The Hindu Business Line : Garment exporters seek relief against appreciating rupee

BUFFETED by the appreciating rupee against the US dollar, the country's apparel exporters have rushed to the authorities hoping to reverse the disadvantageous situation that they find themselves against competitors like China, so that India's export target for the current fiscal does not encounter a serious shortfall.

Talking to Business Line, the Apparel Export Promotion Council Chairman, Mr A. Sakthivel, said in an identical communication to the Finance Minister, Mr Jaswant Singh, the Commerce and Industry Minister, Mr Arun Jaitley, and the Textile Minister, Mr Shahnawaz Hussain, he had drawn attention to the appreciation of the rupee vis-à-vis the dollar by as much as 9.04 per cent between January 2002 and March 2004. As most garment export contracts are undertaken in dollars, the export industry has been badly bruised by the rupee's appreciation, he said.

Mr Sakthivel said for every 10 paise that the rupee gains, an exporter stands to lose Rs 1 lakh for every $1 million of exports. A company with $30-million export of garments stands to lose as much as Rs 30 lakh.

The competitiveness of China in the apparel export trade could be ascribed to a stable currency, coupled with liberal refund of value-added tax to its garment industry.

So at a review meeting of the Council, the AEPC members noted, "It is quite unnatural to see that the Chinese currency has not changed over a period of time despite wide changes in the US dollar-Indian rupee exchange rates." Due to such a situation, India is pushed to a disadvantageous position, he said.

Hence, Mr Sakthivel said members of the AEPC sought immediate relief measures to cushion this adverse development. First, an increase in the all-industry duty drawback rates by two per cent for all kinds of garments needs to be provided. Second, the export profit under Section 80 HHC of the Income Tax Act of 1962 needs to be taxed to the extent of 50 per cent only in the just-ended fiscal year, as against the stipulated 70 per cent. Third, the computation of profits now restricted to 90 per cent of the sum as referred in the Section 28 might be treated at par with computation done in the case of export-oriented units. Finally, they pleaded that the Rupee Packing Credit be made available by authorised dealers at five per cent interest with immediate effect.

Mr Sakthivel said these issues had been pending for quite a while and unless these are addressed at this juncture, when the rupee's appreciation threatens to exact an adverse effect on the prospects of garment exports, the final tally of performance of readymade garments for 2003-04 would fall by as much as $1,250 million from the target of $6,500 million set for the fiscal.

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