Indian cotton yarn spinners to see margin improvement after low profitability - Business Guardian
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Indian cotton yarn spinners to see margin improvement after low profitability

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After a challenging year marked by low profitability, the cotton yarn spinning industry is poised for improvement this financial year, according to a report by Crisil Ratings. Operating margins for cotton yarn spinners are expected to rebound by 150-200 basis points from the decadal lows experienced last year, reaching around 10.5-11% in the current fiscal. Stable cotton prices, supported by better availability during the 2024 cotton season, alongside improved cotton yarn spreads, are cited as key factors driving this margin recovery. The stability in cotton prices is anticipated to persist, remaining below international levels, further contributing to the improved operating margins.

Revenue projections also indicate a positive trajectory, with an estimated growth of 4-6% expected this financial year. This growth is attributed to moderate expansion in downstream demand, particularly from segments such as readymade garments and home textiles. Domestic sales volume, constituting a significant portion of the industry’s revenue, is forecasted to drive this growth.

Despite a remarkable recovery in exports witnessed last fiscal year, with an 80-85% increase, export growth is expected to taper to 3-4% in the current fiscal due to sluggish global economic conditions. However, with the revival in demand and operational performance, the industry’s capacity utilization levels have already reached 80-85%, with further improvement anticipated this year.

Pranav Shandil, Associate Director at CRISIL Ratings, highlighted that while capacity utilization levels are improving, capital expenditure (capex) for cotton yarn spinners is expected to remain moderate in the near term. This cautious approach to capex reflects a recovery phase from the lows experienced in the previous fiscal year, mitigating the need for significant debt additions on already deleveraged balance sheets.

The positive outlook for the cotton yarn spinning industry suggests a gradual recovery from the challenges of the past year, with improved margins and revenue growth expected to support the sector’s resilience amidst evolving market conditions.

The anticipated improvement in the cotton yarn spinning industry, as outlined by the Crisil Ratings report, heralds a promising turnaround from the difficulties encountered in the preceding year. This shift towards a more favorable landscape is underpinned by several factors, each contributing to the industry’s resilience and potential for growth.

Firstly, the stabilization of cotton prices, coupled with enhanced availability during the current cotton season, is a pivotal driver behind the projected margin recovery. The ability to maintain cotton prices below international levels fosters a conducive environment for spinners, alleviating input cost pressures and bolstering operating margins. This stability not only fortifies the financial health of spinners but also instills confidence in their ability to navigate future market fluctuations effectively.

Moreover, the anticipated rebound in operating margins by 150-200 basis points signifies a significant uptick propelled capacity utilization levels to 80-85%, with further improvement anticipated. This upward trajectory not only augurs well for the industry’s growth prospects but also underscores its ability to capitalize on emerging opportunities amidst evolving market dynamics.

The cautious approach to capital expenditure (capex) reflects a prudent stance adopted by spinners as they navigate the recovery phase. While capacity utilization levels improve, a moderate capex outlook mitigates the need for significant debt additions, thereby preserving the deleveraged balance sheets of industry players. This disciplined approach to capital allocation underscores a commitment to long-term sustainability and resilience in the face of uncertainties.

Overall, the positive outlook for the cotton yarn spinning industry signifies a gradual yet robust recovery from the challenges of the past year. With improved margins, revenue growth, and prudent financial management, the industry is well-positioned to thrive amidst evolving market conditions, reaffirming its status as a cornerstone of the textile ecosystem.

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Industry & Commerce

Need better R&D, higher acreage to meet cotton demand: Sampath Kumar

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To enhance cotton production, a pilot project was initiated in 2023-2024, introducing technologies like High Density Planting System (HDPS), Closer Spacing planting, and Production technology for ELS cotton.

India needs to focus on R&D and improved cultivation methods to meet the rising cotton demand in the textile industry at a time when the fiber crop is serving as a cornerstone in supporting the livelihoods of approximately 6 million farmers and an additional 40-50 million individuals involved in related activities, said Raghavan Sampath Kumar, Executive Director, Federation of Seed Industry of India (FSII). He pointed to what Chandrakant Patil, Minister of Textiles, Government of Maharashtra, wrote in an article recently highlighting that the country stands at the cusp of becoming a global textile powerhouse, with numerous states like Maharashtra, Telangana, and Tamil Nadu spearheading policy initiatives to establish textile parks.

The aim is to propel the industry towards a projected $250-billion in textile production by 2030. Sampath Kumar said the textile industry is undergoing a significant transformation with initiatives like the PLI Scheme for Textiles, Kasturi Cotton Bharat program, National Technical Textiles Mission (NTTM), SAMARTH, and PM MITRA, development of 11 exclusive textile parks, strengthening the textile value chain through technological upgradation and so on. With over 45 million skilled workers, the textile sector is significant for employment and economic growth in India. To boost India’s textile sector’s global competitiveness, promoting cotton cultivation is paramount as approximately 74% of the apparel exported from India is made of cotton. Yet, with cotton being the primary source, there are key challenges and concerns that both the government and industry need to acknowledge and address, Sampath Kumar said.

Firstly, the cotton industry requires revitalization through increased production and strengthening of the value chain. With the introduction of Bt Cotton, India saw a significant surge in cotton production from 10 to nearly 40 million bales annually between early 2000s and FY2014, transforming into a leading producer. Cotton production in India increased steadily and rather steeply from 2004-05 onwards primarily due to a sharp rise in yield. However, continuously evolving challenges of pests and diseases, weeds, salinity and soil degradation, and climate aberrations are causing stagnation post-FY2015, with production at 36.2 million bales in FY2022.

Hence, the cotton industry in India is currently at crossroads and there is an imminent need to find innovative solutions through scientific research. Research on pests particularly pink bollworm, several diseases, herbicide-tolerance enable more efficient control against these challenges, reducing manual labor and potentially increasing yields. All these present enormous opportunities for sustainable growth. However, to achieve the above, there should be an imperative on promoting new concepts like High Density Planting System, to increase yields and improve profitability.

It’s crucial for both government and private sectors to collaborate in adopting and promoting innovative technologies to boost yield and farmers’ income, Sampath Kumar added. To enhance cotton production, a pilot project was initiated in 2023-2024, introducing technologies like High Density Planting System (HDPS), Closer Spacing planting, and Production technology for ELS cotton. HDPS has shown promising results, with Maharashtra farmers reporting a three fold yield increase.

It involves denser sowing, boosting light interception, boll production, and yield while optimizing nutrient and water use and suppressing weed growth. Popularizing such practices will increase overall cotton production, realizing the state’s aspiration to drive the Indian textile industry’s growth story.

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Automakers Anticipate Cost Reductions with Advent of Two-Way EV Charging

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That has begun to change with the help of smart electricity meters, artificial intelligence and modelling by innovative energy companies.

Automakers from General Motors to Volvo Cars, alongside utilities and charging app operators are calculating their financial cut as EVs that allow their owners to sell power back to grids become a more realistic prospect. Bidirectional, or vehicle-togrid (V2G), charging lets EV owners charge at overnight off-peak rates then sell power back to grids at a profit during peak hours. For short periods, a million EVs could provide as much power as a large nuclear power plant, says Nick Woolley, CEO of UK software firm energy, which is working on V2G technology with Siemens, Nissan, Volkswagen and others. For many years V2G remained largely theoretical, as the Nissan Leaf was the sole EV capable of it.

That has begun to change with the help of smart electricity meters, artificial intelligence and modelling by innovative energy companies. And most major automakers, including Tesla, BMW, Volkswagen, Renault and Toyota are expected to launch V2G capable models over the coming years. Chinese manufacturers, such as BYD have also developed the technology and, crucially, the Chinese government plans a big role for V2G by 2030. “There is a lot of money to be made,” Doron Frenkel, CEO of Driivz, said of balancing grids. “Everyone wants their own piece of this.” Driivz has access to millions of EVs via the white-label charging software it provides to automakers and others.

In the United States, bidirectional charging is experimental, while in major European market Germany regulatory hurdles around how to price any energy sold back into the grid mean it is a distant prospect. Bidirectional chargers are also more expensive than conventional ones because for now they are produced on a smaller scale. But in the UK, Octopus Energy has launched a V2G tariff for customers, offering free charging if owners keep their EVs plugged in overnight. Octopus plans a similar tariff this year in its other energy markets, including France, Japan, New Zealand and the U.S. state of Texas. “This is a real thing,” Octopus’ global head of flexibility Alex Schoch said. “It’s no longer a theoretical, academic discussion.”

AUTO/ENERGY COMPANIES

Among the breakthroughs that are bringing V2G closer, automakers have set up their own energy units, joining the software platforms, energy distributors and others that are vying for V2G revenue.

They do not yet know how much they might make. Most of the money will go to EV owners, leaving just pennies per kilowatt for intermediaries selling power to grids, but across millions of EVs, that would add up. Within the next few months, GM will launch an electric Chevrolet Silverado pickup truck capable of powering homes – the same technology as V2G – and all its EVs will have bidirectional capability by 2026, Aseem Kapur, GM Energy’s energy solutions director, said.

GM plans to both sell energy to utilities and partner with aggregators pooling larger numbers of EVs to sell power, Kapur said. The automaker is also building partnerships with U.S. utilities, including Duke Energy. GM rival Ford’s F-150 Lightning electric pickup is V2G capable.

CHEAPER BILLS AND GRID BALANCING

Shilpen Patel, 39, has been using his Nissan Leaf for an Octopus Energy V2G pilot scheme in London since 2020, plugging in when at home and cutting his annual household energy bill by 700 pounds ($871.08), or about a third. “The savings have been pretty remarkable,” Patel said. As a precursor to V2G at scale, companies including Octopus already operate grid balancing services. To avoid firing up expensive additional capacity, grid operators pay them to power down EV chargers for very short periods. Denmark’s Monta, for instance, gives charging app users in some markets around 8 euros ($8.53) per month for grid balancing, while Driivz uses it to protect the Dutch grid from demand spikes.

Volkswagen’s energy unit Elli is building a trading platform in Germany for grid balancing as a precursor to V2G and plans to expand or work with partners in other markets, said Ingo Mueller, the unit’s head of energy solutions. Nuvve provides V2G services for around 500 electric buses in a number of U.S. states, an easy proposition as they are plugged in most of the day and during school holidays.

But for passenger EVs, persuading customers via apps with accurate and attractive pricing will be vital. Platforms with reliable AI forecasts for how many EVs will be plugged in will get more business from the likes of Duke Energy, which is running bidirectional tests with GM and Ford. “You’ve got to be able to accurately predict how much capacity is available at any given time,” said Zachary Kuznar, managing director for grid solutions development at Duke. Automakers’ energy units will mostly lack the scale to aggregate enough EVs locally to sell power to utilities, so emerging platforms, including Kaluza or The Mobility House, aim to act as intermediaries, aggregating EVs across multiple brands.

Those intermediaries will also need to ensure EVs do not overburden grids if everyone charges when prices are low and discharges when they are high, Timo Kern, director of energy systems and markets at Munich-based energy research institute FfE, said. Renault has partnered with The Mobility House, while Volvo is working both on its own platform and with others like Kaluza, said Alexander Petrofski, who heads Volvo Cars Energy Solutions. Kaluza is also working with other automakers including Volkswagen, Stellantis, Nissan, GM, Mitsubishi and Porsche to act as an intermediary with thousands of utilities, said Kaluza’s chief product officer Neel Gulhar.

He said charging app providers or others could sidestep automakers and run V2G services via EV chargers. But Kaluza wants to partner with automakers because of the data they can access. “We need those partnerships because you get a lot more data from the vehicle than you do from chargers,” Gulhar said.

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Railways operates record number of addt’l trains to meet summer demand

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Indian Railways gears up for a record-breaking summer with plans to operate 9,111 trips, a substantial increase from last year’s 6,369 trips.

In preparation for the anticipated surge in travel demand during the summer season, Indian Railways has announced plans to operate a record-breaking 9,111 trips, marking a significant increase from the 6,369 trips offered during the previous summer in 2023. These additional trains are strategically planned to connect key destinations across the country, aiming to facilitate seamless travel along major railway routes. All zonal railways spanning India have mobilized to manage the heightened summer travel rush originating from states such as Tamil Nadu, Maharashtra, Gujarat, Odisha, West Bengal, Bihar, Uttar Pradesh, Karnataka, Andhra Pradesh, Telangana, Jharkhand, Madhya Pradesh, Rajasthan, and Delhi.

The process of planning and operating additional trains is a dynamic one, with continuous monitoring and assessment of demand from various sources such as media reports, social media platforms, the Railway Integrated helpline number 139, and waitlist passenger data in the Passenger Reservation System (PRS). Based on these inputs, the number of trains and trips are adjusted accordingly throughout the season to meet evolving travel requirements.

Ensuring passenger comfort and safety is paramount during the summer season. Zonal Railways have been instructed to maintain the availability of drinking water at railway stations, while elaborate crowd control measures are implemented at major stations. Railway Protection Force (RPF) personnel are stationed at originating stations to enforce queue systems for entry into General Class coaches, with skilled staff monitoring CCTV cameras to provide real-time assistance to passengers. To regulate crowd flow and prevent stampede-like situations, Government Railway Police (GRP) and RPF staff are deployed at foot-over bridges. Passengers can conveniently book tickets for these additional trains through railway ticket counters or the IRCTC website/app.

Indian Railways’ proactive approach to managing the summer travel rush underscores its commitment to passenger convenience and safety. As the nation’s lifeline for transportation, Indian Railways continues to adapt and innovate to meet the evolving needs of travelers across the country.

As the summer season approaches, Indian Railways is ramping up its efforts to accommodate the surge in travel demand, ensuring that passengers can reach their destinations comfortably and efficiently. The unprecedented number of trips, totaling 9,111, reflects the railway’s commitment to meeting the needs of travelers across the country. With trains planned to connect key destinations and major railway routes, passengers from various states are set to benefit from the expanded service. The collaborative approach involving all zonal railways ensures a coordinated effort to address the influx of travelers during the peak summer months.

Moreover, the dynamic nature of planning and operating additional trains allows Indian Railways to respond swiftly to changing demand patterns throughout the season. By leveraging inputs from diverse sources, including media reports, social media platforms, and passenger reservation data, the railway can optimize its services to accommodate passenger needs effectively. In addition to enhancing connectivity, Indian Railways is prioritizing passenger safety and comfort. Measures such as ensuring the availability of drinking water at railway stations, implementing crowd control measures, and deploying security personnel demonstrate the railway’s commitment to providing a safe and pleasant travel experience for passengers.

Overall, Indian Railways’ proactive approach to managing the summer travel rush reaffirms its status as the backbone of transportation in India, facilitating essential connections and journeys for millions of passengers nationwide.

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Due to scale-down operations, Vistara fares rise by up to 25% on major routes

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Just ahead of the peak summer travel season, travel industry insiders reported a surge of approximately 20-25% in fares across key routes such as Delhi-Goa, Delhi-Kochi, Delhi-Jammu, and Delhi-Srinagar, said in a news report.

Vistara’s decision to reduce operations by 25-30 flights daily, approximately 10% of its capacity, has led to a 20-25% increase in airfares on major routes. Ahead of the peak summer travel season, insiders in the travel industry noted a surge of around 20-25% in fares on key routes like Delhi-Goa, Delhi-Kochi, Delhi-Jammu, and Delhi-Srinagar, according to the national daily.

On average, the airline conducts approximately 350 flights daily. However, since April 1, Vistara has been forced to cancel more than 150 flights cumulatively due to pilots unexpectedly reporting sick at the end of March. Given the ongoing demand-supply mismatch leading to higher airfares, Vistara’s move has exacerbated pressure, particularly on routes affected by cancellations.

While Vistara has not specified the duration of the capacity cut, indications suggest it will likely remain in effect until at least the end of April, keeping fares high on affected routes during this period, the report said.

Notably, in the Indian airlines’ summer schedule for 2024, Vistara showed significant growth in approved domestic flights compared to the previous winter schedule and last year’s summer schedule.

This year’s summer schedule, spanning March 31 to October 26, featured 2,324 weekly domestic departures by Vistara, marking a 25.2 per cent increase over last year’s summer schedule and 22.2 per cent over the recently concluded winter schedule.

Overall, the current summer schedule for all Indian carriers combined exhibits a 6 per cent year-on-year increase in domestic departures and a 2.3 per cent sequential increase.

Facing significant disruptions and numerous flight cancellations and delays last week amid several pilots taking sick leaves as part of a protest over a new pay structure, concerns have also arisen about Vistara’s impending merger with Air India.

The carrier has tried to resolve the issues. As part of mitigation efforts, the Tata Group airline last week announced a reduction in operational capacity, primarily in its domestic network, to provide “much-needed resilience and buffer” in its crew rosters.

Vistara also announced a new salary structure for its pilots. Under this arrangement, pilots will receive a fixed salary for 40 hours of flying time instead of the current 70 hours. Additionally, they will receive compensation for extra flying hours and a reward based on their years of service with the airline.

This new salary structure was offered as Vistara, which is a 51:49 joint venture of the Tata Group and Singapore Airlines, is in the process of being merged into Air India, which is wholly owned by the Tata Group.

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Pilots flag burnout as vistara tackles flight crisis

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The meeting centered on resolving issues regarding new contracts and scheduling. Pilots were assured of a more thoughtful utilization of their time.

Vistara airline anticipates resuming regular flight operations by the weekend following an agreement with pilots who raised concerns about fatigue. The joint venture between the Tata Group and Singapore Airlines saw pilots operating close to maximum flight duty limits, discussing health issues with management. Despite these challenges, the Directorate General of Civil Aviation (DGCA) postponed implementing revised flight duty norms, originally set for June 1, citing the necessity for further consultations. 125 Vistara Flights Cancelled More than 125 Vistara flights have been cancelled since April 1. The cancellations were attributed to a surge in pilot sick leave requests.

The most affected routes included Delhi-Indore, Delhi-Srinagar, Mumbai-Kochi, and Bengaluru-Udaipur. Spot airfares on these routes also surged by up to 38 per cent following the flight cancellations earlier this week. Vistara-Air India Merger The Competition and Consumer Commission of Singapore granted approval for the merger of Vistara with Air India in March 2024. Vistara’s CEO, Vinod Kannan, indicated plans for operational integration with Air India by mid-2025, with expectations of receiving legal clearances by mid-2024.

Vistara’s management, including chief executive Vinod Kannan, held discussions with pilots during a virtual town hall, The meeting focused on addressing concerns related to new contracts and roster. The pilots were promised more considerate utilization of their time. Kannan appealed to pilots for support in ensuring smooth operations. To alleviate the strain on resources during the crisis, Vistara reduced daily flights.

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Over 150,000 jobs created in Apple’s Indian ecosystem since Aug 2021, says report

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In a recent development, it has been reported that Apple has significantly bolstered employment opportunities within India’s tech sector since its participation in the country’s production-linked incentive (PLI) scheme for smartphones in August 2021. According to insights from an Economic Times report, Apple’s direct employment within its ecosystem in India has surged to an estimated 150,000 individuals. Remarkably, the majority of these employed individuals are young first-time job seekers aged between 19 and 24 years, as highlighted by estimates from government officials and industry experts.

Moreover, the report indicates that an additional 300,000 individuals have found indirect employment opportunities through companies benefiting from the PLI scheme. Apple’s direct employment within India currently stands at 3,000 individuals, with its iOS application development alone supporting over 1 million jobs, as per officials familiar with the matter. This signifies a substantial contribution to the Indian job market over the past 32 months, with the Apple ecosystem estimated to have created over 400,000 jobs, both directly and indirectly.

Despite facing challenges in key markets such as the United States and China, Apple has strategically intensified its focus on India, which ranks as the world’s second-largest smartphone market. Since commencing iPhone manufacturing operations in India back in 2017, Apple has steadily expanded its local production activities in alignment with the PLI scheme. Collaborating with renowned suppliers such as Foxconn, Wistron, and Pegatron, Apple has played a pivotal role in enhancing manufacturing capabilities within the country.

According to the report, Apple has cultivated a robust supplier ecosystem across various states in India, generating over 77,000 direct jobs. Leading collaborators include Foxconn, which has created 41,000 jobs, followed by Wistron with 27,300 jobs and Pegatron with 9,200 jobs. Additionally, other significant contributors such as Tata Electronics and Salcomp Technologies have played integral roles in the production of essential iPhone components, resulting in the creation of over 70,000 direct jobs.

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