sharing
equipment and supplies across states from national stockpiles, and in failing to coordinate
and prioritise support for the worst hit states. Will the different Empowered Groups
coordinate well, and how will they implement what needs to be done?
Beyond the frontline of care for the stricken, testing, contact tracing, and more complex
aspects of societal management require on-ground engagement that will be a challenge
for lower levels of government. One has already seen better responses from police forces
in southern states, which have higher literacy and stronger civil society in general, versus
northern ones, including well-off areas such as the National Capital Territory. The
challenges will be even greater in rural areas, and one cannot help but wonder whether
the manner in which the lockdown was implemented, leading to a hasty and painful
dispersion of migrant workers to their home villages, will still end up making it more
difficult to track, isolate, and treat disease cases.
Despite the critical nature and human consequences of frontline healthcare and public
health interventions, perhaps the biggest challenge for India will be in terms of economic
policy. In a situation unprecedented since the Great Depression, it is difficult to estimate
exactly what ought to be done. But, observing what is being done in the US, it seems that
India needs to do more than it has so far, even though much has been announced in terms
of new measures since the lockdown was announced. My own opinion is that RBI should
provide even more support for financial markets, and for the finances of financial and
non-financial firms. It should consider another interest rate cut as well. Even more
importantly, the central government should be pumping more money into the economy,
both in the form of transfers, and by supporting aggregate production and investment. In
the current situation, it seems to me that all fiscal deficit targets are irrelevant in the short
run. The government should borrow what it needs, and RBI should make this possible.
Control of the health crisis at the expense of a prolonged downturn in the economy, well
beyond what was already being experienced, will substitute one form of suffering for
another.
Of course, there will be concerns about inflation, but the collapse in the price of oil will
help enormously. Another major source of inflation is food prices, and the government
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10 CITI-NEWS LETTER
should be focusing very heavily on maintaining, and even improving, food supply chains,
and enlisting the help of state governments to ensure that agricultural commodities move
freely across the country. This will also mean rolling back some of the lockdown on
transport systems—that complete shutdown was one of the worst aspects of the lockdown
as initially announced. The government should also release food grains from its stocks,
and import food if necessary, to make sure that food supplies are sufficient. Another
concern about government spending is that it may crowd out private spending, especially
investment, but that is unlikely to be an issue for the next year.
It is unfortunate that the crisis will put on hold important economic reforms such as
disinvestment, and cleaning up balance sheets of the financial sector and nonfinancial
corporations. Certainly, a massive stimulus will allow some scoundrels to benefit, or to
escape the consequences of past misdeeds or incompetence. But, that is an unavoidable
side effect of avoiding a major economic collapse. Side effects should not distract from
what is immediately necessary for preserving the livelihoods of the masses.
(The author is Professor of Economics, University of California, Santa Cruz.)
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India, China trade declines by 12.4 per cent in first two months of this year
amid coronovirus outbreak
(Source: Economic Times, April 03, 2020)
The trade between China and India fell 12.4 per cent year-on-year to USD 12 billion in the
first two months amid the coronavirus outbreak, according to the latest data from Chinese
customs. From January to February, China's exports to India were 67.1 billion yuan (USD
9.5 billion), down 12.6 per cent on a yearly basis and imports from India dropped 11.6 per
cent to 18 billion yuan (USD 2.5 billion), the state-run Global Times reported on Friday.
Bilateral trade fell by 12.4 per cent to 85.17 billion yuan (USD 12 billion) in the first two
months, the report quoted Chinese Customs data. The lockdowns in both the countries
due to Covid-19 is expected to badly affect the bilateral trade which declined by three
billion billion dollar last year to USD 92.68 billion from USD 95.7 billion in 2018. The
declining trade was largely attributed to the slowdown of the economies of the two
countries. The trade deficit for India continued to be high amounting to USD 56.77 billion
in 2019.
The trade deficit has become a major irritant in India-China bilateral relations, figuring
high in the bilateral discourse. India has been demanding China to open up its IT and
pharmaceutical sectors to enable it to increase its exports. As China continued to promise
to address India's concerns, the two countries discussed initiatives over the issue at
various levels last year. As a result of lockdowns, the Indian pharma industry is concerned
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11 CITI-NEWS LETTER
as India is a big importer of the main raw materials called APIs (Active pharmaceutical
ingredients) from China. API shipments have started coming in for pre-manufactured
stocks which were lying at ports in China, Lan Jianxue, deputy director of the Department
for Asia-Pacific Studies at the China Institute of International Studies, told the Global
Times. "This is hampering business sentiment and affecting investment and production
schedules of companies in India," he said.
Lan noted that sectors like pharmaceuticals, healthcare and non-traditional securities are
likely to become new forces to drive cooperation between China and India in the near
future. The coronavirus outbreak is slowing down Indian exports to China, Atul Dalakoti,
executive director for China at the Federation of Indian Chambers of Commerce and
Industry (FICCI) said. China in recent years has emerged as a major market for Indian
products like seafood, petrochemicals, gems and jewellery, he said. The Covid-19
outbreak has adversely impacted exports of these items to China, Dalakoti told . The fall
of exports could result in losses in the Indian fisheries sector. India also exports 36 per
cent of its diamonds to China. The cancellation of four major trade events between
February and April could also cause major losses to India's diamond industry, he said.
Home
If the Textile Industry Is to Recover From the Lockdown, It Needs Quick
Government Help
(Source: K. Radharaman, The Wire, April 03, 2020)
The economic shocks that follow the COVID-19 pandemic come at a time when the sector is
already struggling from the aftereffects of demonetisation and other declining economic
indicators.
India’s textile and apparel industry is in a crisis and needs fixing. Widely regarded as the
second-highest employment generator after agriculture, the sector employs around 45
million workers directly and another 60 million indirectly across the country.
The economic shocks that follow the COVID-19 pandemic come at a time when the sector
was already struggling from the aftereffects of demonetisation and other declining
economic indicators. While there is no denying the need to arrest the spread of the virus
by any means possible, including a full or partial lockdown, the need to manage its
economic aftermath is just as urgent.
Across the globe, there is near unanimity on the fact that the global economy is already in
a deep and prolonged recession of the kind not witnessed since the Great Depression.
Data emerging from most corners of the globe do not hold out any positives for an Indian
economy that was already in the midst of a slowdown. Sample this – the US-based retail
giant Macy’s has announced that it would furlough most of its 1,30,000 employees while
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12 CITI-NEWS LETTER
others such as British luxury giant Burberry have forecast a staggering 70%-80% drop in
sales. The UK-based retailer Primark has announced a cancellation of all new orders and
Inditex (the owner of popular brand Zara) has already written off some $336 million
worth of inventory.
Many global buyers are expected to file for bankruptcy or go into liquidation, which would
leave textile manufacturers including those in India with crippling levels of bad debt.
Around the world, governments have announced record financial aid packages worth
trillions of dollars for their industrial sectors. In the wake of this unprecedented crisis, it
is important for policymakers to recognise and plan for well-targeted, industry-specific
measures to address these issues.
It is certain that closing stores and factories across the country for a period of three weeks
will cost India’s textile and apparel industry dearly. The export sector is already besieged
with cancelled orders and a drying up of future orders for the next four to six months.
Domestic consumption was probably the last oasis, but with the shutdown of all forms of
commerce, stakeholders are left with few options.
In urban centres across the country, apparel retailers and garment factories employ
millions of semi-skilled and unskilled workers. Without export orders and a restarting of
the economy, many will be either forced to shut shop entirely or inflict stringent cost-
cutting measures, including layoffs. For those employed here, the option to work from
home is largely impractical. In some of the most backward districts of the country, the
handloom sector – which employs a significant and often forgotten labour force – will
also be forced to drastically reduce output, or cut wages to compensate for the decline in
retail sales across the country. Add to that the fact that the sector is driven by consumer
sentiment and discretionary spending, both of which are at an all-time low.
Given the current scenario, many Indian industry players have shelved expansion plans
indefinitely and have in some extreme instances even been asking customers for
contributions to their salary fund. Evidence of the stress in the industry is apparent when
most players have started announcing pay cuts to middle and senior management and
scaling back of production capacities.
So what can policymakers do at this time? What measures can be instituted for immediate
relief, and which ideas will help the sector get back on its feet in the coming months?
Here are a few suggestions which if swiftly acted upon can avert a potentially explosive
situation.
Wage Support: In a bid to contain the adverse economic fallout of COVID-19, this is by
far one of the most direct means of reaching government assistance to those who need it
the most. Governments around the world have favoured this approach. The UK, to cite
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just one example has promised to pay its workers up to 80% of their wages to avoid mass
layoffs.
While it may be impractical for the government to fund the wage bills of every sector, the
textile industry is most in need of such relief. Providing direct wage support of anywhere
between Rs 5000-Rs 7000 per worker for even one month (assuming the lockdown is
lifted by mid-April) will ensure that the most pressing problem – layoffs and
unemployment – is at least partially staved off. It is necessary to ensure that any aid
reaches the intended beneficiaries and therefore I would advocate disbursement only
through DBT methods directly to employees. Of course, naysayers may argue that such
measures will only positively impact the formal sections of the textile workforce, but it
will serve those employed in organised apparel and textile units that account for a large
percentage of the registered workforce.
GST Refund: The swiftest way to reach the maximum number of stakeholders is to
refund GST payments made in part or full for the past six months. This will cover almost
the entire gamut of industry stakeholders, right from the handloom weavers in the remote
parts of the country to the shopkeepers and traders in the now deserted high streets. It
would also be possible to do this on a sector-specific basis since GST refund rates can be
decided based on the HSN codes used by registered dealers on their invoices, and will also
strengthen the government’s push for greater compliance.
Special Package of Incentives for the Export sector: The export sector is likely to
be the worst hit, and will surely lose further market share to competition from other
countries, most notably China (which is already recovering from the impact of the virus).
The sector will need an immediate package of incentives such as Extra Duty Drawback on
exports made in the previous Financial Year (since exports are likely to be slow in coming
months), and obviously, a continuation of the same to this Financial Year.
Interest Subvention: While the RBI has already announced a rate cut this can be
further augmented by an interest subvention scheme of 1-2 percentage points to be
disbursed by the Ministry of Textiles on all Term loans availed by the sector as has been
done in the past under the Technology Upgradation Fund Scheme (TUFS).
Reduced GST: Once the lockdown is lifted, the government can provide a reduced GST
rate on all textile articles to kick-start demand until the industry recovers sufficiently just
as they had done for the auto industry in the recent past.
All of the above may be partially financed by an anti-dumping duty on Chinese textile
imports for the next 12 months. It will be no one’s case in the foreseeable future to argue
against this measure. And while it may serve as a token measure at best, it will definitely
find resonance amongst many in the comity of nations.
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14 CITI-NEWS LETTER
While this government has traditionally frowned upon sector-specific relief measures, it
is worthwhile noting that textile industries around the world—including those in more
developed economies such as China, Belgium, and Italy—are among the most heavily
subsidised in their respective countries as they are important sources of employment
This is equally if not more true in India, where this sector has employed millions of
ordinary Indians since Independence. The prime minister himself represents a
constituency that is one of India’s leading textile hubs – Benaras (Varanasi) – where
thousands of skilled and unskilled workers depend on the textile sector for their
livelihoods.
While I fully understand that all of these measures may also be addressed by fiscal and
monetary stimulus by the government and RBI, the textile and apparel industry requires
special attention given its role as the second-largest employer of human capital in the
country.
K. Radharaman is a textile designer, fashion retail business owner, and founder of The
House of Angadi.
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Only consumer goods may see green shoots amid coronavirus pandemic
(Source: Indivjal Dhasmana, Business Standard, April 04, 2020)
The Covid-19 impact on various sectors of the Indian economy would depend on the
longevity of the outbreak and the lockdown. Except for essentials in the consumer goods,
most sectors would be impacted
Aviation: The ensuing cash flow disruption could possibly lead to breach of debt
covenants if the outbreak escalates and results in a prolonged near-zero revenue situation
Shipping: Container terminals at the major ports in India have already reported a few
blank sailings or cancellation of port calls. This could intensify in the coming weeks
depending upon the level of outbreak in India’s major trading partner countries
Tourism: The travel bans in place translate to a foregone revenue of around US$ 5 bn
for the industry from foreign tourists alone. The magnitude of the impact would be much
larger when foregone revenue from domestic tourists is also accounted for
Retail: While textile, footwear, fashion accessories, furniture, and other household
appliances will have revenue losses, food and other FMCG essential services segments will
likely face a surge in sales driven by panic buying and hoarding
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15 CITI-NEWS LETTER
Livestock: Given that the average farm size in India is 8,000 birds with a 40-day
production cycle, a typical poultry farmer would lose around Rs 10 lakh. Losses of this
magnitude with no signs of price recovery are expected to drive many players out of
business
MSMEs: Only 53% of large companies in India pay their suppliers on time. Slowdown
may force large firms to scale down production. The ensuing cash flow disruptions will
lead to delayed payments to MSMEs, triggering credit defaults and permanent business
closures of highly leveraged MSMEs, and rendering many people jobless
Gems & jewellery: With the growing number of Covid-19 cases, revival of the sector
does not appear imminent. Given that the gems & jewellery contribute to 12% of India’s
merchandise exports, the impact of the slowdown in global demand is expected to pull
down India’s overall exports very steeply
Electronic goods: High level of dependency on imports makes the sector highly
vulnerable to foreign exchange risk coupled with fear of supply constraint. Of the total
demand for electronics in India, about 50-60% of the products and 70-80% of the
components are imported
Automotive: Normally, auto companies maintain a one-month or two-month inventory,
however if the supply chain remains disrupted for next two months, the Indian auto
industry may face significant revenue loss
Drugs & pharma: The impact of COVID-19 outbreak on the drugs and pharmaceuticals
sector is expected to be moderate. The sector contributes to 1.2% of India’s gross value
added and 7% of manufacturing value added
Textiles: The Covid impact on the textile sector is expected to be moderate in the coming
weeks. However, if the outbreak remains prolonged then the impact is expected to be
high.
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Relief measures announced by govt, RBI not enough, says India Inc
(Source: Surajeet Dasgupta/Dev Chatterjee, Business Standard, April 04, 2020)
Most CEOs favour a partial lifting of the lockdown after April 14
India Inc is near unanimous in its view that the relief measures announced by the Reserve
Bank of India (RBI) and the government are not enough, even as it seeks a comprehensive
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16 CITI-NEWS LETTER
stimulus package from the state to combat the adverse impact of Covid-19 on their
businesses.
The finding is based on a quick survey of 25 CEOs representing big companies in areas
ranging from financial services and banks to energy, automobiles, ports, consumer
electronics, IT and internet, real estate companies and also large business conglomerates.
An overwhelming 96 per cent of the CEOs surveyed want the extension of the moratorium
on loan payments to three months, which was announced by the RBI, to be further relaxed
to at least a year to even two years. And, of course, all of them are pushing for a stimulus
package from the government. Many also point out that the Insolvency and Bankruptcy
Code (IBC) rules need to be made flexible — such as the deferment of proceedings for six
months from the date on which the lockdown is lifted.
Says Venu Srinivasan, chairman of TVS group: “The moratorium on loan repayment
should be extended. More importantly, NPA recognition norms should be relaxed as well.
Otherwise, the NBFC industry will go bankrupt. Also, IBC proceedings should be deferred
by six months for all micro, small and medium companies.”
Harsh Goenka, chairman of RPG Enterprises, expresses a similar view: “The government
has to pump in money to revive demand. But industry is looking for relief in the payment
of taxes, statutory dues like PF and ESIC (three months’ payment to be deferred without
interest and penalty), as well as employment relief (like reimbursement of minimum
wages to companies which have paid contract workers) and increase in working capital
limits from 10 per cent to 25 per cent.”
Clearly, industry is pushing for a much bigger package than
what is being considered by many in the government. The
managing director of a leading diversified conglomerate says:
“The total package should be US $100 billion, first for the poor,
then the self-employed, micro, small and medium sector, in that
order.” A CEO of a leading ports company suggests that 10 per
cent to 15 per cent of the GDP should be given as relief “to all
those contributing to the GDP.”
The CEOs are divided on whether the country will go into a
recession, though all agree that there will be a slowdown. While
40 per cent of the respondents say that recession is inescapable,
the rest are more positive and believe that there will be some
growth, ranging from 1 per cent to 3 per cent.
And though about 60 per cent of the respondents said that they would not cut pay or sack
their employees, about 12 per cent said they have no option but to do so. The rest said that
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17 CITI-NEWS LETTER
they did not know yet what they would do, and that decisions would be taken only in the
future.
There is, however, a consensus amongst more than half (52 per cent) of the respondents
that the lockdown should be partially lifted after 14 April. The discussions between Prime
Minister Narendra Modi and some chief ministers on Thursday suggest that this might
happen in a staggered manner. But others say that life is more important than business
— 28 per cent of the CEOs feel that the lockdown should continue for another 15 days.
I am surprised that in many of the CEO forums on video, corporates are keen to start
business rather than concentrate on the risks to health,” says the CEO of a leading internet
company. Those favouring a partial lifting of the ban have suggested different models for
a staggered reopening. Says the CEO of a financial services company: “There should be
transport across city lines and state lines so that migrants can go home. Secondly, large
industrial outfits should be opened, and also infra projects which generate employment
to wage earners and small shops — but not malls.”
Others have suggested opening up in clusters in cities. “The government should identify
red hotspots and seal them, identify orange hotspots and open them partially and identify
green spots and open them liberally,” says a Mumbai based CEO.
(With inputs from T E Narasimhan, Shine Jacob, Shreya Jai, Avisek Rakshit, Samie
Modak, Rajesh Bhayani, Aditi Divekar, and Namrata Acharya)
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B’luru lockdown: Garment workers face uncertainty, factory owners
unwilling to pay wages
(Source: Harsha Raj Gatty, Citizen Matters, April 03, 2020)
Chitra*, a senior worker at the garment manufacturing company Shahi Exports, is
uncertain about her future. Chitra’s line manager has told her that she would not get her
wages until the lockdown ends.
Ever since garment factories as well as leading fashion retailers downed their shutters,
Chitra has become one among the over four lakh garment factory workers in Bengaluru
who may lose their wages. Given the possibility that the lockdown may be extended, the
workers are more vulnerable.
For the month of March, Chitra did get her full wages of Rs 10,500 in her bank account;
but many factory owners say they wouldn’t be able to pay wages until April 14. This is
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18 CITI-NEWS LETTER
despite the government advisory that employers should pay workers in the lockdown
period.
Chitra, 27, has been working at Shahi Exports for the past 12 years, but like most garment
factory workers in the city, she’s a contract employee. This means she is paid by the
number of days she works in a month. The only paid leave these workers are given, is two
hours per month.
Basic salary of garment workers is still quite low at around Rs 9,500, said Prathiba R,
President of the Garments and Textile Workers Union (GATWU). Most workers in the
industry, including experienced employees, earn only the basic salary or slightly more,
plus PF and bonus.
Chitra might not have travelled beyond Bengaluru. But the finesse in embroidery and
stitching that she and other garment workers employ, has left an indelible mark in top
brands of the global fashion industry.
“I have worn nothing besides a polyester sari all my life. But I can simply see or touch any
fabric and tell you if it is Cashmere, silk or satin,” said Chitra.
Workers struggle; factory owners say there’s no money
Chitra said, “My two children’s education as well as my household expenses depend
completely on my job. I cannot imagine how we will live without this income.”
Seema*, 25, another employee at Shahi Exports, was confident earlier that her steady flow
of income would cover the recurring expenses of her parents’ medications. “I get Rs 560
as daily wage. Though this income is very low, it is very important for me. But now they
have told us not to come until April 14,” she said.
Prathiba said that one of the garment factory managements had even informed workers
that they would have to compensate for the leaves they got due to the lockdown. “The
lockdown leaves were deemed as ‘paid leave’ by the management. So they wanted them
to work extra hours later, including on Sundays,” she said.
But Mallikarjuna S V, General Manager (Human Resource) at Gokuldas Exports, said that
textile managements were just trying to secure the long-term interests of their employees.
According to him, the garment sector is not doing well given the current COVID-19-led
slump.
“Production has taken a backseat. Owners have borrowed capital for raw material and
machineries, and have paid workers to ensure production, but now they are sitting on idle
output that has no market. We can’t even transport the consignments that have already
been completed as transportation services are hit,” Mallikarjuna said.
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He also claimed that garment manufacturers barely have any margin of profit. “Without
fresh orders, production and distribution, we don’t receive payment. So where do we
generate the resources to pay the lakhs of employees who are working with us on a
recurring basis?” he asked.
Govt should announce stimulus package, say factory owners
An executive from Shahi Exports said that the garment factory owners are hoping that,
given over four lakh people and their families are dependent on the garment sector, the
state government would announce a stimulus package. “Even we do not want to let go of
our skilled workforce. But, with all due respect to the government’s request [to pay
employees], we do not have the resources to comply with it. Either the government must
give us domestic orders for garment production, or aid us to pay salary to our employees
in the form of stimulus, till the market is back to normal.”
Mallikarjuna said that, with such a stimulus package, the sector can ensure full
compliance with the rules issued by the government and follow the necessary protocols
on health and safety of its employees. “In fact, from March 9 till the shut down, hand
sanitisers were dispensed, hourly cleaning of factories and thermal screening was
undertaken as preventive measures against COVID-19. Also tracking attendance via
biometrics was suspended. We will continue similar practices,” he said.
Recently, even the Clothing Manufacturers Association of India (CMAI) appealed to the
Prime Minister to support domestic apparel manufacturers to overcome the impact of
lockdown and reduce potential job losses. According to the survey commissioned by
CMAI, the collapse of the garment sector can only be prevented if the government
provides a comprehensive support package.
But Prathiba pointed out that factory owners have been scuttling workers’ demand for
basic wages for years. In February 2018, Siddaramaiah government had issued an order
increasing the minimum wages of these workers, but withdrew it soon. In March 2019,
Karnataka High Court also ordered that minimum wages should be fixed soon. “Even two
subsequent Chief Ministers have failed to implement this due to strong opposition by
garment companies,” she said.
Garment Labour Union (GLU) General Secretary, Saroja K, said, “As a union we are
waiting and watching if the workers will have to work on compensatory basis, or if the
government will give a package post March 31.”
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Banks: Sector Credit Trends - Slowdown, more in store - HDFC Securities
(Source: Equitybulls, April 03, 2020)
After the surprising uptick seen in Jan-20, YoY non-food credit growth slowed to 7.3%,
and MoM growth slowed to just 16bps. Agri credit growth showed slowing trends at 5.8%.
Growth in industry credit slowed to just 70bps, dragging overall credit growth. After
accelerating slightly in Jan-20, service credit growth slowed again to 6.9% (this segment
has seen the most pronounced slowdown, as it grew at 23.7% YoY in Feb-19). Personal
loan growth remained resilient at 17% YoY.
Mar-20 may see materially slower growth. Select management commentary and our
understanding of the sector suggest that a significant proportion of disbursals occur
towards the end of the qtr. Virus related disruptions will impact this. Further, the dip in
growth is likely to be broad-based. Personal loan growth, which has contributed to much
of the growth seen over FY19 and FY20 is likely to slow considerably.
- Within industrial credit, large industries (83% of industrial credit) dragged overall
growth, growing just 70bps YoY (vs. 2.8% in Jan-20). Several sectors such as gems and
jewellery (-16.8% YoY), all engineering (-4.8%), metals and metal products (-10%) and
textiles (-6.6%) saw persistent de-growth. Within infra credit, telecom saw a spurt in
growth (+54.3/3.7% YoY/MoM) while power (-2.8% YoY) and roads (-1.6% YoY) saw de-
growth
- Within services, wholesale trade credit growth (13.6% YoY vs. 8.6% YoY in Jan-20)
picked up while retail trade credit growth slumped (1.2% YoY vs. 1.7% in Jan-20). YoY
credit growth to NBFCs slowed (22.3% YoY vs. 32.2% YoY in Jan-20 and 47.5% YoY in
Feb-19), with MoM de-growth (-4.5%). Credit growth to the CRE segment was resilient at
15.1%
- Resilience in personal loan (28.4% of total credit) growth was visible across sub-
segments (credit cards +33%, home loans +17.1% and other personal loans +20.6%).
Interestingly, auto loan growth has shown accelerating trends, growing at 10.3% YoY (vs.
9.8% YoY in Jan-20 and 5.0% in Oct-19)
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'India may post lowest growth in post-reform period in FY21'
(Source: Economic Times, April 03, 2020)
Indian economy, which was already in slowdown phase for last six quarters, could register
the lowest growth in the post-reform period in 2020-21 despite strong monetary and fiscal
stimulus measures, an eminent economist said on Friday. N R Bhanumurthy, a Professor
at National Institute of Public Finance and Policy, said that with the current lockdown,
the state of the Indian economy has aggravated further. "With the current lockdown, the
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21 CITI-NEWS LETTER
current situation in the Indian economy, which was already in slowdown phase for over
six quarters, has actually aggravated further.
"Assuming that the situation could improve in a quarter, in 2020-21, the Indian economy
could register the lowest growth that was experienced in the post-reform period (since
1991). This is despite strong monetary and fiscal stimulus measures introduced since
February 2020," he told in an interview. Multilateral agency ADB expects India's
economic growth to slow down to 4 pc in FY2021 due to COVID-19 pandemic. Moody's
Investor Service last month also slashed its estimate for India's GDP growth during 2020
calendar year to 2.5 per cent and said that coronavirus outbreak will cause unprecedented
shock to the global economy.
Asked whether under the current circumstances, India can achieve the target of becoming
a USD 5 trillion economy by 2024-25, Bhanumurthy said that some of his studies have
shown that achieving this target even in good times was difficult given the slowing
economy. "Now that the world is expected to get into a recessionary stage and not sure
when there could be some rebound, achieving a USD 5 trillion economy is going to be a
distant dream. "Added to that the exchange rate also depreciated sharply," he noted.
Bhanumurthy, however, added that based on NIPFP study to 15th Finance Commission,"
we strongly believe that with some prudent fiscal policies, we can still achieve such big
targets. But that also means government (both centre and states) needs to sacrifice a lot,
though not sure if politically feasible". On the need for large fiscal stimulus to boost
growth, he said given the current conditions, there are fewer options on the policy front
other than large fiscal stimulus as well as reprioritizing the government expenditures.
"This has to happen even by printing more money. "While the government has come out
with a stimulus of Rs 1.7 lakh crore, with other measures that are brought by monetary
authorities, the actual (both direct and indirect) stimulus could be much more,"
Bhanumurthy emphasised. Earlier this year, the Economic Survey had projected India's
economic growth at 6 per cent to 6.5 per cent for 2020-21 fiscal year
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Aditya Birla Group donates ₹400 crore to PM-CARES Fund for covid-19
relief
(Source: Ridhima Saxena, Live Mint, April 03, 2020)
The group to also spend ₹100 crore towards CSR initiative and for supply of N95
masks, personal protective equipments and ventilators
Aditya Birla Group has already started production of one million triple layer
surgical masks
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22 CITI-NEWS LETTER
The Aditya Birla Group Friday said it has donated ₹400 crore to the Prime Minister’s
Citizen Assistance and Relief in Emergency Situations (PM-CARES) Fund, besides setting
aside ₹100 crore towards its own corporate social responsibility (CSR) initiative and for
the supply of N95 masks, personal protective equipment (PPE) and ventilators.
“Given the severity of the disruption, there is a compelling need for a multi-pronged
response that includes financial and material support, healthcare assistance and
community responsibility," Rajashree Birla, chairperson of the Aditya Birla Centre for
Community Initiatives and Rural Development, said in a press release.
The $48.3 billion business conglomerate, led by billionaire Kumar Mangalam Birla, which
runs multiple businesses in 14 industry sectors including fashion retail,
telecommunication, chemicals and financial services, plans to donate ₹50 crore to
FICCI-Aditya Birla CSR Centre for Excellence for covid-19 relief measures, while the
remaining ₹50 crore will be used to supply one million N95 masks, 2.8 lakh PPE, and
ventilators. The group said it had already started production of one million triple-layer
surgical masks and one lakh coverall garments with the support of the textiles ministry,
and was involved with community and self-help groups in home production of lakhs of
masks across several locations.
The group also plans to activate a 100-bed covid-19 facility at Seven Hills Hospital in
Mumbai, in partnership with the Brihanmumbai Municipal Corporation. It has also
earmarked more than 200 beds for covid-19 patients across locations including Ujjain,
Pune, Hazaribagh, Rayagada, Solapur, and Kharach.
It also plans to launch awareness camps across 200 locations and hold door-to-door
campaigns to reinforce the message of prevention.
The donation by Aditya Birla Group comes amid many other such donations made by
Indian corporates as part of CSR spending, which companies are mandated to make, to
combat the spread of the disease in the country.
Corporate, government and philanthropic entities, including the Airports Authority of
India, Wipro Ltd, Tata Trust and Reliance Industries Ltd (RIL), as well as business leaders
such as Vedanta’s Anil Agarwal and Anand Mahindra, have pledged financial support for
various activities to fight the pandemic. RIL has begun production of face masks, while
the Mahindra Group is producing ventilators.
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Welspun swings into action to combat COVID-19
(Source: Jennifer Marks, Home Textiles Today, April 03, 2020)
Boosts production of protective medical items, creates programs for employees
With India on a COVID-19 lockdown, Welspun is moving on a number of fronts to help
its communities and its workers.
The multi-category home textiles manufacturer’s response to the pandemic ranges from
new production priorities to donations of critical supplies to wellness initiatives across
the company. A major producer of home textiles for retail and hospitality, Welspun also
operates a separate production segment making smart non-woven products and
applications for the safety clothing, filtration, personal hygiene and the cosmetic
industries.
It is now using its capacities there to produce hand wipes and face masks to meet the
demand for personal protection. Production, which had been limited to a few thousand
masks per week, is ramping up and will soon be generating roughly two million masks on
a weekly basis. In addition, Welspun is helping the Indian Army to set up isolation wards
by donating linens.
To support its communities, Welspun has created 24-hour emergency medical centers at
its operating locations. The centers are open to employees and residents of the
surrounding neighborhoods. The facilities include isolation wards, tie-up
communications with hospitals, emergency helplines and virtual consultation with
specialist doctors from anywhere in the world. “The health and safety of each of our
employees and their families is of utmost importance, and we are taking all possible
measures to support them with essentials and medical supplies,” said Dipali Goenka, CEO
of Welspun India Ltd. In addition, the company rolled out our business continuity plan
and a robust IT infrastructure to enable work for home. “While social distancing
necessitates that we work from home, we are bridging distances and virtually engaging
with our teams through lot of fun activities. We are also productively using this time to
invest in health, wellness and learning using digital modules and programs,” she added
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GLOBAL
Bangladesh will extend Tk 50bn coronavirus relief package to exporters as
bank credit
(Source: Abdur Rahim Harmachi, BD News, April 01, 2020)
The government has decided to make available the Tk 50 billion coronavirus bailout fund
to owners of exporting industries affected by the pandemic as bank loans to help pay their
workers.
The Bangladesh Bank will release the fund to the commercial banks while the
entrepreneurs will apply for the loans by submitting estimates of the money they need to
pay wages and allowances of workers and employees.
The loans carrying a 2 percent interest rate will be repayable in two years with a grace
period of six months.
Finance Minister AHM Mustafa Kamal says the interest in reality is the service charge for
the banks to distribute and collect repayments.
The government will not give the money from the national budget, he
told bdnews24.com after a meeting with top officials at his official residence in Dhaka
on Wednesday.
The finance ministry will issue Tk 50 billion bonds and the central bank will raise a
refinancing fund against the bonds, he explained.
Bangladesh Bank Governor Fazle Kabir, National Board of Revenue Chairman Abu Hena
Md Rahmatul Muneem, Financial Institutions Secretary Md Ashadul Islam, Finance
Secretary Abdur Rouf Talukder, and Economic Relations Secretary Fatima Yasmin
attended the meeting.
They finalised the guidelines for the package that the finance ministry sent to the
Bangladesh Bank. Central bank spokesperson Serajul Islam said the guidelines will be
issued in a circular on Thursday.
Prime Minister Sheikh Hasina on Mar 25 rolled out the economic bailout package with
almost all of the funds going to the readymade garment industry that earns $34 billion
annually, more than 80 percent of Bangladesh’s total export earnings.
Rubana Huq, chief of the apparel exporters’ lobby, told bdnews24.com they have been
told in no unclear terms that the fund can be used only for paying wages and allowances
to the workers and other employees.
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25 CITI-NEWS LETTER
After another meeting with the stakeholders at the Secretariat earlier in the day,
Commerce Minister Tipu Munshi said the government has made arrangements for the
apparel industry entrepreneurs to get loans at 2 percent interest as the sector is the largest
exporter of Bangladesh.
“There are talks at different levels that the government is donating money to the exporting
sectors. It’s not a donation. They will have to repay the loan in time. The details will be
sorted out in a day or two,” he added.
He noted that the factories that have work to do can remain open but the owners must
ensure protection of the workers from the virus.
Business leaders also attended the commerce ministry meeting.
In July-February period, Bangladesh exported goods worth $26.24 billion, missing the
target by 13 percent with a nearly 4.8 percent year-on-year decline.
A finance ministry official told bdnews24.com that officials will convene at the Prime
Minister’s Office on Thursday to discuss the impact of the pandemic on other sectors than
RMG.
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Primark and Matalan among retailers allegedly cancelling £2.4bn orders in
‘catastrophic’ move for Bangladesh
(Source: The Guardian, April 03, 2020)
Coronavirus cutbacks amount to a ‘wholesale abandonment’ of garment
workers, says labour rights group
More than a million Bangaldeshi garment workers have been sent home without pay or
have lost their jobs after western clothing brands cancelled or suspended £2.4bn of
existing orders in the wake of the Covid-19 epidemic, according to data from
the Bangladeshi and Garment Exporters Association (BGMEA).
Primark, Matalan and the Edinburgh Woollen Mill are among retailers that have
collectively cancelled £1.4bn and suspended an additional £1bn of orders as they scramble
to minimise losses, according to BGMEA. This includes nearly £1.3bn of orders that were
already in production or had been completed.
Other brands included in the data, including Next, Marks & Spencer and Tesco have since
said they will honour existing orders that have been placed with Bangladeshi suppliers.
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26 CITI-NEWS LETTER
The BGMEA said the impact of the cancellations has already been “catastrophic”
for Bangladesh. More than one-quarter of the country’s 4 million garment workers have
already lost their jobs or have been furloughed without pay because of order cancellations
or the refusal of brands to pay for cancelled shipments.
A survey of nearly 300 Bangladeshi garment suppliers by the Workers Rights Consortium
(WRC) and Penn State University, found that western retailers have been using force
majeure clauses in their contracts to cancel or suspend orders in the wake of the
coronavirus crisis.
Factory owners in Bangladesh told the Guardian that brands and retailers are postponing
the delivery of orders that have already been produced by garment factories so invoices
can’t be raised. They are also cancelling all upcoming orders and refusing to pay the cost
of raw materials already purchased by suppliers.
“We have had to temporarily close our factory for the health and safety of our workers but
we are facing ruin because brands and retailers are cancelling orders that we have already
produced and if they don’t pay, I can’t pay the workers,”said Mostafiz Uddin, the chief
executive of the Bangladesh Apparel Exchange and managing director of Denim Expert,
a clothing company that supplies international brands including Peacocks in the UK.
“We have to pay upfront for all of our materials and banks are blocking my accounts. I
can’t even pay the utility bills. We can’t do anything because after this is over we will need
to work with these brands again so we are powerless to fight them,” he said.
“I can’t sleep at night. I have 2,000 workers but they are all supporting another 10,000
family members. What will I tell them about their jobs and their pay?”
More than 97% of the suppliers surveyed by the WRC and Penn State University said
brands had offered no financial assistance in covering the cost of furloughing workers or
helping to pay severance costs.
“What we’re seeing is a wholesale abandoning of workers and suppliers,” said Scott Nova,
executive director of the WRC.
“The way that the garment supply chain is set up, the suppliers take all the risk. They buy
the cloth, hire the workers and make the clothes but can’t raise an invoice until the order
is shipped. If brands cancel existing orders and refuse shipment then invoices can’t be
sent and nobody in Bangladesh gets paid.”
In a statement, Primark said that, while it recognised and was “deeply saddened” by the
effect this would have further down its supply chain, it had had “no option” but to cancel
orders that had been placed with their Bangladeshi suppliers.
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“If we had not taken this action, we would be taking delivery of stock that we simply could
not sell,” Primark said in a statement. “This has been unprecedented action for
unprecedented and frankly unimaginable times”
Edinburgh Woollen Mill also confirmed it has cancelled all existing orders saying, “Our
relationships with suppliers are absolutely fundamental to our business, and this is not
what we would ever normally wish to do but the current circumstances are such that this
is a necessity.”
Matalan would not confirm whether they had cancelled orders. By email, they said the
company was “looking at multiple ways of repurposing or postponing, rather than
cancelling wherever possible.”
After the BGMEA data was published, Tesco and Marks & Spencer said they were now
working with Bangladeshi suppliers to honour existing orders. Tesco is also refuting the
figure published in the BGMEA data that it cancelled £50m of orders.
In a statement, Next said that as all its shops are currently closed it is cancelling some
orders, but will honour existing agreements that are in place up to 10 April.
Other brands including H&M, Next and Zara said they would also honour existing
financial arrangements with their Bangladeshi suppliers and pay invoices in full for orders
already placed.
Aruna Kashyap, senior researcher at Human Rights Watch said that the situation in
Bangladesh exposed the lack of any sort of protection for workers who make huge profits
for international fashion brands.
Workers who have been furloughed or lost their jobs would struggle to find any way to
support their families throughout a Covid-19 lockdown and it could take years for the
garment industry to recover, Kashyap said.
“The brands are trying to minimise their losses but the impact on the ground in
Bangladesh has already been catastrophic and will spell disaster for millions of families,”
she said.
“Retailers are calling on the governments of garment-producing countries to provide
support for workers, but if you’re going to base your hugely profitable supply chain in
countries where you know no such social safety net is available, you have to take
responsibility when things go wrong.”
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Germany’s Biggest Department Store Files for Insolvency, Victim of COVID-
19 Collapse
(Source: Vicki M. Young, Sourcing Journal, April 03, 2020)
Galeria Karstadt Kaufhof, Germany’s biggest department store retailer, filed for
administrative insolvency, the equivalent of bankruptcy proceedings in the U.S. The filing
on Wednesday follows the bankruptcy petition of Laura Ashley in the U.K. last month,
both victims of the catastrophic coronavirus pandemic. Galeria’s stores, where consumers
can shop brands including Adidas, Calvin Klein Jeans,…
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H&M Group releases Sustainability Performance report 2019
(Source: Fibre2Fashion, April 03, 2020)
The H&M Group, a Swedish multinational clothing-retail company, has released its
Sustainability Performance Report 2019. This report highlights progress towards the
company’s vision to lead the change towards circular and climate positive fashion.
According to the report, the company has reached 97 per cent recycled or other
sustainably sourced cotton.
“I am proud of all the progress we did in 2019. Looking ahead, not only our industry will
continue changing rapidly, but also the world as a whole. This 2020 has started with a
challenge we never saw before with the spread of Covid-19 affecting the whole world,
companies and societies. I am confident that the long-term vision we always had, and will
continue having, on sustainability will play an – even more – crucial role in facing these
challenges. It will be more important than ever to continue our journey towards a circular
economy and sustainable consumption while creating prosperity through job
opportunities. This report is only a summary of the great effort all our colleagues around
the world do every day to change the future of fashion,” Anna Gedda, head of
sustainability H&M Group, said in a press release.
Some highlights from 2019 include: the company will not source conventional cotton for
collections from 2020 onwards. H&M has achieved 57 per cent of their materials to be
either recycled or sourced in a more sustainable way thereby taking steps towards our 100
per cent goal for 2030; The group is launching its business-to-business service Treadler,
which offers textile and apparel retailers access to H&M group’s supply chain, enabling
other companies to accelerate sustainable social and environmental change through their
own value chains more quickly; the group explored new circular business models and
launched several circular initiatives involving on-demand, customisation, repair, rental,
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renewal, re-commerce options and reusable packaging; group’s Circular Innovation Lab
piloted new sustainable materials such as the cellulosic fibre made by Infinited Fiber
Company from recycled cotton textiles and Re:newcell’s ground-breaking and first-time
ever chemically recycled material Circulose launching the first product using this
breakthrough technology in early 2020; the group made it to CDP’s prestigious Climate
A-list for leading effort against climate change; the group started to map and disclose
viscose and other man-made cellulosic fibre suppliers and were ranked as a frontrunner
in Changing Market’s Roadmap to responsible viscose supplier disclosure report; 100 per
cent of group’s textile and leather supply chain, with over 600 suppliers, are now enrolled
in the Zero Discharge of Hazardous Chemicals programme; 900,000 supply chain
workers benefit from improved wage management systems and more than 1,1 million
have been reached by industrial relations and workplace dialogue programmes; and H&M
group collected 29,005 tonnes of garments – an increase of 40 per cent from 2018,
reaching their goal of 25,000 tonnes annually a year early.
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Pakistan: Govt Offers Rs 100 Billion To Uplift Industry: Dawood
(Source: Umer Jamshaid, Urdu Point, April 03, 2020)
Adviser to Prime Minister for Commerce and Textile, Abdul Razak Dawood on Friday said
that the government had offered up to Rs100 billion packages to the industrial sector as a
support following current challenging situation, created due to COVID- 19 pandemic
Adviser to Prime Minister for Commerce and Textile, Abdul Razak Dawood on Friday said
that the government had offered up to Rs100 billion packages to the industrial sector as
a support following current challenging situation, created due to COVID- 19 pandemic.
"We are continuously in contact with all major industrial sectors, including textiles and
construction. With consultation of all stakeholders, the government would give incentive
to the priority areas of industrial sector for revival in current critical situation," Razaq
Dawood told APP here on Friday.
The government wanted to resolve the liquidity issue of industrial sector, he said adding
that Drawback of Local Taxes and Levies (DLTL) payments would be made, which were
pending since 2009.
The adviser said the government would pay Technology upgradation fund worth
Rs30 billion to the industrial sector to help it come out from the current challenge of
COVID- 19 Coronavirus pandemic.
He informed that total Rs 47 billion would be paid to the textiles sector in coming 100
days to support the major export sector of the country.
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30 CITI-NEWS LETTER
Replying to a question, he said the government would pay all the refunds including in
Rs200 billion packages to compensate the industrial sector in coming Budget 2020-21.
He said that this package would be paid at faster pace to the industries, adding that all the
stakeholders were on board with the government to evolve joint strategy to resolve all the
issues of industrial sector in current situation.
He said that promoting industries and giving incentives to the business community was
an important step to leading the country forward.The government would support the
industrial sector and provide Incentives.
The commerce ministry has also prepared a list of industries which could be reopened in
the current situation, he said.
The adviser said the refund of Rs100 billion for the business community is a part of that
process and the government was committed to ensure timely refunds to
the business community in this challenging situation.
Razak Dawood said that his ministry was in constant contact with
the business community to figure out how the challenge posed by the epidemic can be
resolved in country's industrial sector.
He hoped the government and business community including all industrial was one page,
with joint plan of action with consensus of all stake holders "we would overcome on
economic challenges after the COVID-19 pandemic Coronavirus.
President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI)
Mian Anjum Nisar while talking to APP hailed the Rs 100 billion package offered by
the government.
He said the government would take preventive measures and develop strategy to protect
the pace of economic and trade progress and effects of world economic slowdown as
apprehended by leading research organization after evolving the situation in COVID-19
pandemic.
Mian Anjum Nisar while talking to APP said that the whole world including the
potential market of Europe Union (EU) was effected by the coronavirus, which was the
second biggest trade destination for Pakistan after the Generalized Schemes of
Preferences (GSP-Plus) offered by EU in 2013.
In this regard, the government must to go for conducting studies for mitigating the
economic changes after Coronavirus.
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31 CITI-NEWS LETTER
Renowned industrialist from Baluchistan, Ex-President FPCCI , Eng. Daroo Khan
welcomed the package announced by the government and said that proper mechanism
was required to disburse this package according the needs for different industries.
He suggested that the government engage all stakeholder to resolve the current evolving
challenge.
On the occasion, President Islamabad Chamber of Commerce and Industries (ICCI)
Muhammad Ahmed Waheed said that his chamber was fully engage in consultation
with government in current challenging situation.
Business community of the twin's city welcomed the Rs100 billion package offered by
the government for industrial sector.
President, Karachi Chamber of Commerce and Industries, Agha Shahab Ahmed Khan
appreciated the government efforts for mitigating the current challenge.
He said that his chamber and business community from all over the country was
committed to support the government in current evolving situation.
President, Peshawar Chamber of Commerce and Industry Engr. Maqsood Anwar Pervaiz
said that business community of Khyber Puktunkwa (KPK in cooperation
with government and stand with the government and lauded Rs 100 billion package
announced by the government.
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UKFT campaigns to support small companies amid COVID-19
(Source: Fibre2Fashion, April 03, 2020)
UKFT is urging the government to provide support for individuals or companies that are
not eligible for any of the existing Covid-19 related protection schemes. UKFT has been
speaking with companies and individuals throughout the UK fashion and textile
industry over the past few weeks and have identified a number of issues, which must be
addressed urgently.
The association is referring to these companies as the ‘forgotten middle’ and they include
the owners and/or founders of small limited companies who derive their income from a
limited company but not through PAYE, the self-employed who have not shown any
profits and those who were employed after February 28, 2020.
UKFT is raising this issue with the government on a daily basis as are the CBI. UKFT is
also raising many other issues with the government including; difficulty of accessing
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32 CITI-NEWS LETTER
coronavirus business support loans; the need for a rates holiday for all businesses; the
huge difficulty caused by retailers and brands cancelling orders; the limitations of the
Small Business Grant scheme; the need to make the finance from the support schemes
available much more quickly; and the need for the government to significantly increase
the support available to the industry when the immediate crises has passed, according to
a press release by UKFT.
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MIT Develops Cheap, Open Source Ventilator for Coronavirus Treatment
(Source: Ryan Whitwam , Extreme Tech, March 26, 2020)
As the coronavirus pandemic continues to worsen, medical centers around the world have
started running short of vital supplies like masks, gloves, and disinfectants. Hospitals are
also running critically low on ventilators, which can keep COVID-19 patients alive if the
disease becomes severe. An MIT team has developed an open-source ventilator called the
MIT E-Vent that could get regulatory approval soon.
The E-Vent is based on a project that started almost a decade ago as part of the MIT
Precision Machine Design course. Unlike the expensive mechanical ventilators at
hospitals, this is a manual ventilator that personnel would need to operate by hand.
Students designed the device for use in rural areas and developing nations where
mechanical ventilators were not available or reliable. The team built a prototype (above)
and published a paper, but the project didn’t move beyond that.
With ventilators in such short supply, the abandoned project has been revived and
submitted to the Food and Drug Administration (FDA) under an “Emergency Use
Authorization.” The FDA is conducting tests with pigs and could approve the design in
the near future.
When MIT students did the initial work a decade ago, they estimated the device would
cost about $100 to build. That’s considerably lower than the price tag on mechanical
ventilators that are in such short supply. The current team didn’t just revive the existing
design and call it a day, though. They made modifications to ensure the device would be
easy to make and operate, and they developed a new metal frame for improved durability.
Only the most severe COVID-19 infections require a ventilator, which delivers oxygen at
higher pressures to keep patients breathing. The US currently has about 170,000
ventilators in hospitals, but many experts warn that severe coronavirus cases could reach
several hundred thousand.
Many people in the US are under orders to refrain from venturing outside except for
essential travel, but the federal government has yet to issue any national rules. President
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33 CITI-NEWS LETTER
Trump has also discussed “reopening” the economy as soon as early April against the
advice of numerous medical professionals and infectious disease experts. These manual
ventilators might not be ideal, but they could still save a lot of lives.
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Pakistan: Exports dip in March amid global slowdown
(Source: Mubarak Zeb Khan, The Dawn, April 04, 2020)
The country’s export of goods declined by 8.46 per cent year-on-year to $1.807 billion in
March, from $1.974bn amid closure of retail outlets in the wake of the coronavirus
outbreak, the Pakistan Bureau of Statistics reported on Friday.
However, the export proceeds edged up 2.23pc to $17.451bn during the first nine months
of 2019-20, as against $17.071bn over the corresponding period last year.
The government projects exports during the ongoing fiscal year to reach $26.187bn, from
$24.656bn in FY19.
In the 2019-20 budget, it reduced the cost of raw materials and semi-finished products
used in exportable goods by exempting them from all customs duties.
Meanwhile, the imports continued their downward trend, providing some breathing
space to the country despite paltry growth in exports.
The data showed that imports clocked in at $34.814bn during 9MFY20, down 14.42pc,
from $40.679bn in the same period last year. The decline in value of imported goods in
March was 19.85pc to $3.299bn against $4.116bn during the same month last year.
As a result, the trade deficit came down by 26.45pc in the first nine months of 2019-20
mainly on the back of a double-digit fall in imports.
In absolute terms, the trade gap narrowed to $17.363bn during 9MFY20, from $23.608bn
over the corresponding months last year. In March, the deficit plunged 30.35pc to
$1.492bn, from $2.142bn in the same period of FY19.
The Ministry of Commerce estimates that the annual trade deficit may decrease by $12bn
to reach $19bn in the ongoing fiscal year, from $31bn in 2018-19.
The clothing and textile exporters associations have estimated that close to $1.3 billion
worth of orders from foreign buyers for March and April have either been postponed or
cancelled.
To resolve the liquidity issues of the industry, especially textile, the government has
released billions of rupees in relief during March.
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34 CITI-NEWS LETTER
Commerce Adviser Abdul Razak Dawood said the government has released Rs47bn to the
textile sector in 100 days under various schemes while the total sum released during the
20-month period of PTI, Rs93bn have despatched.
He said in the nine years of the past two governments, only an amount of Rs67bn was
released to the textiles and the refunds of non-textile sectors will be announced in the
coming days.
Under the prime minister’s Rs1,240bn stimulus package announced on March 27, the
government has released Rs100bn to industry under tax refunds on Apr 2.
Meanwhile, the finance adviser in a statement claimed the tax refunds released to the
industry are the highest in Pakistan’s history. Improved cash flow position of the
companies will ensure that workers get their salaries on time, he hoped.
Until Mar 31, all tax refunds have now been cleared and the payments made on Apr 2
include Rs52bn in general sales tax refunds to Industry the industry (non-export sector),
Rs10bn released to the export industry through the FASTER system and Rs15bn in duty
drawback payments.
On top of these, the government also released Rs20.5bn under the DLTL scheme.
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US Decontamination Wipe could Help Coronavirus clean-Up
(Source: Technical Textile.net, April 03, 2020)
Seshadri Ramkumar, a professor of chemical countermeasures and advanced materials
in the Texas Tech University’s department of environmental toxicology, had invented
FiberTect, a three-layer, non-woven decontamination wipe to clean up toxic agents.
Researchers now claim that wipe can also be used to clean up bodily fluids contaminated
with the novel coronavirus.
FiberTect features an activated carbon core sandwiched between absorbent top and
bottom layers.
“It is widely used as the primary dry decontamination method in hospitals and
ambulances,” a Texas Tech press release quoted Corey Collings, a training specialist for
First Line Technology, which markets FiberTect TM, as saying.
Hospitals use it in bulk and in rolls, and ambulances use it in a kit called the FastGrab to
do immediate decontamination of patients contaminated with a wide variety of
substances, Collings said.
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35 CITI-NEWS LETTER
Ramkumar said the wipe’s structure is effective in containing bodily fluids like saliva and
mucus through which viruses could be transmitted. Its activated carbon also can absorb
particles transmitted in vapour phase through the air.
As a wipe or mitt, FiberTect TM holds great potential for cleaning in settings where
transmission of the novel coronavirus is a paramount concern, said the press release.
“Highly porous carbon in the structure can trap the vapors and aerosols in which microbes
are contained. The wipe structure is flexible and can take the shape of the objects to be
cleaned. The three-ply structure without glue helps this effective cleaning,” said
Ramkumar.
FiberTect TM previously has been used successfully by the US military to decontaminate
both personnel and equipment, for oil spill cleanup during the Deepwater Horizon spill
in the Gulf of Mexico, and by emergency response teams across the country in dealing
with highly dangerous chemical substances, including Fentanyl.
Its development and testing was sponsored by the US Department of Homeland Security
and managed by the Technical Support Working Group, Office of the Assistant Secretary
of Defence for special operations or low intensity conflict. Product testing was conducted
by Lawrence Livermore National Laboratory. FiberTect TM proved superior in all testing
results against 30 comparable products for decontaminating against toxic chemicals, the
press release added.
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Cotton supply chain at a virtual standstill
(Source: Home Textiles Today, April 03, 2020)
ICAC reports production hits the wall as retailers cancel orders
The early impacts of COVID-19 are crippling the cotton supply chain, according to the
International Cotton Advisory Council (ICAC).
“Brands and retailers are cancelling orders, leaving spinners and textile manufacturers in
Asia and Southeast Asia in a financial crisis,” said the organization, which is an
association of cotton producing, consuming and trading countries.
The global cotton production estimate for the 2019/20 season remains unchanged at 25.9
million tons. However, ICAC’s our consumption estimate has been revised downward to
24.6 million tons.
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The current price projection for the year-end 2019/20 average of the Cotlook A Index has
been revised to 73.5 cents per pound this month. The first price projection for the year-
end 2020/21 average of the Cotlook A Index is 64 cents per pound.
“We don’t yet know what the ultimate impact of Covid-19 will be on the cotton industry,
but the fast-moving pandemic has injected a tremendous amount of uncertainty into
every link in the global supply chain,” ICAC stated.
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