Companies & Sectors
Garment manufacturers on a two-day strike to demand excise duty be scrapped

Industry says it is already burdened by high input costs on account of increasing cotton prices and would have to pass on the hikes to customers 

Days after garment retailers kept their outlets closed to protest against a new 10% excise duty on branded garments, garment manufacturers across the country have shut down for two days demanding that the hefty duty proposal be scrapped altogether.

An estimated two lakh apparel units are closed today and tomorrow, to pressure the Union government not to implement the excise duty that Union finance minister Pranab Mukherjee proposed in the Budget. It is estimated that the two-day shutdown would result in a loss of Rs 500 crore a day, and daily wage workers in the factories would be hurt particularly hard.

Retailers held their protest strike on 4th March and the business has earned sympathy in some quarters as it is already burdened by higher cotton prices. "Branded apparels form a very important sector in retail business," said an analyst from Elara Securities. "Naturally, if excise duty is imposed on garments, they would be worried. They will resort to raising prices, as they are already suffering from higher input costs due to an increase in the price of cotton."

Some popular brands have already increased prices. Pantaloons has hiked its prices by 18% and Pankaj Tibrewal, chief operating officer, indicated at a store launch in New Delhi today that prices could go up further. "In case the government does not roll back the proposed excise duty imposed on branded garments, we will have no option but to pass it on to customers," he said. Shoppers Stop is also considering hiking prices if excise duty is imposed.
Cotton prices have surged nearly 30% in two months in the domestic market. Prices which were at around Rs42,000 per candy in January, went up to Rs51,000 in February. Earlier this month, the Cotton Advisory Board (CAB) also reduced crop estimates for the cotton year (October-September) by 5% to 31.2 million bales (a bale is 170 kg). The CAB pegged mill consumption this year at 23.2 million bales, compared to 20.7 million bales last year.

Exporters globally are facing low production outputs which have resulted in considerable shortage of cotton supply. Consequently, cotton prices have soared and along with this the prices of apparels have gone up too.
The 10% excise duty proposal is "a double whammy" for apparel retailers, said Kishore Biyani, CEO, Future Group, which owns Pantaloons, one of the biggest retail apparel businesses in the country. The effect has been worse on businesses that market their own brands, while franchising for other brands.

Is this situation hopeless? "There are some things to consider," said the Elara Securities analyst. "The attraction of branded apparels is enormous among young shoppers, who have been undeterred by price rises so far. So it would be rash to say that buying will fall dramatically."

"This could also be an opportunity for promoting small, but quality brands," the analyst point out. "If good products are offered to customers, I don't see why they wouldn't go for these products, especially if they are priced right."

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COMMENTS

NARENDRA KUMAR

6 years ago

Please inform me as soon as information about roll back of duty of Excise on branded garments by Government if India.

SEBI clears JSW-Ispat deal; paves way for open offer

In December 2010, the Sajjan Jindal-led JSW Steel had entered into a Rs2,157 crore deal to acquire a 41.29% stake in Ispat Industries through preferential issue of fresh shares at a price of Rs19.85 apiece

New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has cleared the acquisition of Ispat Industries by JSW Steel, paving the way for the acquirer to make a fresh offer for buying up to 20% stake from public shareholders, reports PTI.

SEBI has issued its final observations on the Rs1,329 crore open offer for acquisition of 20% stake in Ispat from public shareholders by the acquirer JSW Steel.

The open offer was earlier scheduled to begin on 12th February, but got delayed due to lack of SEBI approval.

The revised schedule for the open offer is likely to be announced soon, as the market regulator has now cleared it.

In December 2010, Sajjan Jindal-led JSW Steel had entered into a Rs2,157 crore deal to acquire a 41.29% stake in Ispat through preferential issue of fresh shares at a price of Rs19.85 apiece.

The deal has an enterprise value of about Rs12,000 crore after paying all the debts and a working capital loan of Ispat Industries, estimated to be about Rs9,500-Rs9,700 crore.

As part of the deal, JSW Steel had offered to acquire an additional 20% stake from public shareholders at a price of Rs20.54 per share in Ispat, aggregating Rs1,329.43 crore.

Any company buying more than 15% in a listed company needs to mandatorily make an offer to buy 20% additional stake from public shareholders and a SEBI approval is required for this offer.

JSW Steel had sought SEBI approval in December 2010 itself, but the approval got delayed as regulator had sought some clarifications on the deal.

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SAIL begins process of developing 7MT Chiria mines

Steel Authority of India has started the process of developing Chiria reserves in Jharkhand and has also appointed a global consultant to prepare detailed project execution report

The government said state-owned Steel Authority of India Ltd (SAIL) has started the process of developing Chiria reserves in Jharkhand and has also appointed a global consultant to prepare detailed project execution report.

"SAIL has already initiated the process for development of 7 million tonnes (MT) per annum capacity mechanised mine with state-of-art technology," steel minister Beni Prasad Verma said in a reply to Lok Sabha.

"Hatch Associates of Australia, a consultant of global repute, has been appointed for preparation of Detailed Project Execution Report," the minister added.

Approval of mining plan has been received, the steel minister said, adding that the Ministry of Environment and Forests (MoEF) had given forest clearance to SAIL for mining iron ore from Chiria mines last week with stipulated conditions.

MoEF's Expert Appraisal Committee has recommended environment clearance, Mr Verma said.

"As per conditions stipulated in the stage-1 forest clearance, only mining and crushing up to secondary stage will be carried out at Chiria mine. Balance activities like processing plant...will be carried out outside the forest area," he said.

"Construction and development activities would follow after grant of all the statutory clearance," Mr Verma added.

Asserting that mineral rich Chiria reserves belongs to it, state-owned SAIL had last month said that it was hopeful of commencing mining iron ore from the mines by 2012-13.

"Our plans are ready to mine iron ore from Chiria reserves in Jharkhand.....We hope to start production by 2012-13," SAIL chairman CS Verma had said.

On Monday, SAIL ended 2.73% up at Rs159.65 on the Bombay Stock Exchange, while the benchmark Sensex gained 1.46% at 18,439.48.

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