Re rise hits garment exporters
The Statesman, India
Statesman News Service
BANGALORE, Dec. 3: The appreciating rupee is taking a heavy toll of knitwear exports from Tirupur which today accounts for 70 per cent of the country’s total exports of Rs 20,000 from this segment.
Besides dreading the prospect of a sharp fall in export realisation at over 12-15 per cent,these exporters are now staring at the possibility of retrenching over 40,000 workers in the next few months if the rupee continues to rise
Majority of these workers would be migrant labourers from Orissa,West Bengal and Bihar apart from those from the neighbouring districts of Tamil Nadu.The trend is already visible considering the fact the industry has already lost 10,000 labourers ,mosty migrant, following a sharp slump in orders from their buyers in the US and Europe.
According to Mr A Sakthivel,president,Tirupur Exporters Association,the central government has already moved fast with its willingness to consider increased duty drawback to help the hard hit exporters.
Some comfort has been extended for pre-shipment and post shipment credit.Not to speak of the reduction in customs levy on polyester staple fibre and polyester filament yarn and other man made fibres.
At the same time ,he told visiting newsmen from Bangalore that the manner in which the rupee has been appreciating steadily from its earlier levels of 44-45 , has been a cause for concern.Added to that is the analysts’ view that it would ultimately stabilise at 35 from 39.40 at present.
The TEA chief said that already the US buyers have been putting pressure on the exporters to reduce their prices forcing them to cut their margins. Further, there is the latest demand from the European buyers who now want to trade with Indian knitwear exporters in dollars and not the Euro.
Accordingly, he feels that the time is ripe for the government to provide a dual exchange rate for exporters while fixing the value of the rupee at 42 ,at least for one year. China,for example,he said had pegged its currency for the last five years.
Similarly, he has urged the government to compensate the hedging cost for the exporters.Besides a plea for exemption from payment of service tax and Fringe Benefit Tax has been made.
Unless these steps are initiated quickly to add to the available relief,the Tirupur knitwear industry may find itself in dire straits.Of the 3000 odd units,almost 1000 are dedicated export units with buyers in the US and Europe.
Admittedly, the TEA ,on its own, is working towards educating members to meet the crisis in addition to urging them to retain their buyers .For, once these buyers go to Sri Lanka or Bangladesh,it would be difficult to retrieve them.Likewise,with most of these countries also making T-shirts in a big way, the competition for the Tirupur exporters has increased substantially.
As a first step to meet the new situation, most of the units in Tirupur have now engaged foreign experts from Hong Kong,Sri Lanka and other places to bring about value addition to their products.
The problem ,however, is that now they have been hit with poor inflow of orders leading to reduced margins. Even where orders are coming,the rising rupee is affecting them badly.
Significantly, the exporters are also realising that the removal of the quota regime in the late nineties,for which they were fighting earlier, is now proving to be a bane.
Asked about possibilities of diversifying into newer markets including Japan,Australia and Latin America,the TEA chairman said that while these countries were not big spenders,steps were already afoot in this direction.
In response to queries as to why the exporters were not looking at domestic markets,he said that some efforts had begun on this count though the volumes would be comparatively small.
In addition , by and large the exporting units were comparatively small and did not have the budgets for undertaking huge promotional activities and further investments to add value addition to their products.
The TEA chairman is,however, quick to admit that till now the exporters lived in a world where the rupee was allowed to depreciate.So, they were never prepared ,mentally, for the present situation. This explains their predicament today.
