Companies & Sectors
Textile sector on an uptrend

The textile sector was facing a slowdown last year, but a surge in exports may help it to achieve a turnaround, say industry experts

The textile industry was hit hard by the global economic slowdown. However, it is now showing signs of recovery. Experts feel this is just the beginning of the growth story for this sector. According to government data, during FY09, textile exports from India grew by 8.1% to Rs96,309 crore. Higher prices for cotton overseas, a depreciating local currency and stimulus packages from the Union government were the main reasons for higher exports, say experts.

“A gradual improvement in the world economy and consequent rise in demand for textiles in most countries—especially in the major Western markets ahead of Christmas—has led to a boost in exports,” a source from the Synthetic and Rayon Textiles Export Promotion Council (SRTEPC) told Moneylife.

“With a lot of nations across the world recovering from the recession, the demand for textiles has grown,” said Textile Association of India’s (TAI) chairman KD Sanghvi.

According to the SRTEPC source, in the next few months, the demand for textiles from erstwhile markets like the US and EU will gradually decrease (currently India exports around 60% of textiles to these regions), but demand from new markets like Japan, Argentina, Brazil, New Zealand and Australia will see a rise.

Even as the rupee is appreciating against the dollar, industry experts believe that the demand for textile exports will continue to grow.

“By the end of the fourth quarter, the sector will get a boost from the rising demand for cotton which is set to increase by 10% while the demand for man-made fibres will go up by 7%-8%,” said HR Kapoor, managing director, Nahar Spinning.

“Indian cotton quality is higher and with the higher raw cotton price over the last year it is still lower then international prices. Higher cotton prices abroad have resulted in demand from India and Pakistan,” Mr Kapoor added.

However, according to Mr Sanghvi, in the remaining four months of the fiscal year, textile companies may not see a sharp rise in profits, but there will be an improvement.

There is a need for additional stimulus packages to attain the profits incurred a year before for the industry to compete with nations like China and South Korea which have “better trade norms”, said Mr Kapoor.

The segment could get an added boost as Dayanidhi Maran, the country’s textile minister, has called for a need to attract and sustain foreign direct investment in the sector for India to attain 4% share in global trade in textiles and clothing.

According to media reports, Mr Maran has also called upon major international players to collaborate with the Indian textile industry in the manufacture of fabric and setting up of greenfield units in textiles machinery, man-made fibre and yarn.

Maran believes that Indian textiles and apparel exports are expected to register a four-fold increase to touch $90bn-$100bn over the next 25 years.
- Aaron Rodrigues [email protected]

 

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Mobile Number Portability: Quality will survive

While mobile number portability would help harassed subscribers to change their operators, for the mobile services providers it will result in high churn of subscribers

Finally, mobile subscribers across the country will be able to keep their 'beloved' number unchanged despite changing their service provider. Following an order by telecom regulator Telecom Regulatory Authority of India (TRAI), from 31st December onwards, mobile subscribers would be able to change their operators while keeping their number intact. However, according to some media reports, the move may be delayed due to technical issues like network up-gradation.
Mobile Number Portability (MNP) allows subscribers to retain their existing mobile telephone number when they move from one access provider to another, irrespective of the mobile technology—or from one cellular mobile technology to another of the same access provider—in a licensed service area. This means a CDMA subscriber can opt for other a GSM or CDMA service providers and vice-versa.

For subscribers harassed by their current mobile operator, this has come as a blessing. From next year they can simply hang up on their current operator and choose another one—whom they think will provide better services and lower tariffs. However, the subscriber must have stayed with the service provider for at least 90 days before he can transport his number to another service provider.
According to the TRAI notification, subscribers changing their services provider will have to pay Rs19 as porting charge to the recipient operator. However, TRAI has said that operators are free to charge any amount lesser than or equal to this charge. This would prove to be another headache for mobile operators, already reeling under pressure due to the tariff war. Many operators may provide this service free in order to increase subscriber base.

Although MNP is beneficial for both post-paid and pre-paid subscribers, according to analysts, lower porting charge would give further impetus to prepaid churn.

“The TRAI-notified porting charges (PC) is lower than our—and industry—expectations and this would boost higher uptake of MNP among the low average revenues per user (ARPU) segement, mostly prepaid subscribers, leading to higher churn rates than current 4.5%-8.0% per month at least in the short run,” said Anand Rathi Financial Services Ltd, in a report.

The regulator feels that the facility of retention of existing mobile telephone number despite moving to a new telecom service provider would help in increasing competition between the service providers and act as a catalyst for the service providers to improve their quality of service.

This also means that incumbent mobile operators would have to upgrade network quality and customer services which may result in higher capacity expansion and operating expenditure.

However, the ongoing tariff war has discouraged fresh investments from operators, except new players, due to longer payback periods. Many incumbent mobile service providers (MSPs) have not only put on hold their expansion plans but have also reduced capacity expansion (capex) provisions.

The aggressive launch and lower tariff plans from new entrants are not only snatching away customers but are also hurting the top and bottom line of incumbent MSPs. During the recent quarter, all mobile operators have reported a sharp fall in ARPU and minutes of usage (MOU).

Although MNP may prove to be more beneficial for both post-paid and pre-paid subscribers, the question over service quality of almost all mobile operators remains a pertinent one.

According to TRAI, during the April-June quarter, the performance of wireless service providers has deteriorated as compared to the previous quarter, in respect of call set-up success rate, call drop rate, response time to the customer for assistance, complaints and percentage of complaints resolved within four weeks.
So before being wooed by a lower tariff plan or offer, subscribers going in for MNP need to check with existing subscribers of the new operator about the service and network quality. Of course, the subscriber has got an option to switch back to his original operator, once this 24-hour period gets over, he will have to wait for another 90 days before going in for another switch.
-Yogesh Sapkale [email protected]

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COMMENTS

Yogesh

7 years ago

Yes, both post-paid and pre-paid subscribers can go for MNP.

Arvind Pawaskar

7 years ago

Can pre-paid mobile subscriber also avail of facility of Mobile Number Portability?

Iron ore prices set to go up

Strong Chinese import demand overcomes fears of global steel oversupply

Iron ore prices have begun soaring since September 2009 from a bottom of $80-$84 per tonne and are now nearing their recent peak of $110-$112 per tonne of early August 2009. The cash prices for Indian iron ore exported to China have been hovering above $100 per metric tonne on higher freight costs, increased Chinese demand and disruption in Indian supply.

Even the China International Capital Corporation (CICC) comments that steel demand in China may consume 12% of iron ore next year thanks to booming property and auto demand. CICC expects China’s domestic crude steel consumption to increase to 606 million metric tonnes in 2010. India-China freight charges have shot up to $24 per tonne from about $16 per tonne. 
 
In India, the Orissa government has ordered to halt work in 50 mines because they did not have proper documentation and did not meet environmental norms. This has severely affected Indian supply. If the Indian bottleneck continues, iron ore prices are expected to hit higher levels. As per market sources, the cash price for Indian iron ore exported to China is expected to rise by about 4% by the end of November 2009.
 
In the first 10 months of 2009, total iron imports by China rose 37% from a year earlier despite a lull in October 2009. According to China customs data, year to end-October 2009 iron ore imports were 514.8 million tonnes (MT), compared to 469.3MT between January 2009 and September 2009. China’s iron ore imports fell by almost 30% in October 2009 from September 2009. It imported 45.5MT of iron ore in October 2009, 19MT less than the record 64.5MT imported in September 2009. Meanwhile, imported iron ore inventory at China’s major ports fell to 65.74MT as of 16 November 2009 from 66.96MT as of 9 November 2009, indicating strong demand.
 
But the major concern has been the steel oversupply scenario. China Iron and Steel Association (CISA) has warned that oversupply in the Chinese steel sector could worsen in the fourth quarter and in early 2010. China’s crude steel output was 420.40MT, up 7.5% year-on-year in the first nine months of this year. In October 2009 alone, Chinese crude steel production growth has sharply grown by 42% year-on-year to 51.75MT.
 
Meanwhile, the entire year’s output is estimated at 550MT, up 50MT or 10% from 2008. China’s apparent steel demand rose 20% year-on-year in the first nine months, to 421.80MT, mainly driven by the government’s expansion of fixed asset investment, and the growth is predicted to sustain into the fourth quarter and early next year. Surprisingly, in October 2009, the investment in China’s fixed assets and real estate has been below expectations. Investments increased by 33.2% in the first 10 months, but were down by 13.2% monthly, which is the largest monthly reduction over the past decade.

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